The future of General Electric Co Inc’s Rockville, Maryland-based General Electric Information Services Co division has been up in the air for some five years now because the network services operator fits none of GE chief Jack Welch’s criteria for a core business: its return on equity is below his preferred threshold, and it is not number one or two in its market. Nevertheless, presumably because it has never been able to get an acceptable price, it has not been sold outright, and shortly before Christmas, Ameritech Inc announced that it was forming a new company in which it would hold 30% and contribute $472m of cash, while GE would contribute the assets of GE Information Services. The terms put an indicated value of $1,575m on the business, which turns over about $600m annually. Because of regulatory restrictions on the Chicago-based Baby Bell, GE will initially wholly own and operate the new company, which will continue to specialise in the GEnie electronic mail service, and to offer cargo tracking, inventory management and electronic payment information services – Electronic Data Interchange. Ameritech’s investment will take the form of a four-year convertible note that can be converted to the planned 30% when the law is changed. Under Bell System break-up consent decree, Ameritech is barred from transmitting phone calls or any other traffic across its service boundaries. What is frustrating is that GE Information Services operates in 31 countries and we can operate in 30 of them but not in one, the US, moans Ameritech president Richard Notebaert: we can work for Ford in England, but here in Detroit, their headquarters, I’m prevented from working with them.
