Here is an interview with Jeff Immelt, CEO of GE. The questions focus on the Vivendi deal, and I think Immelt gives some great answers about making strategic acquisitions.
Q: GE has maintained for years that it didn't want to be in the production business. What changed?
A: It's one of those industries that's going through strategic change in terms of the evolution of technology and what's happening with consolidation and distribution. Bob [Wright, chairman and CEO of NBC] and I both believe that content was going to be an important part of the future, so [production] began to be a natural part of the strategy.
Q: So you like the production capability?
A: Having the film library and stuff like that really gives us some strategic advantages. And the Universal team has done a pretty good job in how they run their studio, with less volatility and things like that. They operate it with an excellent management team.
Q: This seems kind of opportunistic. It certainly wasn't in your top five in terms of industries you mentioned focusing on in your most recent annual report.
A: There is a core nucleus of GE businesses, of which NBC is one, that I'm always going to be looking to make bigger. I view this as being in the best interest of our investors.
Q: How does this help the overall company?
A: There are really five characteristics that I look at in a GE business. It's got to have some tie to technology, which this does. There's information and a way you can differentiate yourself with content, which is key. I like businesses that have multiple revenue streams, which this clearly gives us in terms of advertising and fees.
I like being able to have control over how we go to market, and this gives us more content to do that. It's capital-efficient. And I like businesses that can be globalized. This has less of a global aspect, but it's strong on the first four.
Like I said, very nice answers. Acquisitions for their own sake usually don't work out. There has to be a good strategic fit, and it must increase shareholder value. It looks like this may turn out really well for GE (and for Businesspundit, who owns GE stock in his Roth IRA).