General Electric revealed this week its plan to spin off its GE Digital business into a standalone industrial Internet of Things company, ending months of speculation about the division's fate.
The company also announced that it has reached an agreement to sell a majority stake of ServiceMax, its field service management software that was part of GE Digital, to private equity firm Silver Lake — a move that will allow the new company to focus on industrial IoT. Financial terms of the deal, which is expected to close in the first quarter next year, were not disclosed.
The spinoff of GE Digital and sale of ServiceMax are happening in the midst of a major restructuring of GE as the company faces shareholder pressure to reduce its large amount of debt. The company has already announced plans to spin off its healthcare and railroad locomotive divisions and sell two IoT-related businesses, connected lighting division Current and automation division Intelligent Platforms.
While becoming a standalone company, GE Digital will remain under the whole ownership of GE. The industrial IoT player will be run independently, however, with its own board of directors, its own equity structure and a new brand and identity.
Bill Ruh, who had been GE Digital's CEO since its inception in 2015, is stepping down to pursue other opportunities, according to GE, and the company has begun an internal and external search for his successor. GE said more details about the GE Digital spinoff will be shared in the first quarter next year, and that it will be subject to customary regulatory approvals.
The new company will bring together GE Digital's portfolio of industrial IoT solutions and GE Power's digital and grid software solutions business. Combined, it will create a business with US$1.2 billion in annual software revenue and an existing base of global industrial customers.
“As an early leader in IIoT, GE has built a strong business with its industrial customers thanks to deep domain knowledge and software expertise," GE CEO Larry Culp said in a statement. "As an independently operated company, our digital business will be best positioned to advance our strategy to focus on our core verticals to deliver greater value for our customers, and generate new value for shareholders."
The news of GE Digital's spinoff plans brings to a close months of speculation about the industrial IoT division's fate under its parent company. Speculation began when a report in June stated that GE was looking to sell key parts of its digital business. Since then, GE named Culp as its new CEO, indefinitely postponed its eighth annual GE Digital conference and sold most of the company's stake in Pivotal Software, the software platform provider behind GE Digital's Predix industrial IoT software.
GE’s stock price was up 13 percent in early trading Thursday morning.