General Electric Co. (GE:US) may make venture-capital investments in technology startups and consider acquisitions (GE:US) as it ramps up offerings of software designed to analyze data harvested from its industrial equipment.
The world’s largest maker of jet engines, diesel locomotives and medical-imaging devices is setting aside as much as $100 million for the investments, which will supplement hiring at its new research center in San Ramon, California, Chief Executive Officer Jeffrey Immelt said yesterday in an interview.
GE is investing $1 billion in the so-called industrial Internet, poaching employees from technology companies including Cisco Systems Inc. (CSCO:US) and SAP AG (SAP) to help it improve the efficiency and reliability of its machines. Deploying venture capital will help GE identify talented programmers and innovative systems as it unveils software-based services developed at its new facility near San Francisco, Immelt said.
“We are engaged in looking at acquisitions, probably smaller things, and we are engaged in looking at venture capital, because it lets us see a flow of information that we wouldn’t otherwise see,” said Mark Little, GE’s chief technology officer.
Even as it considers investing directly in companies, GE’s primary focus will remain on hiring engineers and developers for its San Ramon center, Immelt and Little said. The number of employees at the facility will grow to about 320 by the end of this year, according to Bill Ruh, the vice president who came to GE from Cisco in 2011 to run the center.
GE, unchanged at $21.13 at the close of New York trading, has advanced (GE:US) 18 percent this year, outpacing gains by the Standard & Poor’s 500 Index and the Dow Jones Industrial Average.
The Fairfield, Connecticut-based company plans to deploy sums “in the tens of millions, maybe as much as $100 million” on venture-capital investments, Immelt said. It may ultimately expand its workforce at the facility to as many as 500 to 1,000 employees in a “primarily organic build-out,” he said.
At an event yesterday in San Francisco, GE announced a joint venture with Accenture Plc (ACN:US) to analyze data gathered from jet engines to help airlines anticipate maintenance needs, software that optimizes hospital bed assignments and departmental work flow, and technology that helps manage power- generation equipment in response to electricity demand.
The offerings will add to existing products that monitor the performance of wind turbines and help coordinate rail traffic.
Marc Andreessen, the co-founder of venture-capital firm Andreessen Horowitz who helped create the first Web browser in 1993, and Wired magazine Editor-in-Chief Chris Anderson joined Immelt onstage at the event to discuss the potential of networking industrial equipment. Bloomberg LP, the parent company of Bloomberg News, is an investor in Andreessen Horowitz.
Andy McAfee, principal research scientist at the Massachusetts Institute of Technology, and Tim O’Reilly, founder of O’Reilly Media Inc., also spoke to about 250 entrepreneurs, programmers and GE customers with one of the company’s GEnx jet engines positioned nearby.
Service contracts on GE equipment brought in $42 billion of revenue last year, or 45 percent of its $94 billion in industrial sales. The new initiatives will help make those contracts more lucrative while eliminating as much as $150 billion of waste for its customers over 15 years, GE said.
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