GE Critique, Tech Firms’ Dominance, Barclays Loss: CEO Daily for February 22, 2018
How low can GE go? The iconic company’s stock, which has lost half its value in the last year, continued to tumble yesterday after The Wall Street Journal published a super-tough take on former CEO Jeff Immelt’s leadership there. The story cited multiple insiders saying Immelt cultivated a culture of optimism—“success theater,” some called it—that didn’t accommodate criticism or failure. As a result, the company’s problems were overlooked and underplayed.
It’s a devastating critique of the company that was once considered the pinnacle of business management and was a training ground for a generation of CEOs. Immelt stepped down as CEO last June and left as chairman in October—three months ahead of schedule.
The story quotes Immelt speaking at an event last May saying “this is a strong, very strong company” and that “when I think about where the stock is compared to what the company is, it’s a mismatch.” GE stock was trading at $28 when he made that comment; yesterday it closed at $14.49.
Reuters piled on the GE narrative this morning, with a story about how overly optimistic the company was about the market for gas turbines last year, leading to the meltdown of its power unit.
Immelt completely remade the GE portfolio during his 16-year reign as CEO, exiting the finance and media businesses and adding to the industrial business. But the company’s stock price took little note of the changes. He also made an effort to transform the company into a leader in applying digital technology to industry—but it is still too early to judge the success of that effort.
One of the advisers GE leaned on in its digital transformation was Eric Ries, author of The Lean Startup, who has become adviser to a number of large companies trying to transform troubled cultures. Fortune’s Adam Lashinsky has a fascinating profile of Ries out this morning, in which Ries admits he has no interest in ever running a large company like GE. “I would die. I wouldn’t last 10 minutes. It would destroy me.”
More news below.
Tech Firms’ Dominance
Amazon, Microsoft and Netflix are responsible for almost half the S&P 500’s gains this year—Amazon for 27%, Microsoft for 13%, and Netflix for 8.3%. Great for those companies, but it doesn’t necessarily reflect well on the others in there. Overall, tech companies account for more than three-quarters of the index’s 2018 gains. Wall Street Journal
Barclays reported an after-tax loss of £1.92 billion ($2.67 billion) for 2017, compared with a £1.62 billion profit the year before. Revenues were down 2% and pre-tax profits up 10%. The loss was largely attributable to the sale of Barclays’ African operation and the one-off charge associated with the U.S.’s big tax reform last year. CNBC
U.S. Embassy Explosion
An unidentified attacker threw an explosive device—probably a hand grenade—into the U.S. embassy compound in Podgorica, Montenegro, before blowing himself up, the country’s government has said. The embassy said no-one was hurt, but it was closed for visa issuances today, and U.S. citizens are advised to stay away from the embassy for now. Reuters
Venezuela’s government claims that the pre-sale of its “petro” cryptocurrency successfully raised $735 million. The virtual coin is supposedly backed by Venezuela’s oil reserves, and it’s highly controversial—the whole point is to allow the country to bust the U.S.’s economic blockade, and the U.S. Treasury has warned people not to buy into it. Fortune
Around the Water Cooler
Gun Control Debate
Teens from the Florida high school, where a former student last week slaughtered 17 people, squared off against politicians Wednesday night, including former presidential hopeful Marco Rubio, in a CNN-hosted town hall debate. They also argued with National Rifle Association spokeswoman Dana Loesch. One kid, Avery Anger, entered the debate with the simple question of when it would be safe for her to go back to school. “I don’t feel like they answered the question,” she said afterwards. CNN
The Anglo-Dutch consumer goods giant Unilever may choose to consolidate its headquarters in the Netherlands, in the context of the U.K.’s looming departure from the European Union. According to a Financial Times report, the British government is bracing itself for Unilever’s decision to do just that, despite efforts to convince the company to hang around. FT
A German court will this afternoon (European time) decide whether the cities of Stuttgart and Leipzig can ban diesel cars from their centers, as environmental group Deutsche Umwelthilfe has demanded in order to ensure compliance with clean air standards. If the Leipzig administrative court backs the ban, that will be bad news for the already-shaky value of diesel cars in Germany. Guardian
A former employee of France’s state-owned rail operator, SNCF, has lost a privacy challenge against his former employer, which found pornography on his work computer, along with forged certificates he had apparently created for other people. The man claimed the company had violated his privacy rights by searching his computer while he wasn’t there, but the European Court of Human Rights disagreed—because the files in question were not clearly marked as being private. Politico