TSMC's third-quarter net profit falls 7 percent on supply constraints, beats estimates

TAIPEI (Reuters) – Apple Inc supplier Taiwan Semiconductor Manufacturing Co Ltd (TSMC) on Thursday said supply-chain inventory constraints pulled down net profit in the third quarter, albeit by a lesser degree than analysts had estimated.

The world’s largest contract chipmaker also forecast revenue growth of about 10 percent in the fourth quarter when sales begin for Apple’s iPhone X, which is widely expected to carry TSMC-made chips.

Profit fell 7.1 percent to T$ 89.93 billion ($ 2.98 billion), in July-September, versus the T$ 88.19 billion average of 21 analyst estimates in a Thomson Reuters poll.

Revenue rose 1.5 percent to $ 8.32 billion, slightly above a forecast issued in July. It put fourth-quarter revenue at $ 9.1 billion to $ 9.2 billion.

“Even though demand was slightly dampened by supply chain inventory reduction, our customers’ third-quarter growth was largely healthy,” said co-Chief Executive Officer Mark Liu.

Apple’s recently launched iPhone 8 is proving less popular than predecessors and industry analysts are now awaiting the iPhone X shipping from Nov. 3.

TSMC raised this year’s capital spending forecast by 8 percent to $ 10.8 billion, mainly to accelerate capacity of 7nm chip manufacturing technology.

It expects 2017 revenue growth close to the high end of its 5 to 10 percent target.

Operating margin was 38.9 percent in the third quarter and will likely be 37 to 39 percent in the fourth, TSMC said.

CHINA COMPETITION

TSMC acknowledged increasing competition from mainland China but said it was confident of meeting targets.

“In terms of a lot of fabs (fabrication plants) in mainland China, we don’t like it but we are very competitive. We’ll continue to compete of course and maintain our market share,” co-Chief Executive C.C. Wei said.

Chipmakers are riding a boom in demand for chips that power smartphones and computer servers, driving sharp gains in shares.

TSMC’s stock has jumped 68 percent this year, giving the firm a market value of T$ 6.16 trillion.

The chipmaker also said it expects global semiconductor growth of 16 percent in 2017.

The results come just days before TSMC celebrates its 30th anniversary and about a week before iPhone X pre-orders begin. They are also the first since Chairman Morris Chang – widely regarded as the father of Taiwan’s chip industry – said he would retire in June. He will be succeeded by Liu, leaving Wei as sole CEO.

Following his announcement in early October, Chang told Reuters that TSMC would increase capital spending by 5 to 10 percent over the next five years.

Shares of TSMC closed up 1.5 percent ahead of the earnings announcement.

Reporting by Jess Macy Yu; Editing by Anne Marie Roantree and Christopher Cushing

Tech

Adobe forecasts fiscal 2018 revenue, profit above expectations

(Reuters) – Photoshop maker Adobe Systems Inc forecast better-than-expected revenue and profit for fiscal 2018 on growth in its cloud business, sending its shares up 5 percent in extended trading.

The company said on Wednesday that it expects revenue of $ 8.7 billion and profit of around $ 5.50 per share for fiscal 2018.

Analysts were expecting revenue of $ 8.68 billion and profit of $ 5.21 per share, according to Thomson Reuters I/B/E/S.

Reporting by Laharee Chatterjee; Editing by Sriraj Kalluvila

Tech

The Hunt for the Brain-Eating Amoebas of Yellowstone

It was a lovely September day in Yellowstone’s Boiling River, which was not, in fact, boiling. Tourists trundled through the shallow water and dipped in where it was deeper. A herd of elk even waded through unconcerned. And among it all, a team of researchers in waders sampled the water for a brain-eating amoeba that kills 97 percent of the people it infects.

Not that anyone here has ever fallen victim to the amoeba, Naegleria fowleri. Scientists just know that the Boiling River, which gets its warmth from geothermal energy upstream, can harbor the little nasty. Accordingly, signs posted onshore warn swimmers: This thing can ruin your day, and most likely your life.

Wading in that river was an odd mix of scientists from the Monterey Bay Aquarium Research Institute—650 miles from the nearest ocean—and the United States Geological Survey, which, as it turns out, is interested in far more than just rocks. They were collecting water samples to ship off to a rather more obvious participant: the Centers for Disease Control. There, scientists would analyze the water to help unravel the mysteries of the brain-eating amoeba—and hopefully, protect America’s waterways from nasties of all types.

