GE Creates New Independently Managed IoT Business
GE is creating a new industrial IoT business that will fuse its GE Digital business including its Predix platform and GE Power’s digital and grid software units.
While GE Digital was created with the aim of transforming the parent company into a “digital industrial company” while making GE a top-ten software company by 2020, the new industrial IoT software company will have clearer revenue-targeted ambitions. The new entity has $1.2 billion in annual software revenue.
The new GE Digital business will be rebranded and will receive its own equity structure and board of directors.
In November 2017, the company’s prior CEO John Flannery announced the intent to cut GE Digital expenses by more than 25 percent of $400 million, according to The New York Times. Acknowledging the importance of digital initiatives, Flannery expressed his preference for a “much more focused strategy” for the GE Digital unit.
GE Digital, headquartered in San Ramon, Calif., already had a degree of autonomy and its own chief executive officer, Bill Ruh. As part of the recent news, Ruh announced his departure. The company also announced it is looking internally and externally for a replacement. GE Digital’s chief commercial officer will serve as the interim chief executive officer of the unit beginning in the new year.
This summer, the Wall Street Journal reported that GE wanted to sell off its GE Digital IIoT division — which until recently, was an integral component of the conglomerate’s future and its rebranding as a “digital industrial” firm. Instead, the company has been selling off chunks of its former GE Digital business. As part of the recent announcement, the company announced that it was selling 90 percent of its stake of ServiceMax, whose software is used to manage industrial field service workers, to Silver Lake Partners, a private equity firm. The financial terms were not disclosed. GE bought ServiceMax in 2016 for $915 million.
GE had also been whittling down its ownership of the 9.4 million shares of the cloud software firm Pivotal and recently sold off its remaining shares.
By creating a new digitally-focused business unit, GE retains the option of selling the division in the future. “It’s possible that in six months to a year, depending on how this stand-alone entity progresses, it could still get sold, or some of its pieces could be parceled out,” said Chris Kocher, co-founder of the management and consulting firm Grey Heron.
Subject to regulatory approvals, the transaction will likely close in the first quarter of next year.