GE Explores Options for Consumer, Industrial Units

General Electric said on Thursday it will look to spin off to shareholders its entire consumer and industrial unit, signaling it is ready to part with a much larger slice of its portfolio than just the $7 billion appliance arm it has been seeking to sell.

This plan adds in lighting and other industrial products that together with appliances generate about $17 billion in annual revenue, representing about 10 percent of GE's overall revenue.

Since stunning Wall Street with an unexpected drop in first-quarter profit, the Fairfield, Connecticut-based company has faced investor calls to take aggressive actions to improve its results.

When GE put its appliance unit on the block in May, it held out the possibility of a spin-off. But investor attention has focused on the sale after GE Chairman and Chief executive Jeff Immelt rattled off a list of Asian companies that he said were in the running to buy the unit, which makes products including dishwashers and refrigerators.

"As we explored our options for appliances, it became clear that the fastest, most efficient step we could take in completing the transformation of our industrial portfolio would be to focus on a possible spin-off of the entire unit," Immelt in a statement on Thursday.

GE shares moved little on the news, suggesting investors were not surprised.

"The writing was on the wall," said Matt Collins, capital goods analyst at Edward Jones in St. Louis. "It's been an area that they have not invested heavily in in recent years. It's not a high-growth area. It's not a very profitable area, so it doesn't fit the general description of businesses they want to be in."

Worries Focused on Finance

But calls by analysts and investors to simplify GE's sprawling operations -- which range from making jet engines to writing commercial loans to running NBC Universal media -- have not focused on the appliance and lighting arms.

Rather, some on Wall Street have expressed concerns about GE's financial operations, which represent about half the company and were responsible for its stunning first-quarter earnings shortfall.

"Investors are more concerned today about the financial side of the business," Collins said.

GE is also trying to sell off slices of its financial portfolio, such as its Lake Japanese consumer lending business and its U.S. private-label credit card operations.

But the appliance and lighting units are the two businesses that U.S. consumers most closely associate with the GE brand.

The spin-off would encompass all of GE's industrial portfolio except its Enterprise Solutions unit, which sells security and control systems to corporate customers, a spokesman said.

Investors had suggested GE's appliance arm would have appealed to a large foreign manufacturer looking to build its presence in the United States. That perception was reinforced when Immelt told Asian reporters that China's HaierGroup, South Korea's LG Electronics, Sweden's Electrolux Mexico's Controladora Mabe and Turkey's Arcelik were "obvious" potential bidders.

GE shares were up 5 cents to $27.24 on the New York Stock Exchange.

Since its first-quarter profit drop, its shares have lost about 26 percent of their value, a far deeper slide than the 9 percent decline of the broad Standard & Poor's 500 index and the 11 percent fall of the Dow Jones industrial average.

GE is expected to release its second-quarter earnings on Friday.

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