General Electric (NYSE:GE), which reports earnings tomorrow, has indicated that it may spin-off its weakest divisions -- the firm's consumer and industrial units. No one cared, and the stock did not move. The action would not be enough, nearly enough to pull GE away from its multi-year lows.
What investors would really like to see is GE broken into little pieces, the smaller the better. The only growing and hardy business that GE has now is its huge infrastructure operation. It would make a nice stand-alone company.
The unit that investors most want to see GE kick out the door is NBC Universal, a mismatch with all of GE's other businesses. In the last quarter, it had revenue of $3.6 billion and segment operating profits of $712 million. It is profitable, but not growing.
There is speculation that NBC Universal may have a very interested buyer in Time Warner (NYSE:TWX), which is about to get a load of cash from its own spin-off of Time Warner Cable (NYSE:TWC). The New York Post writes that GE CEO Jeff Immelt may be "interested in exploring a merger or spin-off - with Time Warner and Liberty Media mentioned most often as the likely suitors."
A deal which combines a TV network and another studio with Time Warner is not so far-fetched. NBCU has a number of cable channels including the recently acquired cable and online behemoth, The Weather Channel. Time Warner tried to buy that all on its own. The $3.5 billion price was too high. TWX has it own cable powerhouse, the crown jewel of which is CNN.
Time Warner could save a fair amount of money by putting together two studios, which would allow it to increase earnings by tearing costs out of NBCU.
The financial portion of the transaction would be a big pill to swallow for TWX, but it is not beyond the media company's capacity. CBS (NYSE:CBS), which has revenue comparable to NBCU, has a market cap of about $12 billion. That means Time Warner would probably have to pay $15 billion to get GE's entertainment unit.
Shareholders in Time Warner want to see management step up and improve the company's prospects. There are not many big media deals to be had these days.
Sometimes needing something is just as important as whether owning it makes sense.
Douglas A. McIntyre is an editor at 247wallst.com.
Tesla Roadster sets a record -- travels 313 miles on a single charge
Cramer on BloggingStocks: China's industrial focus helps lots of U.S. names 
Why do we have a weak dollar?
Reader Comments (Page 1 of 1)
7-10-2008 @ 12:36PM
gumbo koontz said...
Doug
Can u tell me whom you are wrtiing this to?? GE shareholders or GE pension for employee unions??
GE is heavily unionized and I would not be surprised to see GE going down the same path GM had gone with EDS, GMAC, Hughes, etc just to feed the ravenous pension coffers for UAW!!
GE had been able to afford union wages because GE sell to distrubituion customers not retail customers who tend to haggle for prices. But with emerging economies with improved technological capabilites that will be able to match GE everywhere.
I think I see the writings on the wall that GE knows that GE cant rest on pillows any longer and has to retreat with asset sales in order to satisfy GE unions.
I suggest that GE buy GM now as GM had already kicked asses and has nowhere to go but up but GM is in need for cash to help it bridge the present recession and future fuel efficient model developments. GE can easly afford to finance GM's turnaround.
I would approve any GE asset sales only if the cash proceedings are strictly used to invest in other divisions or outright purchases of other companies like GM, of course. If GE can find a better purchase than GM, I would say go ahead but I doubt it... It is just a no brainer on GM ... A monkey would hit GM every time with a dart!
7-10-2008 @ 1:20PM
Tom said...
Bewekes is a bigger loser than Parsons!! I never see him say anything to boost this stock. Parsons would at least get on CNBC once or twice a year to try and stop the bleeding. Does Bewekes even exist? if they pay this huge cable dividend, TWX will then be a penny stock on the pink sheets. I think he is an A-Wipe. TomH
7-11-2008 @ 2:39PM
Jessy S. said...
Time Warner would be an complete idiot to buy NBC Universal. Besides, Microsoft would fight that deal tooth and nail. Right now, I would just like to see a deal get done in congress that would kill all these banks and investment firms that are trying to kill our economy.