Immelt Sees No Reason to Sell NBCU

Dec 13, 2005  •  Post A Comment

General Electric Chairman Jeffrey Immelt said Tuesday that despite the wave of deconsolidation gripping the media industry, he doesn’t see any reason for his company to spin off its NBC Universal unit now.

“If it ever became apparent that to break it up would get shareholder value, we would be foolish not to do it,” Mr. Immelt told a crowd of investors and analysts at the company’s annual meeting in New York to discuss the next year’s financial outlook. “But I don’t see it.”

Mr. Immelt did say, however, that NBCU is “always run … in a pro-investor way,” and noted, “We are not in it [owning NBCU] just to be in it.”

Mr. Immelt made his comments against the backdrop of the entertainment industry’s deconsolidation just a few years after a wave of mergers that resulted in media behemoths such as Time Warner and Viacom, two companies that are planning to spin off assets into new publicly traded companies. Viacom is set at year-end to split itself into two separate companies, one to contain high-growth assets such as MTV Networks, which will retain the Viacom name, and another to comprise assets that generate lots of cash flow, to be called CBS Corp.

Time Warner, meanwhile, is looking to offer a portion of its cable operation to the public.

Mr. Immelt said NBCU is likely to report a 10 percent increase in 2006 revenue to around $16 billion from an estimated $14 billion, while segment profit is likely to hold steady year-over-year at around $3 billion, mainly due to troubles with NBC’s prime-time lineup. GE overall is expected to post a 10 percent increase in revenue to $165 billion for 2006, while earnings per share is expected to rise between 12 percent and 17 percent.

Also Tuesday, Mr. Immelt again acknowledged that NBC’s weakened prime-time lineup was in need of improvement, but said he was confident things would improve in 2006, which he described as a turnaround year for the network.

“When I’m with the NBCU team, I’m trying to be encouraging, saying, ‘Guys, we are doing great except for one thing,'” Mr. Immelt said, adding that fixing the prime-time lineup is “job one” for the unit.

He noted that a handful of shows, including “The Office” and “My Name Is Earl,” are performing well, and that the network has four new shows set to launch in early 2006. In addition, he noted that the arrival of the NFL will help alleviate things.

“We’ve tripled the pipeline we have in development, and we are going to come out of this with a better business. I feel pretty good about that,” Mr. Immelt added.

He also repeated that NBC is simply one of several operations that make up NBCU, and that the division’s news, cable and film operations continue to perform well.

What’s more, Mr. Immelt said there are opportunities available to NBCU in the digital content realm, where, as the owner of content, NBCU can play a key role.

“Digital gives us more ways to sell content,” he said. “The digital model is the growth model.”