Perhaps the most frustrating thing about Naegleria fowleri is that it has no business eating human brains. The amoeba prefers smaller game, scooting around freshwater ecosystems gobbling up bacteria. But if you happen to be swimming in one of those ecosystems and get a snout full of water, the amoeba can make its way into your brain and start eating tissue, leading to something called primary amebic meningoencephalitis. With the brain swelling come the fever and vomiting, then the seizures and hallucinations. It kills in an average of five days, and claims 97 percent of its hosts.

Naegleria fowleri loves warm waters, hence its presence in the not-quite-boiling Boiling River. But it can survive when things cool down as well. “When in cooler temperatures, it goes into a cyst state, which is kind of an egg-like state that’s very hardy,” says Mia Mattioli, an environmental engineer in CDC’s Environmental Microbiology Laboratory. “But it’s not viable, it’s not moving, it’s just persisting. When it becomes more favorable and warm it goes into the infectious state.”

Naegleria fowleri‘s sensitivity to temperature makes it maddeningly difficult to track down, since lower temperatures lower its concentration. Scoop up other kinds of freshwater lifeforms and you might get 100 organisms in a liter of water. With Naegleria, you might be looking at 100 organisms in 100 liters of water. (This rarity, plus the fact you have to somehow get the microbe up your nose, is part of the reason why only 40 people picked up the amoeba in the US between 2007 and 2016.)

So the USGS and MBARI want to get better at detecting the menace. They descended on the Boiling River with two complementary missions. One was to hike out of there with water samples, which they took back to Montana State University and shipped off the CDC for analysis. The second was to test MBARI’s Environmental Sample Processor (known as ESP, of course), which the group hopes could one day have the power to detect the amoeba in real time.

Kevan Yamahara/MBARI

MBARI having oceanic proclivities, this device is a drum full of electronics that you dunk in the ocean. “You can think of it as a molecular biology laboratory in a can,” says research specialist Kevan Yamahara. The ESP collects water samples, analyzing genetics to determine what kinds of organisms are present.

What MBARI took to Yellowstone, though, was a sleeker mobile version, which fits in a tackle box. It pulled water from the Boiling River and pushed it through a filter, which trapped particulates like brain-eating amoebas—at least hopefully. MBARI then shipped these filters, along with water samples, to the CDC. While MBARI is still testing this mobile version of ESP, and it can’t yet do on-board genetic testing, it’s designed to be more modular, so researchers can swap in the latest analytical instruments for real-time genetic analysis.

The idea here is to figure out if the ESP might be capable of detecting Naegleria fowleri in real time. First the CDC will try to detect the amoeba with their lab methods. This includes using both molecular techniques to hunt for microbe DNA in the sample and culturing the parasite in a dish. So let’s say that’s successful. Then if the ESP ended up trapping amoebas in its filters, that’s a good indication that the machine will be capable of doing genetic testing in the field to identify the parasites. The results from the CDC and the ESP match.

Conveniently enough, the USGS already has thousands of river gauges around America collecting data like temperature and flow rate. So the work here might help give those sensors the ability to alert authorities to amoeba outbreaks. And that could be critical for unraveling the peculiarities of the Naegleria fowleri life cycle.

“We don’t really know that much about, for instance, how it cycles during the day or during the month or during the year through an environment,” says microbiologist Elliott Barnhart of the USGS. “So one thing this ESP could do would be to sample every hour or every day or different seasons to figure out when might this amoeba be most prevalent.”

The worrying bit is that one of the few things scientists know for sure about Naegleria fowleri is that it loves warm water. And an increasingly warm planet will give rise to increasingly warm rivers. While the amoeba is most prevalent in the relative warmth of the southern US, it may well grow more ubiquitous farther north. “We’re seeing cases more and more with rises in water temperatures,” says Mattioli of the CDC. Advances like ESP could help officials better monitor all kinds of nasties in American rivers, not just Naegleria fowleri. In the meantime, it never hurts to bring a nose plug.

Tech

Alphabet to develop high-tech waterfront site in Toronto

TORONTO (Reuters) – Canadian authorities on Tuesday tapped Google parent Alphabet Inc (GOOGL.O) to help plan a mixed-use development along Toronto’s Lake Ontario waterfront using cutting-edge digital technologies and urban design.

