Many Big Companies Are Splitting, But Conglomerates Are Here To Stay

Many Big Companies Are Splitting, But Conglomerates Are Here To Stay

Size is an asset until it's not. Within one week, J&J, GE, and Toshiba were all disassembling themselves. Companies over a hundred years old suddenly found their current form unfashionable. General Electric will separate into three listed groups. Each will focus respectively on aviation, healthcare, and energy. Johnson & Johnson will spin off its consumer products. Even Toshiba can't withstand the relentless pressure. The Japanese conglomerate will split into three firms. Simply put, investors see less value if these companies were to continue with their previous businesses in combination. They want them to work as independent entities. It's easy to declare that giant conglomerates are falling out of fashion. But they're not. The world has come to embrace a new type of conglomerate. "What is Amazon?" we've got to ask ourselves. Its e-commerce retailing has little resemblance to its cloud computing services. Then you have Microsoft, which doesn't focus only on office productivity—Xbox is a major player in the gaming industry. And Tesla is not just a car company. Its buildup in solar panels and superchargers belongs not to the automotive industry but to the energy sector. Most tellingly, Amazon, Microsoft, and Tesla are among the world's most valuable companies.