Appliance sale might not mean much for GE shares

By Scott Malone - Analysis

BOSTON (Reuters) - A sale of General Electric Co's (GE.N: Quote, Profile, Research, Stock Buzz) 100-year-old appliance unit makes sense to some investors, but any deal would have only a limited effect on the conglomerate's battered share price.

The unit in question, which makes refrigerators, washing machines and other household appliances, generated only about 4 percent of GE's $173 billion in revenue last year. It is also the operation most dependent on the whims of U.S. consumers, who have been pinched by falling home prices and rising fuel costs.

Over the past few years, GE has sold off businesses accounting for more than $50 billion in revenue to try to grow faster, and after a stunning first-quarter profit slide, it has said it will look for other ways to reduce volatility. Most recently, it announced plans to stop offering most loans for consumer boats and recreational vehicles.

Media reports said GE had hired investment bank Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) to auction the appliance unit, which could raise $5 billion to $8 billion. A GE spokesman declined to comment on Thursday.

"This is probably a smart move," said Peter Klein, senior portfolio manager at Cleveland-based Fifth Third Asset Management.

"It has not been an area where they have been able to bring a lot of ingenuity lately," said Klein, whose company oversees about $20 billion in investments and holds GE shares. "That's been coming from the folks like LG and Whirlpool."

GE trails No. 1 U.S. appliance maker Whirlpool Corp (WHR.N: Quote, Profile, Research, Stock Buzz) and faces growing competition from Asian rivals such as South Korea's LG Electronics (066570.KS: Quote, Profile, Research, Stock Buzz) and China's Haier Group.

PROS AND CONS