After my meeting with General Electric Co. (NYSE: GE) CFO Keith Sherin last week, I tried to figure out how much GE's NBC Universal might be worth in the open market. Such analysis is relevant now for two reasons:

• GE's stock price has fallen 2% under its current CEO. When Jeff Immelt took over as CEO on September 7, 2001, GE was trading, 2%, or 87 cents, above today's $38.79. During that same period, the S&P 500 rose 40%. In predecessor Jack Welch's first 5.9 years as CEO, GE's stock rose 221% from a split-adjusted $1.40 in April 1981 to $4.50 in March 1987.
• A respected analyst recently advocated a breakup to get GE stock moving. The New York Times [registration required] recently reported that Citigroup Inc.'s (NYSE: C) John Sprague issued a report titled "Partial Break-Up Could Break Deadlock on the Stock."

Is GE worth more broken up in pieces and sold or kept intact? To answer this, let me explain how a conglomerate like GE can raise its stock price. My theory is that GE management has two levers: the P/Es of the industries in which GE competes and the earnings growth rates of its businesses in those industries. To increase GE's market value, its management should prune GE's portfolio of businesses with the lowest P/Es and slow earnings growth -- replacing them with high P/E, fast earnings growth businesses which it can run successfully (if that can be done without overpaying). Nevertheless, as noted here, I am not sure whether a conglomerate is a good corporate strategy for GE because it may be leading the stock market to discount its earnings by 4%.

I address whether breaking up GE will increase its stock price in Breaking Down GE, a seven-post series.

To get GE's breakup value -- between $315 billion and $408 billion -- I estimated the 2007 net income of each of GE's six divisions. This breakup value range is between 21% below and 2% above GE's current $399 billion stock market value. That surprised me since investors such as Sprague have argued for years that GE should be split up to unlock its value to shareholders. If that theory was correct, the breakup value would have been much higher than the market value.

My estimate, however, suggests that GE's stock price is stuck in a rut because there is not a huge amount of value to unlock through a breakup. Although my analysis is very rough, my hunch is that GE is probably not grossly undervalued. That's in part because my low estimate is probably too low and my high estimate is only fractionally above GE's current market value.

To refine the analysis, I would value each distinct business within the six divisions separately. For example, Industrial includes lighting and appliances each of which should be valued differently. I would also use other valuation methods, such as discounting to the present projections of each distinct business's future cash flows and comparing the worth of GE's distinct businesses to that of recent merger transactions in each industry in which GE competes.

Here are my estimates for the value of the six GE divisions:

• Infrastructure: $154.6 billion.
• Commercial Finance: $43.5 billion to $64.1 billion.
• GE Money: $29.6 billion to $54.7 billion.
• Healthcare: $24.0 billion to $59.1 billion.
• NBC Universal: $42.8 billion to $53.7 billion.
• Industrial: $20.2 billion to $21.7 billion.

One interesting observation from this analysis is that the P/Es of consumer finance companies comparable to GE Money are currently around 10 -- this is roughly half GE's P/E of 19.1. Although companies comparable to GE Commercial Finance have P/Es averaging about 12, Sherin revealed that GE's Infrastructure and Commercial Finance segments work closely together. Thus I would not be inclined to dispose of it.

Due to its low industry P/E and modest earnings growth, if I ran GE, I would be most inclined to sell GE Money in order to raise GE's corporate P/E and remove an earnings drag. Interestingly, the case for dumping NBC Universal isn't as clear as some suggest. The business does add value to GE, helping to raise its overall multiple. GE should only consider selling it if its market share and earnings growth don't dramatically improve in the next two or three years.

I need to do more thinking about what replacement businesses -- those with both high P/Es and fast earnings growth -- GE should buy or build. Let me know if you have any suggestions.

First: Breaking Down GE's Industrial Business.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup and GE and has no financial interest in the other securities mentioned in this post.