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GE Shares Rise On IIoT Software Company Plan, JPMorgan Upgrade

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Shares of General Electric Co. (GE) are rising more than 10 percent on Thursday after the industrial conglomerate said it plans to establish a new, independent company focused on building a comprehensive Industrial Internet of Things or IIoT software portfolio. In addition, longtime bearish analyst Stephen Tusa of J.P. Morgan upgraded shares of GE to neutral.

GE said that the new company will bring together GE Digital's IioT solutions. The company is intended to be a GE wholly-owned, independently run business with a new brand and identity, its own equity structure, and its own Board of Directors. It will start with $1.2 billion in annual software revenue and an existing global industrial customer base.

The proposed new organization intends to bring together GE Digital's IIoT solutions, including the Predix platform, Asset Performance Management, Historian, Automation or HMI/SCADA, Manufacturing Execution Systems, Operations Performance Management, and the GE Power Digital and Grid Software Solutions businesses.

In addition, GE has agreed to sell a majority stake in ServiceMax, a provider of field service management software, to private equity firm Silver Lake. ServiceMax was acquired by GE Digital in November 2016.

Under the agreement, GE will retain a 10 percent equity ownership in ServiceMax. Financial terms of the transaction, which is expected to close in the first quarter of 2019, were not disclosed.

GE's said it's new IIoT business will provide software for asset-intensive industries with a focus on the power, renewables, aviation, oil and gas, food and beverage, chemicals, consumer packaged goods and mining industries.

GE Digital CEO Bill Ruh has decided to depart the company to pursue other opportunities. The company will conduct an internal and external search to identify the CEO for this new independent company. GE will announce further details on its new IIoT software company in the first quarter of 2019.

Separately, analyst Stephen Tusa of JP Morgan, a long-time bear on GE stock, upgraded GE shares to neutral from underweight and also removed the stock from his short idea list, saying that GE has a "more event-driven, balanced risk reward at current levels." Tusa had a sell rating on GE for a period of more than two years.

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