For Elusive GE IT Services, Revenue Down But Profits Up

The company says the decrease is the result of restructuring in the division that consolidated its operations and brought the unit back to profitability.

The drop in revenue for GE's IT solutions, from just over $7 billion in 2000 to less than $4.2 billion last year, was included in the company's recently released 2001 annual report to investors.

While revenue from its GE Capital Services Equipment Management division decreased by 15 percent in 2001 (dropping to $12.5 billion from $14.7 billion in 2000), the largest chunk of lost revenue came from the IT Solutions component. In fact, out of the four subcategories included under the equipment management division, IT Solutions' $2.9 billion drop in revenue was the largest decrease, both in dollar amount and in percentage. It's an even bigger drop from the company's performance in 1999, when GE Capital IT Solutions brought in close to $8.4 billion in revenue and achieved the number three spot on the 2000 VARBusiness 500.

While the company, in its annual report, said the big slide in equipment management revenue was "primarily attributable to effects of rationalization of operations and market conditions on revenues at IT Solutions," a company spokesman says the decrease is the result of internal restructuring that consolidated some lines of business.

"That business has gone through some restructuring and has contracted in its efforts to get more focused," says David Frail, a GE spokesman.

The good news, says Frail is that the moves brought the IT solutions division back to profitability, with GE Capital IT Solutions reporting net earnings of $11 million last year, compared to a $197 million loss in 2000 and a $66 million loss in 1999.

Aside from revealing a smaller, more efficient IT Solutions business, the 2001 annual report marked another milestone in GE's financial reporting, with the company opening its books for broader review. GE's annual report has traditionally vexed the analyst community because of its lack of revenue and earnings breakdowns by division.

But in the wake of Enron's collapse and the added scrutiny being given to public companies, GE told investors it would provide more detailed financial information about its various divisions, including revenue and profit numbers for the 26 different business segments in GE Capital IT Services. Previously, the company had only released numbers for 12 of those segments.