Vivendi Has Relative Strength

It's hard to get a grip on Vivendi Universal . But don't let that stop you.

Vivendi is a record company. It's a book publisher. It's a television broadcaster and a movie studio. It's a theme park operator, an Internet media company and a major shareholder in a mobile telephone company.

Oh, yes, I almost forgot. The Paris-based media and telecom conglomerate is also majority owner of a water/waste/utility company. Imagine if AOL Time Warner , in addition to releasing a Harry Potter movie this fall, also controlled a garbage hauler. That's pretty much the idea.

Now these are lousy times to be investing in media companies, as you might have picked up from all the revenue and EBITDA shortfall announcements made over the past few weeks -- announcements with varying degrees of specificity, yet reflecting roughly the same level of pessimism from AOL Time Warner, Viacom and Disney .

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But last week Vivendi chairman Jean-Marie Messier said the company still expected 35% growth this year in earnings before interest, taxes, depreciation and amortization, although he scaled back expectations somewhat for 2002. It's unclear yet whether the company's confidence in a standout performance is reasonable or a delusion.

That's one uncertainty. Another is the future of the telecom business, which analysts suggest Vivendi could jettison, despite the company's protestations to the contrary. Currently, Vivendi's wireless affiliate in France is threatening to walk away from new wireless licenses it recently won, complaining like a remorseful buyer that the government shouldn't have allowed it to bid so high.

Finally, there's the struggling state of the music industry. In general, music sales are hurting, and music is one of the biggest contributors to Universal's revenue.

Yet there is some promise in this post-terrorist-attack uncertainty. Vivendi's Universal Studios theme park business is only a fraction of Disney's. Its advertising exposure is minimal, accounting for just 1% of revenues in recent months, compared to nearly one-fourth of revenue for AOL Time Warner.

Though Vivendi's music business may be upended by electronic music distribution, the company is embracing technological change. Meanwhile, compared to its peers, the company is trading at relatively low multiples of EBITDA, implying room for multiple expansion.

Another intangible: the company expects next year to start reporting its financial results in accordance with U.S. generally accepted accounting principles (GAAP). That move will likely increase U.S. interest in Vivendi's ADRs, rebuilding strength in shares hit in the recent media slide.