In September of last year when General Electric Company (GE) CEO Jeffrey Immelt predicted GE would be a top-10 software company within five years, the market politely acknowledged the underlying message — that GE was wading deeper into digital waters — but didn’t necessarily take his statement literally.
After all, as advanced as the company has become, GE stock is (or was, anyway) still primarily an investment in an equipment and industrial-technology manufacturer, and there was nothing that could change that anytime soon.
Perhaps investors should have paid a little more attention to what Immelt was saying at the time, though. This week, the company made it clear it’s already well into the world of software, with a hand in … well, possibly everything.
Most of the time, not much. Right now, however, there is a curious common element … all four turned heads in a big way at this year’s Mobile World Congress event.
The annual Mobile World Congress is a showcase to let the world’s most notable Internet-centric and wireless-centric companies showcase new products and talk about the future. Most attendees aren’t even aware that GE is a regular presenter.
This year, however, General Electric made its own big splash with a piece of software called Predix.
What’s Predix? The company describes it as “the foundation for all of GE’s Industrial Internet applications, providing powerful, consistent, secure, and scalable support for the solutions you rely on to optimize your business.”
That’s a wide net, though it still doesn’t do the platform or the potential value it could add to GE stock justice. It would be more effective to ask what Predix isn’t. The answer to that question is, not much — it’s pretty all-encompassing.
While the unveiling of Predix’s details was met with a great deal of enthusiasm, the market may still not fully appreciate just how game-changing the software/platform could be …. not just for GE stock, but the world.
This Is Big … Real Big
It wouldn’t be wrong to categorize Predix as a piece of General Electric’s Internet of Things ventures. It wouldn’t be exactly right either, though. As the company explained several times since the creation of GE Digital last fall and the semi-soft launch of Predix shortly after that, the platform and the recently created Digital Alliance Program is the first ever program of its ilk aimed at allowing organizations to grow their digital industrial ecosystem.
The name and stated purpose of the alliance is exactly what it says it is, but it’s still too ubiquitous for most owners of GE stock to wrap their arms around. Fortunately, GE was willing to discuss some of its partnerships and developments to better explain just how big Predix would be. This is a small sample, in no particular order:
- Cisco’s Internet of Things Solutions: Cisco Systems, Inc. (CSCO) VP Tony Shakib said it succinctly enough, explaining “As digital industrial partners, the companies will introduce Predix-ready appliances integrated into Cisco’s IoT compute platform, as well industry-specific solutions like the brilliant factory offering.”
- GE Digital Power Plant: Leveraging the Predix platform, General Electric’s Digital Power Plant gives facilities as well as utility companies a better way of managing their power production and usage, ultimately allowing them to reduce costs. And it has been plenty marketable. Since its launch in October, 15 customers have bought the product.
- Capgemini Is a Developer of Predix Software “Apps”: Capgemini is a business consultant, but part of that consultancy includes the implementation of new processes and technologies for its clients. With a reported 200 software developers for the Predix platform though, someone else will not only be demonstrating and cultivating Predix, they’ll be selling it to an untold number of potential buyers.
Bottom Line for GE Stock
It’s not clear to what extent or how quickly Predix may have an impact on GE stock. General Electric’s tech and analytics unit drove $6 billion worth of revenue in 2015, and the company didn’t even get serious about this arm until September. And, in that the platform seems able to make all-things-digital at least a little better, the sky’s the limit … even if it’s going to take a while to get there.
And to be clear, it WILL take a while to get there. As was noted in a closer look at Sierra Wireless, Inc. (USA) (SWIR) earlier in the week, many companies like the idea of the Internet of Things, but only a handful are actually willing to pull the trigger on an investment in IoT.
Then again, knowing 15 customers are already on board with General Electric’s Digital Power Plant platform and that companies like Cisco and Capgemini are already pseudo-sponsoring Predix, it’s not like the upside to GE stock is too far down the road to worry about.
Whenever it happens, it’s going to be bigger than most anyone realizes right now.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.