GE 2007 Annual Report Download - page 8

Our competitive advantage in Infrastructure is based in tech-
nology. We invest $3 billion in research and development each
year, so that we have a deep pipeline of new products. Our
Infrastructure equipment orders have grown on average 39%
annually for the last three years. While this has been great
for current earnings, our equipment growth is even more exciting
for the future. In 2007, we added approximately 6,000 thermal
and wind turbines, engines, and locomotives to our installed base,
which drives even greater service growth. We fi nished 2007 with
a $100 billion backlog of service agreements built on the tech-
nology of our installed base. Our Infrastructure service business
has $26 billion of very profi table revenues and should grow
more than 10% annually for the next decade.
One of the things I love about our Infrastructure business
is that we are always on the “same side as our customers.”
In other words, we make money together. A great example is the
relationship we have with Duke Energy. We worked together to
form the U.S. Climate Action Partnership (USCAP), an important
initiative for industry and non-governmental organizations to
provide a set of principles that will guide future climate legislation.
In 2008, Duke and GE are collaborating on wind energy, new
gas turbines, and an investment to build the fi rst commercial
Integrated Gasifi cation Combined Cycle (IGCC) coal plant. We
are strategic, technical, and fi nancial partners.
About 35% of our earnings are in Commercial Finance and
GE Money. Financial services is a great example of how our
execution enables us to outperform our competition. Our teams
have grown their earnings more than 10% for decades, so we
like these businesses. However, in 2007, “fi nancial services” took
on a negative connotation for investors. The equity value of
banks and consumer fi nance companies declined by 20% in the
second half of 2007. Conversely, our fi nancial services earnings
grew 20% this year despite the volatility in the industry. We earned
$10.3 billion, and our write-offs were small relative to our size.
Our fi nancial services businesses are inherently more valuable
than those of traditional banks or other fi nancial services
companies. Why? Because we have signifi cant global origination
in end-user markets that we understand better than others.
We have deep expertise in areas such as commercial real estate
and commercial equipment leasing. We have sound risk principles
that are deeply embedded in our culture and supported by a
strong balance sheet. We underwrite risk to hold on our balance
sheet, so that we can manage our exposure to an asset class or
customer. We have a great global position. More than half of our
fi nancial services earnings are outside the U.S. As the rest of
the world continues to expand, we can withstand a market slow-
down in the U.S. and still grow earnings.
Our fi nancial services businesses should do well in a year like
2008. Pricing will improve as banks retrench. There could be
$300 billion of assets available at high returns. We plan to seize
opportunities in the current turmoil and position our fi nancial
services businesses for years of profi table growth.
NBCU is a great example of a business that becomes more
valuable as its market evolves. In 2002, 75% of its earnings
derived from NBC broadcast television. But we realized that the
broadcast model, while important, would grow more slowly in a
digital world. We have refocused NBCU in global markets around
fast-growth cable, fi lm, and digital businesses. Today, driven by
powerhouse brands such as USA Network and Universal Pictures,
these businesses in total represent more than 80% of NBCU’s
earnings and are growing at about 15% each year. In 2008, we
expect to achieve double-digit growth in digital revenues. As a
result, NBCU is positioned to grow earnings 10% in 2008.
As with the rest of GE, NBCU has exciting growth opportunities
outside the U.S. This is approximately 20% of our revenues today,
and will grow 20% annually. Last year, we launched a studio in
London to produce global content. We recently agreed to acquire
a signifi cant stake in India’s NDTV, a major media company in
one of the world’s fastest-growing markets. In 2008, we will have
15 cable and satellite brands that will be distributed in more than
100 countries around the world. We will double our revenues to
$500 million in international cable. We are playing in a $100 billion
market, so we have a massive runway for growth.
Should we sell NBCU? The answer is no! I just don’t see it
happening … not before the Olympics … not after the Olympics.
It doesn’t make sense. The business has outperformed its
competition and the GE average for the last 20 years. Our diver-
sifi ed content position is very strong. Content is increasing in
value in a digital world. We are in a good cycle, with momentum
around the Beijing Olympics, the U.S. elections, and the 2009
Super Bowl. NBCU benefi ts from GE’s global footprint, fi nancial
strength, and human resource skills. And, NBCU provides us with
a leading perspective on digital transformation. NBCU adds value
to GE, and GE adds value to NBCU. This is true now, and it will
be true in the long term as well.
GROWTH AS A PROCESS
execute
for growth
technology
commercial
excellence
innovation
developing
growth
leaders
customer
focus
globalization
6 ge 2007 annual report
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