Does GE Security's Profitability Make it a Good Company?

Published Sep 23, 2009 00:00 AM
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At ASIS, the GM of GE Security reported that the division is double digit profitable. However, does that make it a good company or a good acquisition?

It's totally believable that GE Security is quite profitable but it does not address the main strategic issued raised in our discussion:

  • The company does not seem to be reinvesting sufficiently to maintain profitability and growth in the future. This can artificially inflate short term profitability at the expense of long term competitiveness.
  • GE Security has a lot of unhappy customers. I have received 8 emails in the last month from GE partners and end users. Here's an e-mail today from an end user: "GE's software is so unstable and problematic that it is practically unusable at times. Is this common among software packages?" Under-staffing QA and customer support can also inflate profitability but at the expense of profitability.
  • How much is GE Security's revenue declining? Many of the large legacy incumbents are suffering double digit revenues decreases? There are only so much costs to cut to maintain profitability.
Profitability and unattractiveness can simultaneously be possible - especially if the 3 factors above are correct and significant.
[Update: GE Security revenue is plummeting, further evidence that short term profitability, like their competitive positioning, was fleeting.]