Priced to Sell

General Electric Seeks 'Strategic Options' for Its Iconic Appliances Unit

General Electric is pulling the plug on its iconic appliances division.

For more than a century, GE ovens, refrigerators and freezers have been a staple of the American home. The company is as closely associated with washers and dryers as IBM was with personal computers.

And like IBM saw its PC line, which it sold to China's Lenovo in 2004, GE sees appliances as a slow-growth drag on the company, preferring to concentrate on its faster-growth units. For IBM, it's software and business services. For GE, the company sees growth in its health care technology and jet engine divisions. Successful brands evolve and often end up making few of the products for which they became famous.

Which is what led the $320 billion company to announce yesterday that it was seeking "strategic options" for its appliances division. GE said those options include a partnership with another company, a spinoff or an outright sale. But when a company "seeks options" for one of its units, it is well understood that its preferred option is generally to find a buyer.

Last year, GE sold its hallowed plastics division to Saudi Basic Industries for $11.6 billion, as Chairman Jeffrey Immelt began trimming the sprawling conglomerate.

Analysts cautioned that GE would be selling its appliances unit at the bottom of the market, which makes it difficult to value. Sales price estimates range from $3 billion to $7.3 billion. GE will keep its lighting and electrical distribution businesses, which are part of the appliances division.

Despite the high profile of GE appliances, the division accounted for a scant 4 percent of GE's 2007 revenue of $172 billion. GE has 20 percent of the U.S. market of large kitchen appliances, according to market researcher Euromonitor International, putting it behind Whirlpool.

Wall Street reacted with ambivalence to the announcement. Shares of GE closed down 24 cents at $32.13.

The news comes one month after GE surprised analysts by missing its first-quarter earnings estimates, reporting a 6 percent drop in profit and lowering its forecast for the rest of the year, prompting a substantial sell-off.

Home appliances are among the products that consumers are most likely to associate with GE, a behemoth that also makes electric motors, wind turbines, wastewater treatment technology, airport security devices and nuclear reactors, and owns NBC Universal, home to shows such as "Heroes."

Why, then, would GE want to exit the "white goods" business, parting with a division that has built solid brand equity and affinity since 1907?

"GE Appliances has a very strong brand, great distribution, a talented leadership team and for more than 100 years, has been one of the icons associated with GE in the United States," Immelt said in a statement. "However, it remains primarily a U.S. business, meaning its fortunes are tied to the rise and fall of a single market."