General Electric Co. said Friday it plans to sell or spin-off its century-old appliance business.
The Fairfield, Conn., industrial conglomerate said in a statement the move is part of an ongoing plan to exit "slower growth and more volatile businesses."
The company is planning a strategic review that could result in an outright sale, a strategic partnership or a spin-off to shareholders.
The Louisville, Ky.-based business, which makes refrigerators, air conditioners and ovens, generates most of its revenue in the U.S., leaving its results dependent on "the rise and fall of a single market," GE said.
Analysts estimate sales in the appliance business, which posted revenue of $7 billion last year, are likely to decline between 10 percent and 12 percent this year. That stems from weak consumer spending and a drop in home improvement sales and residential construction.
Some have suggested a sale price in the low- to mid-$6 billion range.
GE shares rose 10 cents to $32.47 in premarket trading from a $32.37 close Thursday. The stock had its worst day in decades last month after the company reported a smaller-than-expected first-quarter profit and lowered its outlook for the full year.
That led to pressure to ramp up the pace of asset sales, with the appliance business and the NBC Universal media business among the top targets of speculation.
On Thursday analysts said the possible sale of GE's 101-year-old appliance business makes sense as consumer sales fall and financing continues to be squeezed.
Analyst Nicholas Heymann of Sterne Agee said in an investor note that a possible sale of the business should not be a surprise.
"It's not going to bounce back tomorrow," he said in an interview. "A $600 rebate check is not going to buy a $5,000 appliance."
Matt Collins, an analyst at Edward Jones in St. Louis, said selling the business makes sense even if it would be too late. The sharp drop in the housing market now makes an appliance manufacturer less attractive.
"It's a move in the right direction," he said. "The best time to sell it was two years ago. Unfortunately, it didn't happen then."
Collins said GE, which entered the appliance business in 1907, did not invest heavily in the appliance business.
"It's a low-margin low-growth company being attacked by foreign competition," he said.
Peter Sorrentino, senior portfolio manager at Huntington Asset Advisors in Cincinnati, said the timing of the sale is odd.
"It was hitting on all cylinders three years ago during the housing boom. It will be a much reduced bid," he said.
GE's appliance business is probably hurting because a portion of its business is based on consumer credit, which is being squeezed hard, Sorrentino said.
And GE officials must ask themselves if a selling price of between $4 billion and $8 billion is meaningful, he said.
"If not, why do it?" he asked. "If you put money into being competitive, why not wait until an upswing and get rid of it then?"
Heymann said he believes GE could sell the business for between $6.3 billion and $6.5 billion, a little more than half what it got last year for the sale of its plastics business to a Saudi company.
He said GE realizes it must shift its portfolio to higher growth businesses to allow its highly profitable infrastructure business, which makes big-ticket products such as jet engines, locomotives and water treatment plants, to comprise a larger share of the industrial conglomerate.
He also said GE should get rid of NBC-Universal, which he said is suffering from a loss in income from digital content distribution.
Chief Executive Jeff Immelt has rejected calls to sell NBC, though he has been under pressure to restructure the industrial and financial conglomerate, particularly since last month's surprising first-quarter earnings report that profit fell 6 percent.
Immelt has brushed off questions about whether GE will ditch various businesses. He said shortly after the earnings report that GE in the last five or six years has sold businesses valued at between $50 billion and $60 billion in what he called the "most active portfolio change in the history of the company."
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