GE without light bulbs puts focus on other industrial spare parts
3 min read 09 Apr 2017, 05:19 PM ISTAlmost 140 years after GE founder Thomas Edison developed the first practical incandescent light bulb, GE is considering parting with its consumer lighting business
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New York: It’s light (bulbs) out at General Electric Co.
Almost 140 years after GE founder Thomas Edison developed the first practical incandescent light bulb, the industrial giant is considering parting with its consumer lighting business, according to the Wall Street Journal.
Frankly, it’s been a long time coming and is more of a symbolic step than anything else: The unit’s reported potential sale price of about $500 million amounts to just 0.2% of GE’s current market value. But symbolism matters at a company like GE, whose long history has included a series of evolutions.
It will be sad if GE gets rid of light bulbs. But the business just doesn’t fit anymore: it’s a commoditized industry with weak growth, fewer innovation opportunities and different distribution channels than those used to sell locomotives or parts for a Boeing Co. plane.
The unit stood out all the more as GE separated the other consumer-facing parts of its empire including NBC Universal, appliances and the Synchrony Financial credit-card business. Home-bound light bulbs have also become more marginalized within GE’s broader lighting unit, which has shifted its focus to data-driven and energy efficient LED solutions for commercial entities and cities.
The potential sale of a business so core to GE’s historical identity and yet so irrelevant to the modern day reality of what the company has become got me thinking: What other legacy consumer-facing businesses are industrial companies holding onto despite a push across the sector toward higher-margin, technologically advanced products? Could these operations also end up out the door?
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Some companies have already been pruning. Illinois Tool Works Inc. sold its Space Bag brand—which makes vacuum-seal storage products akin to those featured on infomercials—to SC Johnson in 2012. GE’s rival across the sea, Siemens AG, spun off its Osram Licht AG lighting division years ago and that business itself just completed the sale of its lower-margin general lamps operations to a Chinese consortium including MLS Co.
But there are plenty of holdouts. 3M Co. is the obvious one, with an entire consumer division dedicated to things like Scotch tape, Post-it notes, wall-hooks and soap dishes. Philips Lighting, spun off from Royal Philips NV last year, has vowed to stick with traditional and consumer light bulbs rather than follow in Osram’s divestiture footsteps.
In addition to selling jet engines and turbochargers, Honeywell International Inc. has a home-products business that offers humidifiers, doorbells and thermostats. The company also makes Puddletons rain boots for women and children (who knew?) and Muck boots, which sort of kind of maybe fit with its portfolio of professional safety gear.
United Technologies Corp. sells elevators to building operators, but it also sells smoke detectors to average Joes. Pentair Plc offers pool cleaners. Ingersoll-Rand Plc has a golf-cart business, which isn’t really a consumer product unless you’re Donald Trump but it’s random for a company that makes HVAC systems.
Not all of these are so easily gotten rid of. 3M is highly unlikely to part with its consumer unit. The shorter life cycle of those kinds of products works to 3M’s benefit as a company that’s built a reputation for being an innovator, says Bloomberg Intelligence analyst Joel Levington.
The division has had some struggles lately, but it’s generally been a steady, high-margin business and has overlaps with the company’s industrial abrasives and adhesives products. If anything, Philips Lighting’s commitment to light bulbs may actually make it a buyer of GE’s business, barring antitrust concerns. United Technologies’ residential air conditioners and security products aren’t clearly delineated from more-commercial products.
Honeywell’s emphasis on home devices that can be controlled via smartphone fits with its new CEO’s software and connectivity push. But a potential sale of GE’s light bulb business raises the question of whether these companies should take a harder look at what all they put under their industrial umbrella. Like that rain boots business—what’s up with that? Bloomberg
