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GE plans to be a one-stop shop for developing countries

If you are looking for aircraft engines, rail products, water, energy, oil or gas equipment, GE has it all

NY TIMES NEWS SERVICE , NEW YORK

Jeffrey R. Immelt, GE's chairman and chief executive, wants GE to be a one-stop shop for developing countries' industrial needs.

PHOTO: NY TIMES

Last month, government honchos from Vietnam called on David L. Calhoun, who runs General Electric's brand new infrastructure unit. They huddled in a room at Manhattan's Waldorf-Astoria to go over a fairly formidable shopping list. The delegation left without placing an order, but Calhoun said, "I'm pretty sure we're going to get a near-term hit in airplanes, and a longer-term hit in energy."

Jeffrey R. Immelt, GE's chief executive, is clearly counting on him to get multiple hits, and from multiple countries. For the first time, GE has rolled aircraft engines, rail products, water, energy, oil and gas equipment, and even some finance units, into one all-encompassing collection of businesses, aimed at helping developing countries come of age.

"One of the biggest reasons behind creating the infrastructure unit is to offer one-stop shopping to developing countries," Calhoun said.

In fact, revving up sales in emerging countries has become the overarching goal behind many of the seemingly unconnected changes that Immelt has made at GE lately.

The legacy of Jack Welch, his celebrated predecessor, was to turn GE into a hugely profitable company that sold products and services primarily to companies in the US and Europe.

Immelt, just four years into his job, is already shaping a company that may become best known for selling products and expertise to a whole new set of customers: the governments in the developing world, and the businesses they run.

He has little choice: GE is running smack into the law of big numbers. In 1981, when Welch, took the helm, GE was earning US$1.7 billion on revenue of US$25 billion. By the time Immelt took over on Sept. 7, 2001, GE was topping US$28 billion in earnings and US$130 billion in revenue. Analysts expect it will exceed US$170 billion in sales this year.

Immelt has often promised that GE's revenues will grow at least at an 8 percent annual clip, and that its profits will grow even faster. Skeptics abound. "That's a pretty Herculean task, and the odds are against his delivering," warned Robert Friedman, an analyst with S&P Equity Research, who has a hold recommendation on GE shares.

Indeed, Immelt knows that GE's traditional customers -- the airplane manufacturers that buy engines and services, the hospitals that buy CAT scanners, the utilities that buy turbines -- cannot provide that growth. But the governments of China and India, or even Vietnam and Abu Dhabi, with their vast needs for continuous power, rail and air transportation, clean water, health care, and, eventually, consumer finance, just might turn to GE, one of the few true conglomerates, to meet all those needs.

GE already gets about half of its revenue from outside the United States. But only about US$25 billion, or 15 percent, comes from emerging countries. Immelt has said he expects that figure to more than double by 2010.

More important, he wants at least 60 percent of GE's incremental revenue growth to come from such countries, and analysts applaud that thought. "The developing world is GE's best option for delivering sustainable double-digit growth over the next five to 10 years," said Deane M. Dray, an analyst at Goldman Sachs who rates GE shares as "outperform."

Ferdinando Beccalli-Falco, chief executive of GE International and its self-described "minister of foreign affairs," insists that GE is in prime shape to exercise that option. "We're hitting the sweet spot between the needs of these countries and our product portfolio," he said.

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