Alphabet’s Sidewalk Labs unit, which is developing new technologies for use in “smart cities,” said it would invest $ 50 million in the initial phase of the project, which will create a new neighborhood in the city called Quayside.

Google said it would move its Canadian headquarters and some 300 employees to the district, once it is completed. Prime Minister Justin Trudeau, who announced the partnership with Google, said he hoped that Quayside would become “a thriving hub for innovation and a community for tens of thousands of people to live, work and play.”

It is Sidewalk Labs’ most ambitious project to date.

The Google unit has previously worked with Qualcomm Inc and Civiq Smartscapes to retrofit New York City phone booths into digital billboards that serve as WiFi hotspots.

Intersection, the Sidewalk Labs subsidiary behind the effort, recently launched similar kiosks in London. Another division, Flow, has held talks with cities such as Columbus, Ohio, about providing software to evaluate transit programs.

Reporting Alastair Sharp in Toronto, additional reporting by Andrea Hopkins in Ottawa and Paresh Dave in San Francisco; Editing by Paul Simao and Steve Orlofsky

Tech

Here's Why Anyone Will Be Able to Develop a Computer Program 5 Years from Now

These days, while our grandparents struggle endearingly to send a text message or compose an email, we struggle to remember that the use of computers and smartphones wasn’t always intuitive.

Though we understand on an intellectual level that such objects are foreign to them, it’s hard to internalize; after all, most of us caught on to laptops and smartphones as soon as they became the standard.

But a few decades from now, will we be those clueless grandparents? Just as it’s become so natural and intuitive to use computer software, will our children and our children’s children think it’s equally as natural and intuitive to build it?

Back in high school and college, most of us tended to distance ourselves from the field of coding, assuming that it required too much specialized knowledge to tackle on even an elementary level. But that’s no longer the case today. Coding could easily become mainstream in the next few years, and we’ll probably all need to jump onboard regardless of our levels of experience.

Coding is more accessible than ever

Although self-taught coding isn’t new, it’s become easier and more realistic for the everyday person. Decades ago, teaching yourself coding was tedious and required an enormous amount of effort. You had to sort through physical textbooks and copy problem sets by hand, without many resources or available mentors to help you if you got stuck.

Nowadays, it’s different. First, there are more online coding courses available than anyone could count. Since each has a different approach, it’s easy to find ones that are suited for particular learning styles. The ever-popular Khan Academy offers coding courses with periodic mini-quizzes that students can use to test themselves and stay on track. Another program, Skillcrush, offers one-on-one office hours with the professor, as well as a 10-day coding bootcamp for those short on time.

Many of these courses are also specialized for individual skill levels and needs. While there are always those that cater to advanced coders, more and more are serving beginning coders, including older folks and kids.

Second, there are plenty of online resources to facilitate the coding process and supplement these courses. With the explosion of social media and the popularity of online forums, it’s easier than ever to connect with other coders and potential mentors for help. There are even sites that are intended specifically for this. HackHands, for example, makes programming experts available for live online chats 24/7.

Third, the coding process itself is also easier. No longer is it necessary to create simple units of code from scratch. Instead, existing bits of commonly used code components are accessible through open-source platforms like Bit. This means that rather than create each individual piece of code by hand, developers of all levels can put together lego-like building blocks of code, share their code with others, and use it across different projects.

These tools can serve as the infrastructure for building new applications with a simple composition of existing components. Since code is easier than ever to learn and requires less and less specialized knowledge to build, anyone will be able to create their own computer programs in the next few years.

Coding as a practical skill

The significance of all this is not just that programming will be more convenient for developers or even aspiring coding hobbyists. Even more importantly, the availability, accessibility, and increasing popularity of programming means that coding soon will become a mainstream practical skill–one that doesn’t require a university education to acquire.

This is about employability as much as it is about convenience. In the United States, university tuition is notoriously expensive. These days, the cost of private university courses, room, and board can amount to $ 60,000 per year. At the same time, American jobs are increasingly outsourced to countries with cheap labor. The result is that many Americans lack the basic practical skills so important to the American workforce. Instead, they invest in a strictly academic education which, though valuable, is notoriously expensive.

