GE: When Jack Welch Retired, He Went To Siemens

Stocks: (GE)(SI)When Jack Welch retired from GE, he went to rival Siemens. He isn’t going to buy the Boston Globe or live with his younger wife, the defrocked editor of the Harvard Business Review.How can you tell? Look at the stock charts. Over the last five years, Siemens stock is up 60% and GE’s is down almost 15%. Welch must have gone there. Siemens performance has his fingerprints all over it.Profits at Siemens rose eight-fold in its latest quarter, driven by it power-transmission and automation units. It got ride of its cellphone unit. It was not No. 1 or No. 2 in its market, so they sold it. Just like Welch would have. Revenue for the entire company hit 23.92 billion euros for the quarter up from 23.6 billion euros in the quarter a year ago. Profits were helped by the cutting of thousands of jobs, just like Neutron Jack would have done.Siemens went beyond having a good quarter. They raised their forecasts for the year and said that they would meet financial targets in each and every unit in 2007. The company even said its would grow twice as fast as the world economy. That may be hard to measure, but it sounds impressive.Siemens has 13 units and a financial division. The company’s largest operating businesses are in industrial business systems, power generation, transportation products, healthcare, lighting products, and finance. It sounds remarkably like GE, except it does not own a TV network and movied studio. That’s OK since Wall St. doesn’t have much stomach for those businesses.The story of Siemens says a great deal about what is wrong with GE. Siemens went through a company-wide restructuring last year. It cut some businesses and a lot of jobs. The process was merciless and efficient. It bought growth business in industries like diagnostic systems.Investors have shown their appreciation. Siemens stock trades at the high end of its 52-week range of $99.53/$73.17. The stock is approaching the five-year high it set in May.By contrast, the stock performance of GE has been humiliating. The stock trades where it did in late 2004.If you take a trip to Munich, you can find Welch hanging around Siemens headquarters. He is the old guy wearing the lederhosen.Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

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