New CEO Larry Culp Cuts GE's Dividend to 1 cent per share

Larry Culp cut GE's dividend to 1 cent per share from its quarterly level of 12c per share, saving GE around $3.9bn a year. Despite the loss of dividend shares rose.

Larry Culp is known for his "hands-on" approach, having cut his teeth from the age of 37 as CEO of Danaher. He has a BA from Washington College and an MBA from Harvard Business School. He is the first outsider to lead GE, ousting former incumbent John Flannery (who was a 30 year veteran of GE taking the reigns from Jeff Immelt). On Larry's appointment, shares surged 10%.

GE's debt, complexity of corporate structure and bad deals have contributed to its troubles. This has wiped off half a trillion dollars of market value over the past 18 years (its market value peaked in 2000). GE Power is one of its worst performing divisions reporting a 33% decline in Q3 sales. Renewable energy generation is taking away some of its business.

A bright spot in GE's business is GE Aviation, where sales have climbed 12%, in which the company builds jet and turboprop engines (engines that drive aircraft propellers). The division also has a Digital subdivision which offers products in the cloud aimed e.g. at aircraft maintenance records (AVRAD).

IBM to Buy Red Hat for $34bn in "Software for the Cloud" Transaction - Cops 5% Loss on Stock Price, RH up 45%

IBM (NYSE:IBM, Beta 0.87, PE 20x) has confirmed it will pay $190 per share for Red Hat (NYSE:RHT, PE 77x - clearly will push up as people buy up the target), a 60% premium to the current stock price. IBM shares traded down 5% mid afternoon New York time, with some bounce back towards the close, and a traded volume of around 17.5 million (average volume is around 2m).

In terms of approvals, IBM already has the approval from the Boards of Directors of IBM and Red Hat. Shareholder and regulatory approvals are remaining now.

Key management include

• IBM CEO Virginia (Ginni) Rometty (a Computer Science and Electrical Engineering graduate from Northwestern)
• IBM CFO James Kavanaugh (appointed January 2018), also oversees Transformation and Operations. He has an MBA from Ohio State and joined IBM in 1996 from AT&T.
• Red Hat CEO Jim Whitehurst (a Computer Science and Economics graduate from Rice in Houston) who began his career at the Boston Consulting Group. He was also COO of Delta Air Lines for 6 years overseeing all aspects of Operations from Sales to Strategy.
• Red Hat CTO Chris Wright,  who has spent time working deep in the Linux kernel.

The focus of the acquisition is software for the cloud (Dell EMC was bigger at $67bn but that was both hardware and software).  This will allow IBM to tap into a market where they estimate 80 percent of business workloads have "yet to move to the cloud". Linux, containers, Kubernetes and multi-cloud management are all on the cards in the new world of IBM. "Open hybrid cloud" is the mantra of the deal.

The acquisition is designed to be free cash flow and gross margin accretive within 12 months. IBM has also expressed commitment to growing its dividend and maintaining strong investment grade credit ratings. It will target a leverage profile consistent with mid to high single A credit rating.

Jim Whitehurst stated that Red Hat is the leading open-source software business, with growth in 66 consecutive quarters, and could leverage IBM's scale and infrastructure and depth in customer relationships to continue its growth journey. He also mentioned that Red Hat and IBM have partnered over 20 years. Ginni Rometty stated "this lifts all boats for IBM" and that the deal prepares IBM for the "second chapter of the Cloud".

Micron Bets Big on AI to Boost Chip Sales with $100m Venture Fund

Nasdaq-traded Micron Technology (MU, non dividend paying, Beta of 2.27) is betting $100m that AI will ramp up demand for its memory chips. Sanjay Mehrotra, CEO, and former co-founder of SanDisk, spoke highly of the big opportunities ahead which will increasingly require better "memory and storage technologies" to galvanise the operation of neural networks at the heart of machine learning applications. Micron's premise is that machine learning workloads (training process) require six times more DRAM per server and double the SSD capacity than a standard cloud server. The memory bottleneck additionally requires investment in the much touted HBM or high bandwidth memory - Micron's offering in this space takes the shape of hybrid memory cubes (HMC). Samsung and Hynix ("Innovation from Within") are the current market leaders in HBM.

KKR Bids to Grow Portfolio of Tech

KKR has bid A$1.75bn to takover MYOB Group (MYO.AX) which if successful would make it KKR's biggest acquisition in Australia and go a long way to growing its portfolio of tech businesses. MYOB said its board was studying the non-binding offer.

Australia Mortgage Lenders Bought up by US Private Equity Firms

KKR, Blackstone and Cerberus are all in on the game.

