GE Shelves Plans to Spin-Off Digital Business

GE will retain its lucrative digital business—not spin it off, as had been planned—but it will sharpen the division’s focus on four key markets, including electric utilities and power generation, GE Digital CEO Pat Byrne told customers in an Oct. 31 letter.

“I want to affirm that GE Digital is staying in GE,” Byrne wrote. Changes to the business will ensure GE Digital remains “one of the largest industrial software companies in the market with over $1 [billion] in annual revenues,” he said.

The letter follows the company’s third-quarter 2019 earnings call on Oct. 30, in which GE Chairman and CEO Lawrence Culp told investors that the digital business was a “growing and important [profit and loss account (P&L) in its own right within corporate.” Under the leadership of Byrne, who took on the position three months ago, GE Digital is is “refining its focus to leverage GE’s first-mover investments in industrial software and analytics to be an important contributor to our customers’ digital futures,” Culp said.

Saving a Pioneering Business

GE, which has provided software for its energy equipment for decades, established the digital division in 2011, when it announced a $1 billion commitment to develop industrial software and analytics. In 2013, it launched Predix, its first software platform for the industrial internet of things (IIOT), and it has since released enhanced versions of the platform to enable companies to connect machines, data, and people in a single cloud-based platform.

To give the business clout in a fast-moving and highly competitive market, in December 2018 the company announced it was considering plans to establish a “new, independent company” focused on building a full IIOT software portfolio. GE intended to furnish the company—which it would wholly own but equip with its own identity, equity structure, and board of directors—with $1.2 billion. The proposed business would have taken on the Predix platform, asset performance management, historian, automation (HMI/SCADA), manufacturing execution systems, operations performance management, and the GE Power Digital and Grid Software Solutions businesses. As GE made the announcement, it also confirmed it had sold a majority stake in ServiceMax, its sizable field service management software, to private equity firm Silver Lake.

This April, however, the company laid off 172 employees at its two head offices in San Ramon, California, owing to “changes driven by commercial demands for GE Digital.” The changes, it noted, would “give GE Digital the best structure to speed product delivery for customers and meet market demands. These changes began last year and include, but are not limited to, job actions,” it said in a statement.

In a LinkedIn post on Friday, Byrne confirmed the company’s directional shift, saying that GE’s “clear market focus” would best position the company to use its strength of “deep industrial domain knowledge to deliver compelling value.”

“GE pioneered the Industrial Internet of Things and has a great combination of talent and technologies to help our customers meet their ambitions,” he said. However, the division has been revamped with a mission that is focused on bringing “simplicity, speed and scale to your digital transformation with software that helps you to better operate, analyze and optimize your business processes,” Byrne told customers in his letter.

Refining Focus

According to GE’s financial filings, over the second quarter of 2019, the conglomerate split its Grid Solutions unit into two: a Grid Solutions software business, which GE Digital absorbed; and the Grid Solutions equipment and services business, which is now housed within GE Renewable Energy. The Grid Software Solutions portfolio encapsulates geospatial information, market management, distributed energy resource management, grid stability, and utilities communications.

GE Digital has also soaked up the conglomerate’s other software businesses, including Power Digital and the Oil and Gas digital teams into its existing portfolio—which “includes manufacturing execution and automation software, Predix products, and digital transformation projects,” Byrne said. GE Digital will also “continue to provide key technology support in GE markets such as renewables, healthcare and aviation,” he said.

Byrne also noted the business has gained good traction in recent months. He pointed to partnerships with Australian firm Western Power, new relationships with Algerian oil and gas company Sonelgaz and U.S-based Catihness Energy, and a new manufacturing predictive analytics partnership with Intel.

Future directions, meanwhile, may focus on feedback GE Digital gained from its two-day 2019 user conference, which it held in Austin, Texas, in late September.

“Unlike any other software company around, GE’s industrial DNA is imprinted in everything we do,” Byrne noted. “It has been a busy year as we continue to invest and upgrade our software products across the board. In just the past eight months we’ve released iFIX 6.0 to deliver improved operational productivity for plant operators; Predix Manufacturing Data Cloud to create ‘connected factories’ and run powerful analytics in the cloud; Grid Analytics including Storm Readiness, Network Connectivity and Effective Inertia to predict outages and reduce restoration time; APM Integrity to help safety and compliance leaders manage potential issues; and most recently, Plant Applications 8.0 to help discrete and process manufacturers leverage real-time data to optimize operations.”

Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).