GE Picking Microsoft Is Ideal for Predix Internet Partnership

Microsoft is an ideal match for GE, says a William Blair analyst.
By James Passeri ,

Since last fall, General Electric (GE) - Get Report  has been looking for the right partners for its Predix operating system, the cloud-based backbone supporting its so-called Industrial Internet.

It may have found an ideal match in Microsoft (MSFT) - Get Report  , William Blair analyst Nick Heymann said in a Tuesday report. (GE stock is held in Jim Cramer's Action Alerts PLUS charitable trust.)

William Blair, which maintains an outperform rating on GE and $38 12-month price target, said GE's Monday announcement that it has inked two new partnerships to help develop Predix -- Microsoft and airline Flydubai -- will bring meaningful change to the Industrial Internet, which aims to optimize the performance on a range of machines through sensors connected to GE software.

"Every industry and every company around the world is being transformed by digital technology," Microsoft CEO Satya Nadella said in a Monday statement. "Working with companies like GE, we can reach a new set of customers to help them accelerate their transformation across every line of business -- from the factory floor to smart buildings."

GE first launched Predix last August, and has since inked partnerships with companies such as Action Alerts PLUS portfolio holding Cisco (CSCO) - Get Report  , as well as with Intel (INTC) - Get Report  and wireless companies Verizon (VZ) - Get Report  , AT&T (T) - Get Report  , Vodafone (VOD) - Get Report  and Sprint's (S) - Get Report  parent, Softbank.

Through the newly created Predix OS Alliance with Microsoft, GE expects to rake in about $15 billion in data-analystics sales by 2020, which represents roughly 7.5% of a $200 billion market, Heymann said.

Microsoft will bring its own Azure cloud to the Industrial Internet, allowing customers using machines from wind farms to jet engines share data through Microsoft applications and programs in its Office 365 suite.

"For instance, software apps running on GE Digital's Predix OS will be able to seamlessly communicate with systems running on Azure such as supply-chain management and product life-cycle management to more fully unlock and commercialize the full potential of the Industrial Internet," Heymann added.

GE shares are up roughly 25% since its Predix cloud was rolled out.

Editor's Note: This article was originally published at 4:06 p.m. EDT on Real Money on July 12.

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