GE 2007 Annual Report Download - page 3

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Housing was particularly challenged. After fueling consumer
wealth for many years, U.S. housing prices declined for the fi rst
time in 40 years. Subprime lending standards and complex
investment products with risks that were not clearly understood
created a “hangover” for consumers and fi nancial institutions.
The environment we face today is a challenging one. How will
the U.S. consumer respond to falling housing prices? Should
we worry about infl ation or recession or both? Can the global
markets expand while the U.S. contracts? What impact will
the U.S. election have? Will banks resume lending money again
at normal levels — when, and at what price?
You could try to pick the perfect investment for this environ-
ment, but it would be a challenge. Maybe it is in technology, or
emerging markets, or commodities, or Treasury bills.
Or, you could pick GE. A company leading in the essential
themes of this global era. A high-performance company fi lled
with strong businesses. A company dedicated to developing
leaders. A company built to perform in good times and bad.
One reason for my confi dence is our performance. Even in
these diffi cult markets, 2007 was another record-setting year.
Revenues grew 14% to $173 billion. Earnings from continuing
operations grew 16% to $22.5 billion. We generated record indus-
trial cash fl ow, and returned $25.4 billion to investors through
the dividend and stock buyback.
We performed well against the operating metrics that we
use to measure our progress. Organic revenue growth was 9%,
surpassing our goal of growing at 2 to 3 times GDP growth.
Earnings per share (EPS) from continuing operations grew 18%,
well above our double-digit goal. Our operating profi t margin
grew 70 basis points, below our 100-basis-point goal, but we
made good progress. Returns reached 18.9%, and we are on
track for 20% in 2008. Industrial cash from operations grew 15%,
well above our target, and our free cash fl ow was $19 billion.
Can we continue to perform well in 2008? It will be challenging,
as we expect U.S. consumer spending to slow and credit to
tighten and be more expensive. However, GE is well-suited for
this environment and any other. This is because we invest and
deliver. We do this every day, every quarter, and every year.
To Our Investors,
Bubbles burst and excess ends in an ugly fashion. The
easy credit cycles that defi ned the recent past have given
way to a tidal wave of fi nancial crises. As I am writing,
banks have written off almost $150 billion, entire classes
of securities have disappeared, and rating agencies have
been criticized. This transition — from easy credit to no
liquidity — seemed to occur in the blink of an eye.