Buffett Dumps GE Stock: What's It Mean for Predix?

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By: R. Scott Raynovich

GE has made a lot of waves with its GE Predix Industrial Internet of Things (IoT) analytics platform. But as we predicted in Futuriom's Ultimate IIoT report, it's not helping GE's stock. That may start to change with new GE leadership.

Warren Buffett's Berkshire Hathaway Inc. disclosed in an SEC filing yesterday that it has dumped its entire stake of GE, which has been underperforming the market. Year-to-date, the stock is down 21 percent, to $25.10, a new 52-week low.

Law of Large Numbers

GE, with a $217 billion market capitalization, is no small fry -- and that's part of the problem. Large technology efforts such as IIoT can't move the needle because of GE's large numbers. Its sprawling empire produces goods as varied as wind turbines, aviation engines, electrical systems, healthcare diagnostics, and train locomotives. That's just part of the business.

But with the diss by Buffett and the stock hitting new lows, the urgency may be ratcheted up to change GE, which has pledged to modernize and move to full-scale digitalization.

Jeff Immelt stepped down as CEO of GE in August, leaving the task to John Flannery, the former head of the healthcare division. Flannery will have the job of deciding how to restructure GE.

The obvious thing to do would be to modernize the company and acquire a larger technology footprint. Immelt dabbled in unloading some units that did not fit the company, which, in the last few years, has also unloaded $195 billion of GE Capital assets in deals meant to downsize the financial operation. Immelt's parting gift was a spinoff of GE's Oil & Gas unit, which was combined with Baker Hughes and turned into GE subsidiary designed to boost earnings.

Predix: $6 Billion Business

Where does that leave GE on IIoT -- and the all-important growth segment of technology?

GE launched its Predix cloud analytics platform in 2016 and has touted it as central to its digital strategy. It says that it has saved $500 million in productivity and is now $6 billion in revenue. The company had 20,000 developers working on Predix at the end of 2016, with plans to expand it to 35,000 in 2017. The company has a goal of making it a $15 billion business by 2020.

The company is also focused on "additive manufacturing," which uses digital design and tools such as 3D printing to develop industrial products. GE says it has invested $1.5 billion to keep developing these new technologies.

Predix may be key to GE's future, as new CEO Flannery looks at ways to accelerate the "digitization" of one of the world's largest industrial companies.

GE will likely continue to be a player in IoT M&A, as it looks for snap-in acquisitions that can benefit Predix and its IoT strategy. The company has already acquired BitStew and Wise.io to connect data from industrial machines. Machine learning and artificial intelligence are also likely to be a focus -- because everybody is focused on that, right?

For a full picture of the Industrial IoT market, purchase our 50-page Ultimate Industrial Internet of Things (IIoT) Report, which covers a wide range of communications and cloud technologies that are being applied to businesses around the world to provide connectivity, analysis, automation, and optimization of a range of industrial applications. Use discount code "EDGE" for 20% off.