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# General Electric's Financial Struggles: A Tough Third Quarter

General Electric (GE) faced another challenging third quarter, with profits and revenue falling short of even the low expectations set by analysts. The stark reality of the situation has raised important concerns among investors, and many are looking to discern the key takeaways from the company's recent performance.

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## Dividend Cut: A Necessary Measure

One of the most significant headlines to emerge from this quarter is the drastic cut in GE's quarterly dividend, which has been slashed from $0.12 per share to just $0.01 per share. This decision is expected to save the company approximately $3.9 billion. While some shareholders may view this move harshly, it’s arguably a prudent step for a company struggling financially.

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Taylor Muckerman remarked that a cut was necessary, noting that the previous dividend yield was insufficient when compared to the steep decline in the share price—some investors have seen their investments lose around 50% of value over the past year. The savings from the dividend should, at the very least, help GE address some of its pressing financial obligations, including potentially hefty insurance claims tied to GE Capital, which could amount to as much as $15 billion.

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## Challenges in the Power Division

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The company's Power division, which is GE's largest operating segment, also showed alarming signs of distress. Sales within the division dropped by 33% in the quarter, resulting in an operating loss. This struggle emphasizes a pressing need for strategic changes, and GE will likely lean on the savings from the dividend cut to bolster recovery efforts in this critical area.

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The new CEO, Larry Culp, recently acknowledged these challenges and indicated that there will be a full investor update in early 2019, during which he will outline a clearer strategy going forward. Culp is exploring separating the Power division into two distinct units: one dedicated to gas products and services, and the other focusing on nuclear power and grid solutions. This bifurcation could lead to greater management focus and transparency about the performance of these diverse segments, ultimately benefiting the company’s strategic direction.

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## Operational Hurdles

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However, the road ahead is fraught with hurdles. Challenges such as an oversupply of natural gas turbines versus demand and recent equipment failures in GE's nuclear sector only add to the pressure. A malfunctioning nuclear turbine not only brings bad publicity but also raises serious safety concerns in an already dangerous sector.

Given the substantial decline in sales—particularly in a division that has historically been a backbone of the company—the potential for deeper scrutiny and necessary reforms becomes apparent.

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## Financial Future: Capital Raises and Debt Markets

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Culp has made a firm declaration regarding the company’s financial trajectory, stating there are currently no plans for capital raises. For shareholders, any potential move to hit the debt markets for financing is a cause for concern, particularly in light of GE’s declining stock price. The possibility of issuing equity shares at a low valuation could further demoralize investors and complicate GE’s recovery efforts.

Muckerman expressed his hope that the significant savings from the dividend cut will be enough to sustain GE during this rocky period, conveying an underlying sense of caution and anticipation about the company's financial health.

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## Conclusion: A Pivotal Moment for GE

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In conclusion, General Electric is at a pivotal moment in its history where strategic decisions have far-reaching implications. The significant dividend cut, though painful, appears necessary to address immediate financial obligations and reposition the company for future growth. As shareholders wait for more clarity in early 2019, the focus will undoubtedly be on how GE executes its recovery strategy amidst ongoing operational challenges. The effectiveness of this leadership transition under Larry Culp will ultimately dictate the company’s trajectory moving forward.