Even as General Electric Co. (IW 500/6) remakes itself around heavy industry, it plans to keep its $4 billion life-sciences operations..
GE is looking to expand investment in the fast-growing business, Healthcare Chief Executive Officer John Flannery said on March 11 at an investor meeting. Sales in life sciences, which makes products spanning chromatography, imaging and cell-therapy tools, will increase at least 10% this year, GE said.
“It’s a fundamentally attractive industry with growth and we have a very strong competitive position,’’ Flannery said. “We are certain this business grows faster inside of GE than it would grow outside.”
The health-care unit, with sales last year of $17.6 billion, is one of the largest businesses at GE as chief executive Jeffrey Immelt reshapes the company around manufacturing heavy-duty machinery. The company agreed to sell more than $150 billion of finance assets over the past year and is unloading the consumer-focused home-appliances division.
While Flannery said there may be “scattered portfolio pruning,” his comments answered speculation about whether a broader GE Healthcare sale was in the offing.
In a March 8 note, Deane Dray, an analyst at RBC Capital Markets LLC, said the greater focus on industrial products such as jet engines and gas turbines could make the health-care operations a candidate for divestiture. An exit would mirror moves by industrial companies such as Siemens AG to move away from the health-care business, he said.
“It is within the realm of possibility that Healthcare, or part of the segment, could eventually be divested,” Dray said. “The premise is that the diagnostics and life-sciences businesses have enough critical mass to stand as an independent entity and could arguably be declared as noncore to GE’s portfolio migration.”
GE Healthcare isn’t likely to make a big acquisition, in part because prices are too high, Flannery said.
“We’ve been outbid on a number of things,” said the executive, who previously handled business development for GE. While the division will consider small acquisitions, or “bolt-on” deals, “we feel we can drive earnings and margins best with an organic strategy,” Flannery said.
GE Healthcare will increase profitability by cutting costs, he said. The company sees operating margins rising to more than 18% in 2018 from 16.3% last year. Digital-cloud revenue could expand by double-digits this year, he said.