Now that it’s particularly vital for Americans to develop practical skills and now that university education is more expensive than most can afford, widespread knowledge of coding as a basic practical skill is both beneficial and feasible. The gig economy has made modern jobs more fluid and flexible than they were a few decades ago; career shifts and alternative forms of education are not only easier to pursue, but they’re also more culturally acceptable than they once were.

This isn’t to say that self-taught coding should replace traditional forms of higher education. Rather, it’s to say that it could be a viable option for people who can’t afford the high cost of a formal university education, who don’t have access to institutions of higher education at all, or who simply want to eliminate the pressure of having to pursue a degree in a technical field.

Learning to code, after all, is just as inexpensive as it is accessible, and it’s becoming increasingly standard to pursue on the side. In just a few years, building a computer program will be as normal as using one.

Tech

Amazon Aims to Be the Next Big Fashion Brand with Body Labs Acquisition

This month, not long after acquiring Whole Foods, Amazon quietly bolted on Body Labs, a New York artificial intelligence startup that creates 3D models of real people from photos, with better than 2-centimeter accuracy. Natasha Lomos and Jordan Crook, writing for TechCrunch which broke the acquisition story, commented, “Amazon has been ramping up its own fashion business in recent years, expanding and growing its private label fashion brands.”

So what are three possible outcomes from another Amazon acquisition, this one AI? Let’s take them one by one.

1. Amazon uses social selling to sell more clothes, sportswear, shoes and jewelry

Amazon has already invested a lot into its product recommendation engine. If you’re like me, you scan Amazon’s “Recommended for you” a lot–it’s good. Body Labs should jump that forward in product categories like clothing, jewelry, and sportswear.

Flo McDavid, director of business development at Body Labs, put it this way just before the acquisition,  “While there are tons and tons of Google images of very diverse people, it’s hard to find someone who’s like you. At Body Labs we’ve developed artificially intelligence software that understands human body shape from everyday photos.  . . . No body scanners, no changing clothes or anything like that–just a  simple photo. So we thought, what if we could connect people with similar body shapes so they could be inspired by people like them?”

The Body Labs demo shows people using a selfie to connect them to “shape doppelgangers” on Instagram in clothes that look good. Hear Flo talk more about it in the video below:

2. Amazon Fashion rolls out the red carpet for customers.

Amazon currently has a product–Echo Look–that takes real-time images of customers. It is marketed as a “Hands-Free Camera and Style Assistant with Alexa–includes Style Check to get a second opinion on your outfit.” It is not a tough guess that Amazon’s second opinion is you can buy three or four more things–just ask Alexa. But seriously, by bolting on Body Labs engine in the background, Amazon could power recommendations around fashion and accessories that work in the real world.

Body Labs VP of Developer Relations Ali Javid said recently in a company YouTube video, “Imagine if an apparel brand or retailer knew the shape of every single one of their customers—imagine how the shopping experience could change. Imagine how the supply chain would be innovated upon. This is possible today with BodyLabs human-aware AI.”

3.    Amazon grows profitable game developer infrastructure.

In July, Amazon reported just over 4 billion in income from its Amazon Web Services division. Amazon runs its own games studios, distributes Lumberyard, and has GameLift and GameSparks back-end services for multi-player games. Body Labs would be a natural extension for gamers to have to develop photo-realistic, moving body avatars. Adding on this kind of service would continue to expand their digital revenue, so it makes sense, although the company has not commented on this direction.

So, what’s next for Amazon?

Integrating Body Labs into the launch of Amazon Prime Wardrobe, a try-before-you-buy clothing discount service now in beta, is an obvious next step–whether or not that integration is obvious to the customer. Echo Look integration also looks to be a no-brainer. Peering a bit further down the line, with big technology companies hungry to acquire production and distribution, it wouldn’t be surprising to have Amazon acquire fashion production as well as fashion brand assets in the near future to round out its in-house fashion lines Lark + Ro, Franklin & Freeman, Pinzon, Scout + Ro, and more.

Tech

IBM and Stellar Are Launching Blockchain Banking Across Multiple Countries

The news also comes as an important validation of blockchain technology.

In a breakthrough for payments technology, IBM and a network of banks have begun using digital currency and blockchain software to move money across borders throughout the South Pacific.

