Of all companies that probably come to mind when you think of IoT plays, General Electric Company (NYSE:GE) stock isn’t likely the first. But that’s what acquisitions are for.
The Internet of Things may often get framed as snazzy home gadgets, like a fridge that knows when it’s time to go grocery shopping, but the the real weight is in industrial applications.
ServiceMax, the biggest of General Electric’s recent buyouts, is a cloud-based provider of software used in inventory and workforce management.
GE explicitly said the buy was to power the “industrial internet,” which really means powering its software platform called Predix, the goal of which is efficiency.
Predix works at the intersection of industry, Big Data and software, helping industries like utilities, for example, ingest large amounts of data and apply more efficient equipment and personnel management.
In the case of ServiceMax, for instance, it’s about equipping field workers with better technology. More specifically, the software helps field workers access data, contracts and pricing from anywhere and on any device.
GE Stock: Buying a Ticket to the Big Show
But the industrial internet buys don’t end there. In an attempt to spruce up its GE Digital business, the company also acquired Wise.io, a machine learning platform that is used to route support tickets and even suggest automated answers, growing smarter based on how humans use the software. Wise.io is used by companies like Pinterest, Twilio Inc (NYSE:TWLO), TaskRabbit, Thumbtack and other tech startups.
And GE bought Bit Stew Systems. As the company’s CEO noted, “Data integration is the Achilles’ heel of dealing with data coming from diverse sources and systems,” which is what the industrial internet is all about and what Bit Stew explicitly works to solve.
That’s a lot of technology to wrap into its blossoming platform, plus over one hundred new personnel. The potential is serious — and perhaps seriously underestimated for GE stock holders.
According to The Wall Street Journal, General Electric said this software unit will generate orders of $7 billion this year, while software sales are expected to tally $15 billion in annual revenue by 2020, with about half of that coming from Predix.
Bottom Line on GE Stock
Hopefully, that will help GE stock light a fire under its sales, as a decline is expected next year. But GE stock is slated to keep growing earnings anyway (speaking of efficiencies), with a 14% expansion expected this year and yet another 12% growth on top of that the year after. And the company is sitting on a strong streak of topping estimates.
Toss in a 3% dividend yield and you have a nice tech play in GE stock without the normal amount of speculation that comes with the Internet of Things, especially.
GE is making all the right moves toward the IoT with wide-sweeping, in-demand enterprise applications, and it already has the customer base to sell to.
Yet, GE stock has moved sideways so far this year, suggesting there may be more room for growth as these recent investments pay off.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
