The sharp decline of General Electric was masked by complexity that concealed the decay at the 126-year-old company.
Even though GE makes light bulbs, MRI machines and other tangible products, the conglomerate is notoriously complicated. For many years, GE relied on aggressive accounting, confusing financial statements and a murky banking arm.
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But now GE is under new management. Investors are hoping Larry Culp, the widely-respected new GE boss, will cut complexity to give a clear view of the company's comeback efforts. They say Culp needs to make GE more transparent, clean up its financial reporting and acknowledge how bad things have gotten at the company.
"GE needs to find and embrace simplicity," Scott Davis, lead analyst at Melius Research, recently wrote to clients.
Davis complained that GE is one of the "most complex companies" in the S&P 500. "Veteran analysts can't get through the filings and/or earnings slides. Basic questions on debt, cash, margins go unanswered," he wrote.
Even GE veterans acknowledge the problem.
"People inside and outside of GE didn't appreciate how complicated and complex the company had gotten," Beth Comstock, who stepped down as GE's vice chair at the end of 2017, told CNN Business.
Comstock, the author of "Imagine it Forward," a book about embracing change in business, said that GE has been trying for many years to simplify itself.
"Could things have gone faster? You bet. There are huge legacy systems that need to be redone, rebuilt and refocused. That just takes time," she said.
Jack De Gan, chief investment officer at Harbor Advisory, said the investment firm dumped its GE shares last fall in part due to frustrations with complexity. Harbor Advisory had been a GE shareholder for 21 years.
De Gan pointed to recent developments that shocked GE shareholders. For instance, earlier this year GE's long-term care insurance business took a $6 billion loss. And GE recently said its slumping power division needs to take an accounting write down of up to $23 billion to reflect the deterioration of businesses acquired.
"When your balance sheet holds time bombs like that," De Gan said, "it means you didn't have your arms around the business."
Investors fear what other problems are lurking at GE.
It doesn't help that GE's quarterly earnings can resemble a maze.
GE emphasizes the results from its "industrial" business, the profits and cash flow from the core part of the company that makes jet engines, wind turbines and power plant equipment.
But that draws attention away from GE Capital, a still-massive division that is bleeding. GE Capital lost $2 billion during the first half of 2018, triple as much as last year.
GE's most recent quarterly report listed about eight different metrics for how the company made money. There's "consolidated EPS from continuing operations," "adjusted consolidated EPS," "GE Industrial EPS (non-GAAP)," "Adjusted GE Industrial EPS (non-GAAP)," "GE Capital EPS," "Adjusted GE Capital EPS (non-GAAP)," and "Adjusted GE Industrial EPS." And finally, "Adjusted EPS" for the entire company.
"It gets your head spinning. You lose sight on what you should really be following: GAAP earnings," said De Gan.
Will Larry Culp listen?
GE is a massive company that can't easily be summed up in a single figure. And GE has responded to criticism by making changes in recent quarters. For instance, GE has moved to reporting free cash flow as a metric.
Jamie Miller, GE's chief financial officer, told analysts earlier this year that the company aims to "simplify our financial reporting and bring our metrics more in line with industry peers."
John Flannery, who Culp replaced as CEO, repeatedly promised to fix GE's complexity. "We are progressing on our plans to make GE simpler and stronger," Flannery told analysts during a July conference call.
When he was named CEO on October 1, Culp vowed to "move with urgency" in the coming weeks to "drive superior execution."
Culp, who achieved great success leading industrial manufacturer Danaher, is the first outsider CEO in GE's storied history. Culp's proven track record and outsider perspective make him well positioned to enact the sweeping change that investors are calling for.
"Larry Culp has a lot of good will and credibility," John Inch, an analyst at Gordon Haskett Research Advisors, said during a conference call this week. "That can eviscerate if he doesn't take the bull by the horns and bring some of this stuff clean."