The significance of the news, which IBM announced on Monday, is that merchants and consumers will be able to send money to another country in near real-time, accelerating a payments process that typically takes days.

The banking network includes “12 currency corridors” that encompass Australia and New Zealand, as well as smaller countries like Fiji and Tonga. It will reportedly process up to 60 percent of all cross-border payments in the South Pacific’s retail foreign exchange corridors by early next year.

The news also comes as an important validation of blockchain technology, which has long promised enormous efficiencies for the financial sector, but has been slow to move from the concept stage to the real world.

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Blockchain, which relies on a disparate network of computers to create an indelible, tamper-proof record of transactions, is most famously associated with the digital currency bitcoin. But it can be used in many other applications such as tracking shipments or, as in this case, to record a series of cross-border transactions.

As an example, IBM said a farmer in Samoa will soon be able to contract with a buyer in Indonesia, and use the blockchain to record everything from the farmer’s collateral to letters of credit to payment.

“This is the next step in the evolution of blockchain technology. It’s live money moving around a network,” Jesse Lund, IBM’s VP of Blockchain, told Fortune.

Digital Currency is Key

The new blockchain banking process is also notable because the banks will initially rely on a bitcoin-like digital currency, known as Lumens, to facilitate the cross border payments.

Currently, banks arrange such payments by maintaining foreign accounts in a local currency (so-called nostro accounts), and then debiting the accounts as required—a process that is both slow and ties up capital.

Under the new blockchain arrangement, banks will conduct the transactions using Lumens, and then rely on local market makers to convert the Lumens into local fiat currency. The Lumens are created by a non-profit company called Stellar, founded a Jed McCaleb, a well known figure in the payments and crypto-currency world.

Both Stellar and IBM are part of a project called Hyperledger Fabric, which is building open source blockchain tools to support payment infrastructures.

According to Lund, though, the banks use of Stellar’s digital currency is likely to be temporary. He predicts that, in the next year, central banks will begin issuing digital currencies of their own, and that these will become an integral part of blockchain-based money transfers.

The IBM-backed blockchain project comes at a time when other companies are creating efficient new ways to conduct global money transfers. These include BitPesa, which relies on the bitcoin network to replace traditional wire transfers between merchants in Africa, and TransferWise, which provides an inexpensive way for consumers to obtain foreign currencies.

This is part of Fortune’s new initiative, The Ledger, a trusted news source at the intersection of tech and finance. For more on The Ledger, click here.

Tech

Elon Musk Reveals More Details About His Plan to Colonize Mars

SpaceX CEO Elon Musk revealed a trove of new details on the company’s plan to colonize Mars.

He discussed technical details about the giant rocket that he says will take passengers to the Red Planet, the road map for getting to its first launch, and insights into SpaceX’s broader strategy in an “Ask Me Anything” forum on Reddit Saturday.

Musk was his typical freewheeling self during the AMA, quoting the cartoon Bob the Builder and responding to a question about spaceship design with the highly technical insight that “tails are lame.”

He also gamely responded to questions about tangential details of settling Mars, including speculation that settlers might use a compressed version of the Internet. Musk observed that data would take between 3 and 22 minutes to travel between Earth and Mars. “So you could Snapchat, I suppose. If that’s a thing in the future,” he wrote.

More substantively, Musk clarified the scope of SpaceX’s ambitions on Mars. Though he has shared images of vast Martian cities in his presentations on Mars colonization, he said SpaceX isn’t focused on building those cities itself.

“Our goal is get you there and ensure the basic infrastructure for propellant production and survival is in place. A rough analogy is that we are trying to build the equivalent of the transcontinental railway. A vast amount of industry will need to be built on Mars by many other companies and millions of people.”

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That means SpaceX will be designing and building things like systems for creating fuel from Martian resources, work that Musk said is “pretty far along.” But they won’t be focused on issues like how colonists grow food.

Musk also reiterated previous claims that SpaceX is designing the new Mars rocketstill code-named BFR, which stands for exactly what you think it does – to be as safe and reliable as today’s commercial airliners. That will be crucial if plans to use the BFR for transportation around Earth come to fruition.

Musk also shared some details about the game plan for testing the BFR ahead of its first scheduled flight in 2022.

