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Tale of Two Tracking Stocks

As Microsoft makes waves with its tracking-stock plans, GE quietly files with the SEC for its NBC Internet venture.



(MSFT) - Get Report

isn't creating a tracking stock for its Internet operations. Yet.

But don't think for a second the tracking-stock concept is dead. All Microsoft CFO Greg Maffei said after the company's earnings Monday is that it isn't "imminent." The plan to create a stock tied to Microsoft's Internet operations that would have the value of a "pure-play" Net company remains a way for Microsoft to attract wampum-hungry employees. After all, they want a shot at getting as rich as their Microsoft predecessors did.

And plenty of other corporate titans are moving ahead with tracking stocks, most notably

General Electric

(GE) - Get Report

. GE last week quietly filed papers with the

Securities and Exchange Commission

that show just what the first pure play carved out of a true blue-chip will look like.

The new concern is called

NBC Internet

, or the cute


for short. Based in San Francisco, NBCi will be the combination of consumer-oriented Web services firm


(whose stock and CEO will become NBCi's stock and CEO when the deal is done), portal

and four Net properties belonging to GE's NBC television unit. The other partner involved is


(CNET) - Get Report

, the computer-information site that jointly owns with NBC.

There's a lot that looks impressive about NBCi, particularly that GE's grand poobah, Jack Welch, and NBC President and CEO Bob Wright are on the new unit's board. (Unlike

Network Associates



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William Larson, neither Welch nor Wright helped themselves to any NBCi stock options, according to the company's SEC filing.)

Even more impressive is that NBC has been running


Internet operations like something resembling a business. The three primary NBC contributions to NBCi -- network portal;, the aggregate sites of more than 100 affiliates; and on-demand video programmer


-- are actually profitable. Grouped together as the NBC Multimedia unit to be rolled into NBCi, these three earned $838,000 in the first quarter on revenue of $3.5 million. NBC's fourth contribution to NBCi is a 10% stake in

, the financial channel's Web site and a mighty spiffy-looking competitor to


The other participants in NBCi surely will cure NBC of its profit-making urge. The overall entity, if it had existed at the end of last year, would have had revenue of $27.8 million and an operating loss of $290 million. And NBCi's red ink isn't slowing. First-quarter losses grew to $88 million on sales of $13.3 million, according to the SEC filing.

With's current market cap of $736 million, its proposed 37% stake in NBCi values the as-yet-nonexistent company at almost $2 billion.

That's a neat feat for NBC, of course, to turn a few million bucks in revenue into a billion-dollar investment. NBC will hold 48.5% of NBCi, with an option to own as much as 53.8%. Another goodie for NBC is the $880 million in advertising NBCi has promised to purchase from the Peacock over 10 years.

That latter arrangement is reminiscent of the way



hedged its bets on



by taking a big stake but arranging for the fledgling global satellite network to buy its gear from Motorola.


Herb Greenberg's


coverage of Iridium makes clear, sometimes even hedged bets don't pan out.

Adam Lashinsky's column appears Mondays, Wednesdays and Fridays. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Lashinsky writes a monthly column for Fortune called the Wired Investor, and is a frequent commentator on public radio's Marketplace program. He welcomes your feedback at

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