Unraveling of Swiss Banking Secrecy Laws

The Federal Tax Administration (FTA) has for the first time shared data on 2 million accounts under the framework of the new AEOI (Automatic Exchange of Information), relevant to EU states as well as a further nine states and territories (states e.g. Australia, Canada, South Korea, territories e.g. Isle of Man, Guernsey, Jersey).

Honeywell Launches Cyber Consulting Wing to Address Customer Skills Gap

Honeywell has launched CyberVantage (TM) a cyber service for its Industrial Internet of Things customers. This includes penetration testing to identify and eliminate security weaknesses.

Announcing the move at an annual customer conference in Madrid, Honeywell Process Solutions, which is focused on process industries, said it was an "imperative" and "logical" step to take.

Process industries are concerned with processing bulk resources into other products and include the chemical and petrochemical industries.

Mike Spear is Honeywell's global operations director for Industrial Cybersecurity.

Technology partners include Intel Security which includes the McAfee business purchased by Intel in February 2011. Relevant related institutions include ICS-CERT, the Industrial Control Systems Cyber Emergency Response Team, part of the NCCIC (National Cybersecurity and Communications Integration Center).

Cryptocurrencies are Commodities

A ruling by Judge Rya Zobel in September 2018 has determined cryptocurrencies are commodities under the Commodity Exchange Act. The ruling involved an allegedly illegal cryptocurrency called My Big Coin (MBC).

Bringing Hardcore Tech In House - Apple Consumes PMIC Supplier

Apple is buying a portion of Dialog Semiconductor for $300m, a manufacturer of power management ICs (PMICs) taking control of its Swindon site as well as offices in Livorno, Italy and Nabern (where Daimler also have a research facility) and Neuaubing in Germany.

For this price, Apple will also acquire Dialog's patents and also take on its chip engineering workforce.  Apple will also prepay $300m to Dialog for products to be delivered over the next 3 years, creating an outlay of $600m for Apple.

Apple's hardware chief Johny Srouji, who reports to CEO Tim Cook, praised Dialog's "deep expertise in chip development" and alluded to their engineers having a long track record supporting Apple from the early days of the iPhone.

Johny joined Apple in 2008 to lead development on the A4, the first Apple-designed System on a Chip, having previously held senior positions at Intel and IBM. He has Bachelors and Masters from Technion which has close links with Intel.

The announcement caused Dialog's shares to surge 30% given the certainty the deal places over its future. The uncertainty (which at one point led to a 20% drop in the share price) was triggered by both Dialog's dependence on Apple (from whom it gets 75% of its revenue), and Apple's decision to drop Imagination Technologies in favour of developing its GPUs in-house, creating anxiety amongst suppliers (Imagination threatened legal action against Apple before being bought out by Canyon Bridge).

Dr Jalal Bagherli, who joined Dialog as CEO in 2005 (and has also worked as CEO of Alphamosaic, a Cambridge startup building video processing chips for mobile, sold to Broadcom in 2004 for $123m), and has a PhD in Electronics from Kent University, said the deal was "in the best interests of employees and shareholders".

Dialog's financial advisors were Qatalyst Partners (the advisory firm led by George Boutros and Frank Quatrrone) and legal counsel Linklaters.

Dialog's competitors in the Smartphone PMIC market are Qualcomm (with about 40% market share), TI (20% market share),  Maxim and formerly ST-Ericsson.

World Bank Buffers Up On Batteries in $5bn Power Play

The World Bank has announced at the UN General Assembly that it is creating a $1bn buffer of loan money to dish out for battery financing in the developing world. It is also seeking partners to provide an additional $4bn of financing ($3bn from public and private sector and $1bn from channels such as the Clean Technology Fund - whose biggest donors are the UK, US and Japan).

The KPI is to finance 17.5 GWh of battery storage capacity by 2025. This will be expanding the current capacity in developing countries today of 4.5 GWh.

Jim Yong Kim, president of the World Bank, stated "Batteries are critical to decarbonizing the world's power systems". They allow storage of renewable energy and reduce dependence on power from the grid. Banks of batteries can allow the creation of mini-grids supporting remote communities, something the World Bank is already financing.

The International Finance Corporation, part of the World Bank, predicts 40% growth in energy storage over the next nine or ten years.

Amazon Markets ACK to OEMS Targeting Home Automation

Amazon is marketing a board with chip and antenna to OEMs looking to integrate with Alexa in the home automation space. They call it the ACK. The cost of the chip will be only a few dollars. This puts Amazon in the driving seat of home automation, alongside the likes of Google (which purchased Nest Labs in 2014), Apple and Microsoft. Hamilton Beach and Proctor and Gamble are partnering with Amazon on this. The value of Amazon's offering is not in the chips themselves, but in binding consumers to their platform, and owning the data generated off of it.