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Profit And Shareholder Wealth Comparison Paper: General Electric And Tyco

862 words - 3 pages

General Electric and Tyco International are classified as conglomerates with each approaching their business strategies differently resulting in different financial results. General Electric has pursued a conservative growth strategy by focusing on being the number one or number two in each industry where it competes as Tyco has pursued a very aggressive sales and earnings growth strategy through rapid, multiple acquisitions.According to the website www.finance.yahoo.com General Electric Company (GE) is a diversified industrial corporation and Tyco International Ltd. (TYC) is a diversified manufacturing and service company.GE's infrastructure segment produces jet engines, turboprop and turbo shaft engines, and related replacement parts for use in military and commercial aircraft; wind turbines; aircraft engine derivatives; gas and steam turbines, and generators; oil and natural gas compressors and turbines; diesel-electric locomotives and parts; and productivity solutions for industrial and municipal water systems. GE offers various financial products and services in the aviation and energy sectors also (General Electric, 2007).Tyco operates in four business segments, the first segment is electronics, which designs, manufactures and distributes electrical and electronic components. The second segment is fire and security, which designs, manufactures, installs, monitors and services electronic security and fire protection systems. The third segment is healthcare, which designs, manufactures and distributes medical devices and supplies, imaging agents, pharmaceuticals, and adult incontinence and infant care products. The fourth segment is engineered products and services, which designs, manufactures, distributes and services engineered products, including industrial valves and controls, as well as steel tubular goods, and provides consulting, engineering and construction management and operating services (Tyco, 2007).From web based financial services site www.finance.yahoo.com the following financial information has been recorded:Common shareholders' equity - 2006 (total equity less any preferred stock equity)(GE) $112,314,000 - $0 = $112,314,000(TYC) $35,419,000 - $0 = $35,419,000Market Capitalization - 2006 (total common stock shares outstanding times latest stock price)(GE) $10.28 Billion x $35.02 = $360.1 Billion(TYC) $2.0 Billion x $32.5 = $63.57 BillionNet profit margins for each company for the past 5 years.(GE)2006 - 12.65%2005 - 12.2%2004 - 12.1%2003 - 12.2%2002 - 11.5%(TYC)2006 - 9.65%2005 - 8.1%2004 - 7.7%2003 - 2.6%2002 - 8.2%Net Income - 2006(GE) $20,829,000(TYC) $3,713,000Return on Equity - 2006(GE) 18.65%(TYC) 11.74%After looking at both GE's (32.1 percent)and Tyco's (18 percent) market to book ratios along with their rate of return on equity this shows that General Electric (18.65 percent) has done a much better job than Tyco (11.74 percent) of providing greater shareholder...

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