Some analysts are suggesting that General Electric Co. is leaving the business-to-business arena because it couldn’t make any money. But the company said Monday the motivation behind its US$800 million sale of GE Global Exchange Services (GXS) to Francisco Partners Management LLC is strictly strategic.
GE announced the sale to Menlo Park, Calif.-based Francisco Partners this morning and said it should be complete by the end of October. Under the disclosed terms, GXS President and CEO Harvey Seegers will continue to lead the Gaithersburg, Md.-based company, and GE will retain 10 per cent ownership.
The announcement led some analysts to speculate GE was having trouble making money in the business-to-business space.
“They weren’t making a lot of money — that is pretty much what I make of it in a nutshell,” said Robert Friedman, an analyst at New York-based Standard & Poor’s.
James Kelleher, an analyst at Argus Research Corp. in New York, agreed and said that GE might be following former CEO Jack Welch’s philosophy: If you can’t be the best at something, then don’t do it.
But in a telephone interview this afternoon, Seegers discounted that, as did GE spokesman David Frail.
“I don’t think so,” Seegers said. “The new CEO [of GE], Jeff Immelt, evaluated his portfolio, said this was not something that was a strategic fit inside GE and has the chance to be a much bigger business as a stand alone.”
Frail also said the move was strategic and predicted that GXS will have a better chance to establish itself and grow as one of Francisco’s companies, Frail said.
Seegers said GE will remain loyal to its exchange, which began 35 years ago and now counts 60 percent of the Fortune 500 among its customers, including FedEx Corp., The Coca-Cola Co. and J.C. Penney Co.
The exchange, which co-developed the Basic computer language with Dartmouth College, has failed to garner the attention Seegers thinks it deserves. Although the business-to-business industry has been hit by a number of widely publicized failures, GXS has continued to add customers, he said.
“There were a lot of overhyped promises in the last couple of years that caught customers flat-footed when they didn’t pan out the way the customers expected,” Seegers said.
During that time, Seegers said, GXS added 40,000 suppliers. “We were not getting the headlines,” he said.
Seegers said that he looks forward to GXS becoming a stand-alone, privately held company under Francisco and that he believes it will help the exchange thrive.
Franciso portfolio companies include AMI Semiconductor Inc., integrated circuit company Legerity Inc. and XcelleNet Inc., which makes software to manage remote and mobile networks.
GE is online at http://www.ge.com