“[We] will be starting with a full-scale Ship doing short hops of a few hundred kilometers in altitude and lateral distance,” Musk wrote. “Those are fairly easy on the vehicle, as no heat shield is needed, we can have a large amount of reserve propellant and don’t need the high area ratio, deep space Raptor engines.

“[The] next step will be doing orbital velocity Ship flights, which will need all of the above.”

SpaceX’s progress on its Falcon 9 rocket in recent years – especially its unprecedented success in landing and reusing rockets – has fascinated observers and re-energized public dialogue about space.

Tech

6 Rules You Must Know for Using SEO and SEM to Grow Your Business

If you’re managing a business, you know how important a web and mobile presence is. Whether you’re selling tacos, tiaras, or terabytes, customers need to be able to find you.

You’ve probably dipped your toe into the complex world of organic or “free” search, also known as Search Engine Optimization (SEO), and paid search, also known as Search Engine Marketing (SEM). But what do you really need to know about SEO and SEM?

I spoke with SEO/SEM expert Andrew Shelton, founder of the digital marketing agency Martec360, who gave me six rules that you need to pay attention to right now if you want to increase your sales through search:

1. Mobile is king

Need evidence of the importance of mobile? Some 96% of smartphone owners use their device to get things done. About 70% of smartphone owners use their phone to research a product before purchasing it in a store. Half of all web traffic comes from smartphones and tablets.

Furthermore, Google has begun to make its search index “mobile-first.” That means that Google will primarily index mobile content and use that to decide how to rank its results.

2. Paid search pays off on mobile

On mobile, paid search (SEM) is increasingly paying off. Shelton says he used to tell his clients to focus on free search (SEO) but with users putting mobile first, the continuum has changed.

“The greatest return on investment is email,” Shelton says, “because you have those customers in house. But paid search is next.” He estimates that paid search spending went up by factors of 25% to 50% in 2016.

3. Have a solid content strategy

The old adage is the new adage: “Content is king.” You need high-quality content for your website if it’s going to compete in the free search business. You can’t go about that blindly.

Consider what customer problem you’re solving. What customer questions can you be answering?

Do you have a mechanism for customers to ask questions? There could be a wealth of ideas for blog posts, FAQs, and buyers’ guides right there.

4. Social media is worth your return on investment

Social media can be vexing for many businesses. You definitely have to perform a cost-benefit analysis on it. Spending six hours a day sending out tweets that don’t lead to conversions is going to be a losing proposition.

Treat social media as “an engagement with an ongoing conversation with your customers,” Shelton recommends. “It’s not just for selling.”

In fact, if your social media channels are too hard-sell, they’ll be counter productive. You have to create value. Tools like Hootsuite, Falcon.IO, and Curalate can help.

5. Manage your online reputation

According to Shopper Approved, an app that helps its clients collect online ratings and reviews, 88% of all consumers read online reviews to determine whether a local business is a good business.

All of those reviews are part of the SEO equation. They can help you, or they can hurt you. But an app like Shopper Approved can help push more positive reviews where you need them.

6. Measure and monitor your progress

The only way you’re going see your business grow exponentially through SEO, SEM, and social media is to measure what you’re doing. You have to know where you’re starting, set some benchmarks, and monitor your progress.

Install Google Analytics. There is a plethora of other e-commerce tools you can use for analysis. Data is your friend. Get used to swimming in it.

And if you need help, find a consulting firm that understands your customer and your goals.

Just remember, effective search is process. You won’t get it right the first time. But you’ll get better at it with everything you learn.

About the author:

Kim Folsom is the Founder of LIFT Development Enterprises–a not-for-profit, community development organization with a mission to help underserved, underrepresented small-business owners – and Co-Founder and CEO of Founders First Capital Partners, LLC, a small business growth accelerator and revenue based venture fund. Learn more about Kim and her company’s mission to help grow and fund 1000 underserved and underrepresented small businesses by 2026 via their Founders Business Growth Bootcamp program at www.foundersfirstcapitalpartners.com.

 

Tech

General Electric: Dividend Cut?

General Electric’s (GE) shares fell to fresh 52-week lows last week as investors continue to be negative about the industrial company. While negative analyst commentary and concerns over General Electric’s dividend sustainability have more heavily weighed on investor sentiment lately, I think General Electric makes for an interesting contrarian ‘Buy’ today.

