General Electric's Back-to-Basics Strategy is Paying Off

Last Updated Jul 22, 2011 10:04 AM EDT

General Electric's strategy of getting back to the basics of making and selling industrial goods rather than financial products appears to be paying off, at least if the company's latest earnings report is any indication.

The iconic American conglomerate and only remaining original member of the Dow Jones Industrial Average posted a 22 jump in second-quarter profit, thanks largely to strong sales of railroad locomotives, turbine engines and other heavy industrial goods.

True, GE's (GE) financial arm, GE Capital, which did so much to cripple the company during the credit crisis and recession, is on the mend, and that greatly helped results. With $12 billion in revenue, GE Capital is still the biggest part of the company, accounting for about a third of total sales.

But accelerating profit growth came from GE's smokestack business -- the industrial divisions -- driven by robust demand from up-and-coming emerging markets.

International industrial revenue rose 23 percent, GE said, representing nearly 60 percent of GE's total industrial revenue.

GE's industrial divisions posted double-digit revenue gains in India, China and Russia, as well as in the regions of Southeast Asia, Africa and Latin America, the company said. Australia and Canada -- developed economies with strong currencies and lots of commodities to export -- also bought plenty of GE's industrial wares.

In the last century GE manufactured the transportation, technology and infrastructure goods that helped fuel outsized U.S. economic growth. If the company's latest results represent a trend, the 21st Century could offer more of the same, only this time around the customers will increasingly be found overseas.

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    Dan Burrows, a veteran of Aol's DailyFinance, SmartMoney and MarketWatch from Dow Jones, covers the markets and economy with an eye toward investing for the long haul.

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