Friday, September 5, 2008

Jack Welch & GE’s Stock Price

What is the root cause of the loss of investor confidence with General Electric’s Jeffrey Immelt?

On July 10, 2008, Bloomberg reported: “…investors, impatient with…Immelt’s effort to revive the shares…his job appears secure for now…it is safe in the short run. He has the support of the board in the short run…”

Could Jack Welch have created this uncertainty, with his April 16, 2008 statement on CNBC, claiming Mr. Immelt has suffered a “credibility crash”?

GE announced its first quarter earnings forecast on March 2008, just weeks prior to reporting the actual earnings. The bottom line was significantly lower than the forecast, leaving investors shocked and surprised. GE stock dropped significantly.

However, Mr. Immelt has almost doubled the earnings for GE over his 5 year tenure. Wouldn’t this be considered a success? Isn’t this proof of his credibility?

Was Mr. Welch’s negative insight merely a slip of the tongue? Did he ever make this type of verbal error in his twenty years as GE’s CEO?

Was this intentional? What would be the motive?

Perhaps as Genghis Khan once said, “It is not sufficient that I succeed - all others must fail.”