GE 2008 Annual Report Download - page 6

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Expand Leadership in Infrastructure and Media
We have built leadership in infrastructure and media, growing these businesses to about
$100 billion in revenues with margins of 17%. They require only $2 billion of annual
investments to drive long-term growth. These businesses grew 10% in 2008 and we
expect them to grow even in a difficult 2009.
TECHNOLOGY INFRASTRUCTURE earned about $8 billion in 2008 and under our framework
we are planning for positive earnings growth in 2009. Margins continue to be solid and
we expect them to expand in 2009. But we’ll face some headwinds, too. We expect some
aircraft engine order cancellations and Healthcare’s diagnostic imaging business could
have a very tough year in the U.S. We are planning for both of these events, which are
balanced against strong service revenue growth and cost reductions. John Rice
and his team have done a good job in building a strong set of leadership businesses that
can grow through this cycle.
ENERGY INFRASTRUCTURE earned about $6 billion in 2008 and we expect earnings and
margin growth in 2009. The decline in the price of oil is a negative, but we believe
that as costs go down for steel and other raw materials, some projects may in fact
accelerate. Long term, growth remains robust; electricity demand should double in
the next 25 years. We have a substantial advantage in a “clean energy world” thanks
to our ecomaginationSM initiative. We sold $17 billion in ecomagination products in 2008
and we are on track for sustained growth. John Krenicki and his team have positioned
GE to win in the global energy market.
NBC UNIVERSAL earned about $3 billion last year. It’s likely to be down in 2009, as we
expect the network environment to be particularly tough. But cable, more than 60% of
our earnings, is going to continue to be a source of strength, building on its ratings success
in 2008. Our movie business has already invested in new films for next year, which will also
support DVD sales. Our strengths are good content, a strong cable focus, and international
distribution. Jeff Zucker and his team have done a great job in repositioning NBC Universal
to win in the rapidly changing media landscape.
Capitalize on GE’s Cyclical Advantages
GE’s infrastructure businesses have cyclical demand tailwinds in 2009. One driver is
services. About two-thirds of our earnings come from services. We have a large installed
base of proprietary technology that has created a $121 billion backlog in services.
We will have about $40 billion in service revenues in 2009, growing approximately
10% at attractive margins. Service is more robust in a downturn because it creates value
for our customers. Service value for our customers comes from two streams: customer
efficiency through system performance and energy savings; and customer productivity
through process improvements and data management.
Aviation is an example of a business that can grow earnings even if the market for
new aircraft declines. We have $90 billion of potential long-term aviation service revenues
just on the engines we have shipped in the last three years. Our shop visits should
grow 20% in 2009, as 40% of our engines have not had their first overhaul. Our key
customers, like Southwest Airlines, appreciate our services because they get predictable
maintenance costs, improved reliability, and increased engine residual value.
Another driver is the impact government stimulus will have on infrastructure
investment. GE’s broad technical portfolio positions us as a natural partner as the role
of government increases in the current crisis. Over the past decade, we have positioned
GE to lead in the “big themes.” These include emerging market growth, clean energy,
and sustainable healthcare.
Global investments in infrastructure were expected to be $7 trillion before the crisis.
These investments make populations more productive, provide basic needs, and
importantly, create jobs. Now there will be an additional $3 trillion in government stimulus
directed towards infrastructure investments.
4 ge 2008 annual report