A round up of some of the week’s most significant corporate events and news stories.

Immelt in unexpected exit after 16 years as GE chief

Jeff Immelt took over as chief executive of General Electric on September 10 2001, and it had been clear for some time that it would be hard to match his predecessor Jack Welch’s 20-year tenure. But the announcement of his departure still took the world by surprise, writes Ed Crooks in New York.

Outgoing GE CEO Jeff Immelt © FT montage / Bloomberg

The board’s choice of successor, John Flannery, chief executive of GE Healthcare, was also somewhat unexpected. Others, including Jeff Bornstein, the chief financial officer, had been tagged as more likely contenders.

In the event, Mr Bornstein was appointed vice-chairman, and it is Mr Flannery, who has spent his career mostly in GE’s financial services businesses, who has led responsibility for improving the group’s lacklustre share price performance.

Under Mr Immelt, GE’s shares dropped 30 per cent while the S&P 500 rose by 124 per cent — though there is a case that the shares were overvalued under Mr Welch, who cast an aura of success over the businesses he led.

Mr Immelt worked hard to reinvigorate the conglomerate of unrelated operations that he inherited. He sold divisions including plastic, domestic appliances, entertainment and — most radically — financial services, returning more than $130bn to shareholders in dividends.

But the stock market was still unimpressed. Trian, the activist fund that took a stake of about 1 per cent in 2015, became the most visible face of a wider group of discontented shareholders hoping that Mr Immelt and his team would do more to improve performance.

Mr Flannery, who takes over as chief executive on August 1 and as chairman at the end of the year, has said his plan is to begin an immediate review of GE’s operations, and to come back with conclusions in the autumn.

A complete break-up of the group seems unlikely, but further efforts to improve margins and possibly some more sell-offs are possible.

Mr Immelt told the Financial Times that he had given Mr Flannery “maybe the most important advice for incoming CEOs . . . and that is: every job looks easy when you’re not the one doing it”.

● Andrew Hill: GE reverts to old-fashioned methods to pick a new style of leader
● Lex: General Electric — Immelt down
● Podcast: GE management shake up
● John Authers: In defence of GE’s Jeff Immelt

Microsoft’s new Xbox tries to catch up with game rivals

Microsoft is supercharging its Xbox games console in a renewed attempt to close the gap with Sony’s Play­Station 4 and fend off Nintendo’s popular new Switch, writes Tim Bradshaw in San Francisco.

© Getty

The video games groups went head to head at the E3 convention this week in Los Angeles, vying for the attention of fans.

Microsoft is trying to win over hardcore gamers with its new Xbox One X, a $499 challenger to Sony’s cheaper PS4 Pro.

The Xbox One has sold about half as many consoles as Sony’s original PS4. Both have had “mid-cycle” upgrades in processing speed and graphics horsepower, as the groups seek to extend the life of home consoles.

Analysts were doubtful that Microsoft would close the gap with Sony, whose PlayStation VR headset has also had a strong start, selling more than 1m units since its launch late last year.

Microsoft said the Xbox One X would be supported by virtual-reality headsets in 2018.

“It is a cheaper price point coupled with a range of exclusives in 2017 and 2018 that will help [Sony] maintain its market share,” said Piers Harding-Rolls, at IHS Markit.

Nintendo’s Switch, which has aimed for a different audience with its unique combination of handheld and TV-based play, will be boosted by the arrival of Super Mario Odyssey in November.

In demonstrations of the game at E3, Mario was seen to leave the Mushroom Kingdom on an airship and visit various new locations, such as the skyscrapers of New Donk City.

● News: Sony rules out hybrid gaming consoles

Nordic operators battle to avoid law on roaming fees

A new law banning roaming fees within the EU came into force on Thursday, triggering a scramble by telecom operators in eastern Europe and Scandinavia to wiggle out of the rules, writes Duncan Robinson in Brussels.

© AFP

The vast majority of operators are expected to drop roaming charges, which had led to high fees for customers using their mobile phones while travelling abroad.

But dozens of networks in the Baltics, Nordics and even Belgium have applied for derogations to the rule, arguing that it would damage their profitability.

The proposal took more than a decade of negotiations, with telecoms groups fiercely resisting efforts to curtail what had been an industry cash cow. In total, the loss of roaming fees is expected to knock €7bn off the revenues of European telecoms groups, according to the industry group ETNO.

Operators can charge their peers €7.70 per gigabyte of data — equivalent to one hour watching Netflix — when a customer from a rival wanders on to their networks.

This has made roaming potentially lossmaking for operators in countries such as Finland, where mobile data is far cheaper and customers use vast amounts.

Under a loophole in the legislation, if allowing cost-free roaming knocks 3 per cent or more off an operator’s net margin, they will be allowed to introduce roaming fees, subject to permission from their national regulators.

Nordic operators expect a drop of 1-3 per cent in earnings before interest, tax, depreciation and amortisation, according to Bengt Nordstrom of Northstream, a telecoms consultancy.

Google parent backs drug developer fund with $300m

The life sciences division of Google’s parent company has invested in a $300m biotech fund, marking its biggest foray into the realm of drug development, writes David Crow in New York.

© EPA

Verily Life Sciences, a unit of Google owner Alphabet, joined the Swiss drugmaker Novartis in backing the vehicle, which will take stakes in European drugmakers that need cash to run clinical trials of their experimental medicines.

Verily has made a string of bets on healthcare in recent years, although investing in drugmakers is something of a departure for a group that has focused on “med-tech” products, including a vibrating spoon for Parkinson’s sufferers and surgical robots.

The fund is being managed by Medicxi, a venture capital group that was recently spun out of technology specialist Index Ventures.

Francesco De Rubertis, co-founder and partner at Medicxi, said the vehicle would buy shares in drugmakers that already had at least one medicine in mid-stage clinical trials but needed capital to take the product through the final stretch of testing.

Mr De Rubertis said many of these companies were forced to sell themselves or their assets to a large pharmaceutical group because of a dearth of capital for biotech groups in Europe. “In many cases, the molecules would be better served by retaining focus without the distraction of an acquisition,” he added.

Andrew Conrad, chief executive of Verily, said the partnership would “help European life sciences innovators accelerate patient and physician access to new and promising therapeutics”.

Thames Water faces probe over ‘unacceptable’ leaks

Thames Water is being investigated by Ofwat, the UK regulator, for its “unacceptable failure” to control leakages, with 180 litres a day spilling per property that the group supplies, writes Gill Plimmer in London.

Workers replacing some Thames Water pipes © Bloomberg

Thames Water has been handed a fine of £8.55m, the maximum that Ofwat can impose.

The utility recently revealed that its investors — which include pension and sovereign wealth funds from China, Abu Dhabi and Kuwait — had been paid £100m in dividends in the year to March.

The probe was announced weeks after Thames Water received a record penalty for releasing 1.4bn litres of raw sewage — the equivalent of 1,700 Olympic-sized swimming pools — into the Thames between 2012 and 2014 in a move that was seen as “borderline deliberate” by the judge who handed down the £20m fine.

Amid the fines and criticism, the pension deficit increased almost 50 per cent from £260m to £380m in the year to March 31.

Steve Robertson, who took over as chief executive of Thames Water in September, also received an annual bonus of £54,000, in addition to his basic salary of £550,000 a year.

For the hundreds of people who were forced to evacuate their homes and businesses because of burst pipes and leaks — including those caught in three floods in London’s suburbs in one week last December — the latest penalty will provide little satisfaction.

The fine is equivalent to less than 0.5 per cent of Thames’s annual revenues of £2bn.



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