General Electric Co. (IW 500/6) is creating an independent company for its software business as the struggling manufacturer rethinks what had been a key pillar of its growth strategy in recent years.
GE will retain ownership of the new operation, which will have about $1.2 billion of existing software revenue, according to a statement Thursday. GE Digital’s leader, Bill Ruh, will step down “to pursue other other opportunities” as part of the reshuffling.
The company also agreed to sell a majority stake in ServiceMax, a software provider it bought two years ago for $915 million, to technology investment firm Silver Lake. Terms of the latest deal weren’t disclosed.
The moves mark a major shift in GE’s digital strategy as new CEO Larry Culp tries to narrow the focus and pull the company out of one of the biggest crises in its 126-year history. Under former boss Jeffrey Immelt, GE had invested heavily to build a software business to complement its industrial machinery, even adopting the moniker “digital industrial company” to describe GE.
The shares jumped 9.4% to $7.34 before regular trading in New York as JPMorgan Chase & Co. upgraded GE to neutral. GE fell 62% this year through Wednesday, following a 45% decline in 2017.
By Richard Clough