What Good Thing Should GE Bring to Life Next? Software
TO: General Electric Chairman Jack Welch
EX: Mickey the Agent
RE: Post-Peacock Purchasing
Jack! Thanks again for those funny-looking light bulbs. They cut my electric bills in half, just like you said they would. The savings almost make up for my losses with Kidder--but, hey! I know you’ve got bigger problems to manage there than my portfolio.
And speaking of portfolio management, I think it’s great you’re finally serious about selling NBC. Your timing couldn’t be better and, let’s face it, you were never really comfortable running a pop culture business. I mean, Jack, it’s tough to picture you leaning back in your La-Z-Boy quaffing a brewski while you channel-surf to “Frasier.” That’s not your style; that’s not GE.
Besides, you know that NBC is simply the wrong vehicle for GE to be driving on the information superhighway. The Peacock has the wrong kind of programming, the wrong kind of network, the wrong kind of software. It’s a dodo bird, not an eagle.
No, Jack, GE needs a different kind of software company--a software company that fits snugly into GE’s industrial base but neatly complements your presence in services. You need a company that can be just as much a part of the global information infrastructure--the infostructure--as GE Power, GE Appliances and GE Lighting are today a part of the global electric power grids. You need this because you know the software content of every single business that GE is in--from plastics to power, from medical imaging to mutual funds--has been rising rapidly. You really want to ignore that reality?
If GE hopes to retain its preeminence as a value-added supplier to the world’s industrial infrastructures, it needs to commit to becoming a value-added software supplier to the world’s infostructure. Software is blurring the lines between the products GE sells and the services it provides. The software-designed derivatives offered by a GE Capital are as much products as financial services. Similarly, the polymers peddled by GE Plastics--your old stomping grounds, Jack--are so customized by your engineers that GE Plastics is as much a service firm as an industrial manufacturer. That’s why you need to be a player.
So, Jack, have I got a deal for you! It’s pricey, but isn’t GE’s future worth it? Buy Oracle Corp. It’s the kind of company GE needs to own. It fits your criteria of globalism, growth and market leadership.
With revenue approaching $2.5 billion annually, Oracle is the top company in database-management software. That’s the software that lets companies store, index, tabulate, link, structure and retrieve all their critical information. Customers use it for managing everything from personnel to logistics to product design. It’s the kind of software GE Capital would use to keep track of all the permutations of its deals. It’s what GE’s chief information officer would call “mission-critical.” But you should know that fully 40% of Oracle’s revenue comes from its consulting and support business. So it’s both a product and a services company--like GE.
Worried about the future of the database-management market? It’s a business Microsoft desperately wants to get into. This is an incredible growth industry.
But wait, it gets better. It turns out these database designs can handle audio and video as well as spreadsheets and text. That means that with the right hardware, Oracle’s software can become a distributor of high-speed interactive multimedia. In other words, the local cable company or telephone company could use these multimedia servers to pipe interactive video games, movies and television programs down their networks. Bang! You’re in the video-on-demand transactions business without exposing yourself to the vagaries of the fickle public.
Just as GE turbines generate power for the regional utilities, GE multimedia servers could generate interactive video for the regional Bell operating companies. GE sticks to the industrial infrastructure and service businesses it knows and does so well, right, Jack?
By the way, Jack, Microsoft is trying to get into the media server business too. Beginning to sense a pattern here?
Why does an Oracle need a GE? Well, your credibility and global reach wouldn’t hurt. Frankly, there are a lot of companies out there that would be more comfortable having a strategic software relationship with a reliable giant such as GE than with an entrepreneurial company that is constantly complaining about growing pains. Trust me, you’d get a kick out of having Oracle CEO Larry Ellison on your board.
What’s more, the deep pockets of GE would let an Oracle make strategic investments in, say, an Apple Computer to better compete with Microsoft for control of the interface at both the desktop and the cable converter box.
The catch, Jack, is that Oracle’s market cap at the moment is a tony $12 billion. To be sure, it will stumble--all software companies do--and then GE can pounce. But if that’s just too much for GE to swallow in one gulp, consider Sybase, the No. 2 company behind Oracle in the database market. Sybase’s market cap is around $2.5 billon--just about what you’re supposed to be getting for NBC. Is that a good swap or what?
The point is, between financial services and all the computer-aided design work you do with GE Plastics and Medical Systems, you’re already in the software business in a big way. It’s time to take the next big step. Come on, Jack, anybody can buy another mutual fund or credit card firm.
Gotta hop. I’ve got Sumner on the other line. Gee, isn’t it a little early for him to be asking me for Knicks tickets?
