GE 2012 Annual Report Download - page 6

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A PORTFOLIO THAT PLAYS TO STRENGTH
PREMIER
INFRASTRUCTURE
COMPANY
VALUABLE
SPECIALTY
FINANCE
Strength
Cash
STRATEGIC IMPERATIVES
Superior
technology
Enhancing
customer
services and
analytics
Leading
in growth
markets
Simple and
competitive
cost structure
U.S. and Europe, which will keep a limit
on growth in the short term.
The major source of volatility in corpo-
rate planning is the U.S., something I
never thought I would see. We would
all like to believe that the U.S. will con-
tinue at a steady rate of 3%–4% GDP
growth, as we saw in the 30 years
before the global financial crisis.
However, the U.S. faces more major
“political storms” this year: the fiscal
situation, repeated debt-limit contro-
versy and tax reform. We fear that this
uncertainty will impact capital invest-
ment. And the amount of regulation
tends to grow during periods of fiscal
strain, and we are certainly seeing that
in the U.S. The number of “major regu-
lations”—regulations with more than
$100 million of impact—has exploded in
the last few years. The result has been
an additional burden on business.
Until we solve for these constraints, it
is hard to see that the U.S. will return
to its full growth potential.
We have demonstrated that GE can
perform in this environment. In 2012,
we grew our segment profits by 11% to
$22.9 billion. We generated $17.8 billion
of cash from operating activities (CFOA),
up 48%, and returned $12.4 billion of
cash to investors through dividends and
stock buybacks. Our total shareholder
return grew by 21%, well ahead of the
16% growth in the S&P 500. Our market
cap grew by about $30 billion, and
we remain the seventh most valuable
company in the world.
We like the way GE is positioned in
this environment: a great portfolio
of world-class, technology-leading
businesses; a strong position in fast-
growth global markets; leading-edge
service technologies that achieve cus-
tomer productivity; high visibility with
a backlog of $210 billion; and a strong
financial position. We want investors
to see GE as a safe, long-term invest-
ment. One with a great dividend that is
delivering long-term growth.
FIVE CHOICES THAT DRIVE
THE FUTURE
Strategy is about making choices,
building competitive advantage and
planning for the future. Strategy is
not set through one act or one deal.
Rather, we build it sequentially through
making decisions and enhancing
capability. As we look forward, it is
important that investors see the
Company through a set of choices we
make for the purpose of creating value
over time.
First, we have remade GE as an
“Infrastructure Leader” with a
smaller financial services division.
We like infrastructure markets because
they are growing and because they
utilize GE capabilities in technology,
globalization, financing and customer
relationships. About $60 trillion of infra-
structure investment is needed by 2030
to support billions of new consumers
joining the middle class in the emerging
world, and to support developed-
market productivity. At $100 billion of
revenue with 15% margins, we are the
largest and most profitable infrastruc-
ture company in the world.
Over the last decade, we have grown
our infrastructure platforms by
investing in adjacencies, pursuing
opportunities that are closely related
to our core. About one-third of our
infrastructure revenues comes from
businesses we weren’t in a decade
ago. These include fast-growth busi-
nesses like Oil & Gas, Life Sciences, and
Distributed Power. This growth has
come through organic investment and
focused acquisitions.
4 GE 2012 ANNUAL REPORT
LETTER TO SHAREOWNERS