Jack Welch Answers...

15 October 1998

Jack Welch, CEO of General Electric responded with good grace and wit to our open letter suggesting that his company, although superbly managed, was too expensive for value investors like us, and that this could be remedied by launching a takeover bid on Korea. (See: Why Not Simply Buy Korea).

"Dear Mr. Sicart,

I've been all over Asia for three weeks - hence the delay in replying to your "cute memo." As to valuations - that's your job. Mine is to deliver consistent double-digit earnings and cash flow growth in all environments.

Hopefully, we'll both do our jobs well...but I'll let you buy Korea - not me.

Best,

Jack Welch (10/15/98)"

So, we now know that, in addition to being a superb manager and leader, Mr. Welch has a sense of humor - all the more reason to keep an eye on the stock of GE - when it starts offering value.

However, reading between the lines, one may notice a twinge of frustration with Korea. Other executives trying to acquire companies in that country have shared similar frustrations with us. In part, this has to do with pure denial on the part of chaebols' controlling shareholders, and the rest simply comes from the lack of preparation of Korean businessmen for such negotiations. To a degree, this is true in most of Asia, and it may explain why the tens of billions of dollars of announced transactions have not yet been finalized. They will take place one day, though, and unlock the brakes that are now hampering the recovery of these economies.

So, -- doing our "job" as searchers of value -- we restate our conviction that Asia offers once-in-a-generation opportunities for courageous, contrarian investors.