GE Bets on Health Care

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General Electric's (NYSE: GE) spending spree for health care culminated with its largest deal last week. The U.K.'s first corporation privatized by Margaret Thatcher, Amersham (NYSE: AHM), became part of GE in a stock swap worth $9.5 billion. Last year, GE bought Finnish medical equipment maker Instrumentarium.

General Electric believes its GE Healthcare unit will offer greater growth potential than its traditional consumer products units. GE's medical systems unit, which it was called before changing its name to GE Healthcare, had revenues of just $10.2 billon out of GE's total $134.2 billion in 2003.

British executive Sir William Castell will be chief executive and president of GE Healthcare and is expected to add a very different management style to the unit's operations. TheWall Street Journal reported last week that Castell opened his first presentation to GE managers by saying he wanted to have a "dreaming session" and made it clear he would focus on innovation rather than the bottom line. He believes innovation leads to profits. That hasn't worked badly for Amersham, which has been the world leader in diagnostic imaging and other life sciences equipment.

At first glance it looks like General Electric is betting on a winning leader and giving him free rein to do his magic. The only question is whether GE will give him the time to dream or will pull in the money reins before innovation has a chance to take hold.

What do you think about GE's new purchase? Talk it over with other Fools on the General Electric discussion board.

Fool contributor Lita Epstein ponders money and politics under the palm trees in Florida; view her Fool profile here. She owns shares in none of the companies mentioned here.