GE Not Media-Shy

Meanwhile, GE is under fire from investors because its stock price has made no forward progress over the last seven years. Critics say the conglomerate needs to trim down in order to get its stock price moving again, and with the media industry in turmoil amid the rise of the Internet, they point to GE's media arm, NBC Universal, as the logical place to start cutting.

"Buying Dow Jones won't get Immelt any closer than he is now to unlocking value at GE," says Matthew McCormick, a portfolio manager with investment firm Bahl & Gaynor, which owns a stake in GE. "We're more in favor of GE spinning off assets now rather than adding to them. Clearly, NBC Universal is not one of their strengths."

NBC Universal recorded a 6% drop in profits last year as NBC slipped to last place among the four broadcast networks in ratings. The division expects flat revenue for all of 2007 with profit growth of zero to 5%.

Some observers say the business is showing signs of coming out of its slump, and Immelt has consistently shown a commitment to keeping GE in the media industry.

Content creators are suffering across the board now as audiences move online and Web aggregators such as Google (GOOG) suck up the lion's share of the online ad dollars. In this environment, GE's exposure to the media industry is weighing on its valuation, but as the digital transformation takes shape in the years ahead, Immelt is keeping faith that the old axiom "content is king" will once again be proven true. When content creation regains its value in the future, Dow Jones' assets could be a virtual goldmine, and GE's current stock price will be a bargain.

With that in mind, making a move for Dow Jones now would seal Immelt's commitment to GE's media business and deal one of its chief competitors, News Corp., an embarrassing setback. Also, GE might be able to work out a deal with Pearson that allows it to put up its CNBC brand as an asset in the deal without investing much cash or taking on much debt.

"Without a major financial commitment, a deal for Dow Jones could make sense for GE's long-term strategy if the company wants to stick it out in the media business," says Jack De Gan, a manager with Harbor Advisory and a GE shareholder. "It would not be viewed very positively in the markets right away, but Immelt is not the kind of CEO that's going to let that stop him."

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