GE Hits the Off Switch on Lighting Business
General Electric will no longer make lightbulbs. In May, GE announced that it is selling its lighting business to Savant Systems Inc., a seller of home-automation technology. GE Lighting will remain in Cleveland, and its more than 700 employees will transfer to Savant, which will also get a long-term license for the GE brand.
The move is not surprising. Lighting is a commodity now, and GE wants to focus on assembling high-margin products, like gas turbines, jet engines and medical imaging equipment. Still, the sale feels wrong. The lighting division traces its roots to the company’s founding 130 years ago, when Thomas Edison invented the first viable incandescent lamp. Since then, GE Lighting was at the forefront of every major lighting innovation. In 1935, the first Major League Baseball night game was played under GE lights. A GE engineer invented the LED light in 1962, and the company introduced the first energy-saving fluorescent bulb in 1974. GE’s slogan—we bring good things to life—was inspired by the success of the lighting business.
Alas, lightbulbs are just the latest in a long list of things—toasters, fans, radios, televisions, plastics, adhesives, motors, mixers—that GE no longer makes. In the 1950s, GE got into computer manufacturing because it was the largest user of computers outside of the federal government. In 1970, GE sold its computer division to Honeywell. The company sold its appliance division to Haier Group in January 2016 and spun off its locomotive division to Wabtec in May 2018.
Then again, maybe the whole notion of manufacturing conglomerates like GE is as outdated as, well, the incandescent lamp. Sprawling conglomerates once dominated in the corporate landscape. They promised investors ever-increasing revenues and a steady stream of dividends. Through diversification, conglomerates can ride out fluctuations in any one market or industry. And, companies that are part of a conglomerate can often access financing through the parent company.
On the downside, it’s not easy to manage unrelated businesses equally well, and extra layers of management increase costs. Culture clashes, brand dilution and inertia are common problems. For investors, conglomerates can be hard to assess, since financial data are typically disclosed for the group, rather than for each business. And, since investors can diversify on their own, they don’t necessarily need to invest in a conglomerate. As a result, conglomerates can trade at a discount to the overall individual value of their businesses. In short, the whole is often worth less than the sum of its parts.
We wish Savant the best of luck. Please take good care of this historic American brand.
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