As GE shares slump, investor frustration rises

BOSTON (Reuters) - Investors are growing increasingly frustrated with the continued slide in shares of General Electric Co -- which this week touched their lowest point since late 1995 approaching the $10 level.

The U.S. conglomerate's stock has lost almost 70 percent of its value over the past year, and in a sign that the slide may continue J.P. Morgan on Friday cut its target price for the shares to $9.

While the current severe economic downturn has hammered stocks around the world, some investors said they are growing concerned that GE Chief Executive Jeff Immelt is not taking aggressive enough action to respond.

"It's been a little too much business as usual and not enough decisive, bold action," said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati, Ohio, which holds GE shares. "Status quo at this point in time is not good."

Like many GE shareholders, Sorrentino had watched GE shares lag the broader market prior to the current downturn and assuaged his concerns with the thought that its diverse lineup of businesses -- from railroad locomotives to lending to NBC Universal media would help it weather a downturn.

In the face of the most severe recession in decades, the shares are down 67 percent over the past year, a steeper drop than the 32 percent decline of the blue-chip Dow Jones industrial average and the 35 percent fall of the broad Standard & Poor's 500 index.

GE on Friday said it would evaluate how much of a dividend to pay in the second half of the year, saying that its priority would be keeping the company "safe and secure" in the downturn and allowing it to make "attractive" investments that might arise. That raised the possibility that shareholders could see a reduction to the $1.24 per share annual payout they had expected.

Investors also are worried that the Fairfield, Connecticut-based company could lose its triple-A debt ratings, which allow it to borrow money cheaply.

That could further hit its stock and bond prices, as many pensions and endowments would no longer be able to hold GE debt if it lost the triple-A, and a number of mutual funds and pensions have guidelines that steer money managers away from stocks priced below $10.

WHO'S TO BLAME?

Investors differ on how accountable to hold Immelt for the shares' performance. GE's valuation had soared under his predecessor, Jack Welch, who was lionized by Wall Street. Immelt took the helm days before the September 11, 2001 attacks in New York and Washington and the subsequent economic downturn.

"His predecessor ... benefited from globalization, 20 years of declining interest rates and 20 years of rising stock prices," said Tom Sowanick, chief investment officer for $22 billion in assets at Clearbrook Financial LLC in Princeton, New Jersey, who does not own GE stock but follows it closely.

Mike McGarr, portfolio manager at Becker Capital Management in Portland, Oregon, which owns GE shares agreed that Immelt was handed a tough hand of cards, though GE's share price has fallen about 75 percent during his tenure.

"I'm more in the camp that this is more of a Welch legacy issue than Immelt mismanagement," McGarr said, referring to the run up GE stock prices and expansion into financial services during Welch's tenure. "I'm still willing to cut him some slack."

But Sorrentino said it may be time for the board to reevaluate Immelt's performance.

"That's the job of the board. They need to say these are desperate times, we need a battlefield commander," Sorrentino. Alluding to a line from the 1972 movie "The Godfather," he said, "maybe we need a wartime consigliere."

Immelt retains the full confidence of the board, said spokesman Russell Wilkerson.

On Friday Immelt was named to a new panel of independent economic advisors to U.S. President Barack Obama, a group that also includes top executives of Caterpillar Inc, Oracle Corp and UBS AG.

GE has restructured extensively under Immelt's leadership, buying businesses with about $80 billion in revenues and selling others -- including its former insurance businesses -- that generated about $50 billion.

"We did a lot of things to dramatically improve the portfolio," Wilkerson said. Without those moves, which also included acquisitions in the aerospace and energy businesses, he added, "today we would be in a much tougher position."

Last year GE attempted to restructure itself even further, placing its U.S. private-label credit card business and its century-old appliance unit on the block. Those efforts were mothballed after the credit crisis made it all but impossible to sell large businesses.

The GE Capital finance business has been its Achilles heel in the current downturn, with profit falling 29 percent last year. But Wilkerson noted that nonetheless it earned $8.6 billion in a year when top U.S. banks including Citigroup and Wachovia Corp -- now a unit of Wells Fargo & Co recorded losses.

Overall GE's total net income fell 22 percent to $17.4 billion last year.

GE's stock closed up 25 cents to $11.10 on Friday, down from its 52-week high of $38.52 reached on April 2, but up from $10.66 on Thursday.

"I think GE is a very well run company, but they've walked into a buzz saw," said Dan Fuss, vice chairman of Boston-based Loomis Sayles, which oversees more than $100 billion in fixed-income securities, including GE shares. "Immelt is dealing with the toughest economy since the 1930s, so are the rest of us."

(Reporting by Scott Malone, additional reporting by Jennifer Ablan and Nick Zieminski in New York; editing by Carol Bishopric)