Senior GE Exec Becomes Home Depot CEO

ATLANTA —  Home Depot Inc. on Tuesday named General Electric Co.’s Robert Nardelli chief executive and president, the first outsider to run the nation’s largest home-improvement chain.

Home Depot’s current chief executive and co-founder, 58-year-old Arthur Blank, will become co-chairman with Bernard Marcus, 71. The two have run Home Depot since its inception in 1978, and analysts said the Atlanta-based company wasn’t known to be in the market for a CEO.

Shares of Home Depot reached as high as $46.75 in after-hours trading on the news, after closing up $2.88 at $43.63 on the New York Stock Exchange. The shares had sunk to a 52-week low of $34.69 in October after the company said it would not meet earnings expectations in the third quarter and 2000.

Nardelli, 52, will assume his new positions immediately.

“It’s somewhat surprising to go outside the retail industry, but given the caliber of the GE pool, the perception is that it is a positive move,” Dan Kapusta, portfolio manager at Banc One Investment Advisors, told Bloomberg News.

Nardelli said he felt well prepared to move from GE, where he headed the conglomerate’s power-systems unit, to Home Depot.

“GE is a premier industrial business. Home Depot is a premier retail business. . . . At the end of the day both companies are noted for their success and credibility,” he said in an interview with Reuters.

Nardelli is the second senior GE executive to leave a week after Jeffrey Immelt won the race to succeed Chief Executive John F. Welch Jr. James McNerney, head of GE’s aircraft engine unit, was named chairman and CEO of Minnesota Mining & Manufacturing Co. on Tuesday.

Analysts said Nardelli had a wildly successful run at GE Power, where he nearly doubled revenue to a projected $15 billion this year from $7.9 billion in 1997.

When he took over at GE Power in May 1995, the division’s outlook was shaky, with a stalled market for turbines and generators.

Nardelli spearheaded more than two dozen acquisitions and alliances, broadened the product line, expanded the service business and jumped on the Internet bandwagon.

“I think that this is a huge win for the Home Depot stockholders, because he’s going to build out dimensions of the retailing concept that, despite being one of the leading retailers, Home Depot probably never even knew existed,” said Nick Heymann, analyst at Prudential Securities.

In particular, Nardelli is likely to “digitize” Home Depot’s operations and create ways to sell more products without necessarily building new stores, Heymann said.

Dan Wewer, analyst with brokerage Deutsche Banc Alex. Brown in Atlanta, said he expected that Blank would remain very involved in operations for an interim period, particularly since Nardelli, who began his career at GE in 1971, has no significant retailing experience.

“I would imagine they’re going to put an orange apron on Bob and he’ll go out and learn what the business is about,” Wewer said.

But Nardelli is likely to face some stiff challenges as he takes over the reins of Home Depot, which, like most U.S. retailers, has been hit hard by a spike in interest rates and a resulting slowdown in consumer spending.