After 20 years at the helm of General Electric (GE), Mr Jack Welch's career has come full circle.

In 1981, when he took over as chairman and chief executive, the US industrial group was struggling through a recession that led him to mount a severe cost-cutting drive. The redundancies of that era earned him the nickname Neutron Jack.

In the most economically sensitive parts of GE's business, things are now "as tough as I've seen in my 20 years on the job", Mr Welch said last Friday, as he announced his intention to step down in September.

The upshot was the news that quarterly revenues had fallen for the first time since 1987.

The decline had a lot to do with the disposal of some businesses, principally the Montgomery Ward department store chain, the company said. But even without that, revenues grew by just 6 per cent from a year before, a big step down from the sort of growth rates that the company had been recording in recent quarters.

GE, however, is a very different animal from Mr Welch's early days at the top. Even in the face of a global economic slowdown, it was able to report net earnings of $3.9 billion (#4.6 billion) yesterday, a 15 per cent increase from the year before. The cash produced by GE's operating businesses was even more impressive, rising by 32 per cent to $7.8 billion.

Wall Street had been expecting the slumping US economy and weakening global environment to hit GE's most economically sensitive businesses, but the declines were worse than most analysts had expected.

The GE operations that Mr Welch describes as "shortcycle" businesses, given their reliance on short-term economic conditions, suffered a revenue decline of 7 per cent during the second quarter of this year. These include appliances, plastics and the NBC television group. Operating profits slipped 11 per cent.

The declines in plastics and appliances, both of which saw revenues fall by 11 per cent, were bigger than expected, said Mr Michael Regan, an analyst at Credit Suisse First Boston, although like others on Wall Street he added that GE was capable of absorbing declines such as these while still maintaining its earnings momentum.

The price war among makers of household appliances has become even fiercer and there is little chance of things getting better in the short term, says Mr Nick Heymann, an analyst at Prudential Securities. Revenues at GE's appliance unit fell 11 per cent in the quarter, while earnings tumbled 22 per cent.

By contrast, "long-cycle" industrial businesses, which are less vulnerable to immediate swings in the economy, increased revenues by 20 per cent and operating profits by 30 per cent during the latest quarter, Mr Welch said. These include aircraft engines, power systems, transportation equipment and medical equipment. It is in these areas that Mr Welch can point to some of his biggest successes. In the mid-1980s, only about 10 per cent of revenues in these units came from maintenance and service contracts, as opposed to product sales.

Service revenues are now up to 50 per cent, he said, making the businesses less reliant on cyclical equipment sales and lifting overall profit margins.

To keep growth going, Mr Immelt, GE president and chairman-elect, will have to keep pushing GE towards services while boosting the "technology content" in the products, Mr Welch said.

Finding ways to embed new intellectual property in its products and services would also be the secret to how Mr Immelt could continue to increase GE's profit margins, Prudential's Mr Heymann added.

Mr Welch had one other parting comment for his successor: keep the acquisitions coming. While GE does not disclose separately how much of its growth has come from mergers, deals have become a vital ingredient in Mr Welch's growth mix. In the latest quarter, GE said acquisitions had had a "negligible" effect. The attempt to buy Honeywell, which has consumed so much management time in Mr Welch's final months, may have something to do with that.

Mr Immelt has "got to continue the acquisition flow", the GE chairman said. "We've been doing 100-200 a year and he's got to keep doing it."