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TheStreet Open House

GE Hopes Transformation Brings Energy Back to Its Shares

NEW YORK (TheStreet) --General Electric (GE) keeps surprising investors in ways it hopes will build excitement and loyalty. Most recently it won the energy business of French engineering conglomerate Alstom, a deal that GE snatched from the jaws of its German competitor Siemens (SI).

But CEO Jeff Immelt is looking beyond that. He wants to make good on his plan to transform GE from a finance-focused labyrinth into a heavyweight of the industrial equipment universe. The Alstom transaction is just one component of that transformation.

By spinning off its credit card business, Synchrony Financial, via an initial public offering later this year GE lowers its dependence on profits from its finance division to a target of less than 25% by the beginning of 2016 from 45% in 2013.

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In addition, the company built a research center in San Ramon, Calif., just down the road from Silicon Valley. There it employs nearly 1,000 bright minds working on what GE has called its "industrial Internet," a host of software operating systems that connects physical machinery to a digital network.

With 5% of the company's revenue devoted to research and development, the new research facility is working furiously to fulfill GE's self-proclaimed ambition to become one of the world's 10 largest software firms. This is quite the departure from the old GE, which prided itself on being a hardware industrial provider only.

GE's Immelt recently said that rather than acquire its way into the software business it would build that business organically. So the company hired Bill Ruh from Cisco Systems (CSCO) and set off on the task of getting GE's software operations going strong.

The three-pronged areas of software development include: how to optimize the efficient performance of machines like GE's jet engines, predicting when a machine will need maintenance or repairs, and coordinating the performance of a complex system like a railway or an alternative energy grid.

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