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article imageGE's stock slumps further as digital strategy starts to fall flat

By James Walker     Sep 8, 2017 in Technology
GE's stock has dropped to a two-year low after a J.P. Morgan analyst expressed concerns about growth. The fall has worsened GE's market slump, triggered by lasting problems with its Predix software. Predix is supposed to be a keystone of digital industry.
Predix is GE's most important digital solution. It's meant to connect industry infrastructure to an intelligent cloud platform, giving customers a way to predict failures, increase productivity and monitor their equipment. Targeting businesses ranging from energy through to aviation, the software was designed to transform GE into a "digital industrial" company.
Predix has been repeatedly hindered by setbacks. GE has faced delays and technical troubles in bringing it to market. The company's efforts to become a major player in the "industrial Internet" aren't panning out as planned. Reuters recently reported that GE could restructure itself and sell a minority unit as it tries to get a "clearer picture" of its software operations.
In the interim, GE is losing ground to other digital industry firms. As its digital transformation strategy languishes, existing cloud-first companies are being handed a greater advantage. GE has already had to abandon its plan to build its own cloud network to supported Predix. The service is hosted on Amazon Web Services and Microsoft Azure.
GE is now looking for ways to cut costs across its GE Digital industry. The company's value has fallen by $64 billion this year. Yesterday afternoon, it sank a further 3.2 percent after J.P. Morgan analyst Steve Tusa said the share price should be "something in the high teens." The stock had closed on Wednesday at $24.92, Bloomberg reports. According to Tusa, his bearish viewpoint represents an "adjustment to reality."
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GE's struggles demonstrate the difficulties companies are experiencing as they become digital-first businesses. Despite holding a 125-year legacy and a large-scale digital strategy, GE is learning that success in the digital era isn't guaranteed. Predix hasn't yet secured GE a place in the future of business. Instead, it's becoming a money sink that’s not delivering its anticipated returns.
GE isn't giving up yet though. Predix will remain a core part of the company's portfolio amid a general tightening of its digital strategy. According to Reuters, senior executives want to "ensure there's a return" from the platform after investing so many resources. The company's refocusing its sales plan to prioritise existing customers in core industries such as aviation and oil and gas.
This week, GE and Qantas announced a new app to cut carbon emissions from planes, showing how Predix's technology can be applied in industry. The app assists pilots to improve flight efficiency and reduce fuel usage. It analyses "trillions" of data points and has been hailed as "transformative" for airline carbon emissions. It's this kind of application that GE wants to target, assisting big industry in streamlining legacy processes.
More about General electric, GE, digital transformation, digital industry, digital strategy
 
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