General Electric announced plans Thursday spin off its GE Digital business and establish an independent Internet of Things company, built around several GE Digital technologies.
GE is simultaneously selling a majority stake in Service Max to private equity shop Silver Lake, the company announced. Service Max is a software business GE Digital acquired for $915 million in November 2016.
"As an independently operated company, our digital business will be best positioned to advance our strategy to focus on our core verticals to deliver greater value for our customers and generate new value for shareholders," GE chairman and CEO Larry Culp said in a statement.
The spin off comes as GE also announced that GE Digital CEO Bill Ruh left the company. GE said it will "conduct an internal and external search to identify the CEO for this new independent company."
GE says more detail about the new internet of things company will be announced in the first quarter of next year. GE says the company will have its a new brand, as well its own equity structure and independent board of directors.
GE shares jumped 10 percent in premarket trading to $7.41 from Wednesday's close of $6.71 a share. The jump came after longtime bearish analyst Stephen Tusa of J.P. Morgan upgraded GE shares to neutral from underweight, saying the embattled industrial giant now has a more "balanced risk reward at current levels."
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General Electric announces plans to establish a new, independent company focused on building a comprehensive Industrial Internet of Things software portfolio
The company will start with $1.2 billion in annual software revenue and an existing global industrial customer base. The company is intended to be a GE wholly-owned, independently run business with a new brand and identity, its own equity structure, and its own Board of Directors.
- GE Digital CEO, Bill Ruh, has decided to depart GE to pursue other opportunities. The company intends to conduct an internal and external search to identify the CEO for this new independent company. Further details on GE's new IIoT software company will be announced in Q1 2019. This plan is subject to customary regulatory approvals, including information and consultation with employee representatives where required.
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J.P. Morgan upgraded shares of GE to neutral from underweight. Stephen Tusa, the firm's lead analyst on the stock, says the embattled industrial giant now has a more "balanced risk reward at current levels."
Tusa put out a bearish note on GE in May 2016 when the stock was above $30 that questioned the conglomerate's earnings and cash flow outlook.
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