Thursday, November 12, 2009

As G.E. Struggles, a Rival Steps Up (GE; UTX)

From Breakingviews via the New York Times:
It is only fitting that United Technologies is poised to buy assets from its cross-state rival General Electric. At least in the eyes of shareholders, United Technologies — the manufacturer of Otis elevators, Pratt & Whitney jet engines and Sikorsky helicopters — has emerged as the more successful of the two industrial conglomerates, both based in Connecticut.

G.E. is the larger of the two, with a $169 billion market cap. But it is hobbling its way out of the credit crisis, diverting cash away from dividends and selling assets to shore up its balance sheet. Next week, it is expected to sell a controlling stake in NBC Universal, the broadcaster it has owned for decades.

United Technologies, with its $63 billion market value, appears in robust health, quietly buying assets. It is also said to be in talks to acquire fire alarm and security systems operations that G.E., led by Jeffrey R. Immelt, has put on the block for some $1.5 billion.

Both companies are sprawling industrial corporations with concentrated portfolios in the aerospace, power and infrastructure.

Their main point of difference, however, explains why they find themselves at such remarkable odds. G.E. made a huge bet on finance while United Technologies stuck to its manufacturing knitting. Lately, G.E.’s decision has been dreadful for its shareholders.

In the last year, United Technologies, headed by Louis R. Chênevert, has returned 40 percent including dividends. That is 10 times G.E.’s total shareholder return....MORE