General Electric Co. (GE) with the completion of the acquisition of the privately-held Lineage Power Holdings Inc. from The Gores Group, LLC has broadened its expertise in telecommunication and datacenter power. Lineage Power is a worldwide provider of high-efficiency power conversion infrastructure technology and provides services for the telecommunications and datacenter industries.
The acquisition of Lineage Power provides an opportunity for GE Energy to employ its technology in power conversion space which has annual turnover of $20 billion. In this sector, the demand for reliable, high quality power is driven by the growth in cloud computing and mobile internet voice, video and data applications. The company will be able to aid the technology worldwide in optimizing their energy efficiency.
The combined research and development groups of both the companies are expected by General Electric to benefit the battery, datacenter, electric vehicle and renewable energy segments.
Lineage Power, based in Plano, Texas, generated about $450 million revenue in 2010 and employs about 2,300 employees, with its manufacturing locations in China, Mexicoand India.
General Electric has one of the best infrastructure franchises worldwide with solid organic growth rates, exposure to favorable secular trends and a large installed base supporting a growing annuity-like service business.
The company faces significant headwinds, including reduced infrastructure spending globally, ongoing regulatory-driven challenges in the healthcare market, reduced advertising spending and increasing delinquencies and default rates in financial businesses.
General Electric, however, operates in a highly competitive climate, characterized by changing technology that requires continuing research and development. The company remains focused on product leadership, expanding its core technologies, and creating a lower cost position. However, the company’s global expansion is subject to economic and political risks pertaining to diverse operating geographies.
Operating in more than 100 countries globally and employing about 300,000 people worldwide, General Electric Co. is a diversified infrastructure, finance and media company. Major competitors of General Electric are Citigroup Inc. (C), Koninklijke Philips Electronics NV (PHG) and Siemens AG (SI).
General Electric currently has a Zacks #3 Rank (short-term Hold recommendation).
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