Why GE Is Getting Out of the Kitchen

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Still, GE's brand could become a factor in the terms of any sale. A buyer would surely be motivated to keep the GE moniker and retain the brand equity built up over many years. But GE might bristle at the prospect of refrigerators and ovens carrying its logo after it exits the market. IBM's case could provide a blueprint: Lenovo continued selling ThinkPad laptops with IBM's name on them after the 2004 deal. Lenovo had the right to use the IBM name for five years but phased it out after just two, as consumers realized the product had largely stayed the same. "Most likely," says Innosight's Anthony, "the GE appliance brand will fade out and disappear."

Company Culture and Legacy

Letting go of GE's appliance division may be long overdue. Some management gurus believe that companies typically hold on to legacy businesses longer than they should, either out of fear of giving up a steady cash flow or because of the internal or even external cultural upheaval that may ensue. IBM and Intel provide almost textbook examples: Both met outcries of concern that by exiting their iconic PC and memory-chip businesses, they were signaling surrender of key manufacturing jobs to Asian competition. In Intel's case, though, Japanese dominance of memory chips gave way to weakness as other suppliers undercut prices on what had become a commodity. And IBM has gone on to record growth with its emphasis on software and services. Ultimately, both companies' game plans were validated. "The risk to innovation," says Anthony, "is often that companies will hold on to the past far too long."

The only real surprise in GE's case is that it took so long to make this move. Change seems embedded in the company's DNA. Since December, 2002, for instance, Immelt has sold off more than $75 billion in GE businesses such as its plastics and insurance units, while spending more than $50 billion on acquisitions in faster-growing sectors including wind power and aviation. Under Jack Welch before him, GE bought and sold hundreds of companies. "GE's mark of distinction is this smartly tuned portfolio approach," says Jeneanne Rae, president of Peer Insight, an innovation consultancy in Alexandria, Va.

Under Welch's tenure, GE's appliance division was one of the company's largest consumer-facing businesses, a staple of American domestic life that made the company a household name. A sale would leave, in the near term, just GE's lighting and media divisions to fill the gap as well-known consumer brands. Health care could be the company's next big touch point, say innovation and design experts. As health care becomes more decentralized, with technologies such as defibrillators moving into the home, GE is investing heavily in products that could in the next century very well have the impact that appliances made in the last one.

"The question is about iconography," Z + Partners' Zolli says. "Does GE want to be remembered [as] an icon in the kitchen, or does it want to give itself a chance to become iconic of something in the 21st century?"

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Vella is a writer for BusinessWeek.com in New York.