General Electric is not in an enviable position, and neither are shareholders that bought into the industrial company at a much higher valuation in the past. General Electric’s shares have slumped 27.3 percent year-to-date, falling to one new low after another. Last week, General Electric hit a new 52-week low @$ 22.83, extending a multi-week streak of losses.

See for yourself.

Source: StockCharts.com

A couple of factors have weighed on investor sentiment lately, including negative analyst commentary from JPMorgan that suggested General Electric might have to cut its dividend. According to a CNBC report, analysts at JPMorgan see a GE dividend cut as “increasingly likely”.

Not only did JPMorgan fuel the fire of doubt when it comes to General Electric’s dividend sustainability but the investment bank also lowered its price target for GE’s shares from $ 22 to $ 20, maintaining its firm ‘underweight’ rating on the stock. In addition, widely-followed media and investment personality Jim Cramer last week suggested that General Electric likely will cut guidance and may slash the dividend.

Given General Electric’s core industrial business weakness – keep in mind that GE’s industrial revenues slumped 12 percent and industrial/vertical EPS dropped 45 percent year on year in the second quarter on the back of a weak performance in oil & gas as well as transportation – a guidance revision is a distinct possibility, especially as it relates to GE’s industrial operating profit and margin guidance.

Source: General Electric

The real question, however, is whether General Electric will take the rather significant step and slash its dividend.

General Electric has cut its dividend in the past. The last time General Electric slashed its dividend payout was during the Great Recession when a lot of companies cut back on shareholder payments. In 2009, General Electric cut its quarterly cash dividend from $ 0.31/share to $ 0.10/share. However, GE’s dividend rate consistently edged up over the last eight years. General Electric’s long-term dividend history is impressive.

Source: General Electric

Will General Electric Have To Cut Its Dividend?

I don’t think General Electric will have to cut its dividend, although management could decide that it is better for the company to conserve cash and invest in General Electric’s industrial businesses directly. That said, here is why I think a dividend cut is relatively unlikely.

For one thing, General Electric has affirmed investors multiple times that the dividend is a ‘top priority’ for management. This statement suggests that management will remain committed to paying shareholders a steady dividend even though it costs the company a lot of cash. Remember that General Electric plans to return $ 8 billion in dividends to shareholders this year alone.

Further, I think General Electric will be able to maintain its dividend from a cash flow perspective.

General Electric has guided for $ 16-20 billion in free cash flow, including dispositions in 2017. A large part of this cash flow is contributed by GE Capital, which is expected to produce $ 6-7 billion in dividends for GE this year. In the first six months of 2017, GE Capital has already beefed up General Electric’s cash flow by $ 4 billion, making up for a significant portion of General Electric’s dividends to shareholders.

GE Capital dividends indeed play a crucial role in propping up General Electric’s cash flow. General Electric’s industrial free cash flow excluding deal taxes and pension expenses was actually negative $ 1.6 billion year to date, and total FCF only turned positive because of GE Capital’s dividend to the parent company. Shareholder dividends therefore depend largely on GE Capital’s cash flow, while GE’s industrial business on a standalone basis does not have the cash power right now to fund those payments.

Source: General Electric

I don’t think that General Electric will have to cut its dividend, though. General Electric has guided for $ 19-21 billion in capital returns this year of which only $ 8 billion are cash (and recurring). In other words, as long as GE can fall back on GE Capital for its dividend payments and the company cuts back on share buybacks, there is no immediate need to cut the dividend.

Your Takeaway

General Electric could adjust its dividend payout. Yes, but I consider this not that likely considering past management statements that the dividend is a ‘top priority’ and considering that GE Capital produces a LOT of cash for General Electric. General Electric has an impressive long-term dividend history which signals its commitment to shareholders, and I doubt management wants to put off investors with another dividend cut. I think investors are a bit too fearful right now, which is exactly the right time to get greedy. Buy for long-term dividend income and capital appreciation.

If you like to read more of my articles, and like to be kept up to date with the companies I cover, I kindly ask you that you scroll to the top of this page and click ‘follow‘. I am largely investing in dividend paying stocks, but also venture out occasionally and cover special situations that offer appealing reward-to-risk ratios and have potential for significant capital appreciation. Above all, my immediate investment goal is to achieve financial independence.

Disclosure: I am/we are long GE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Tech