GE (GE) investors have never liked the fact that the conglomerate owns entertainment and news unit NBC Universal. The network and studio are part of a venture in which French company Vivendi owns 20%. There is nothing about the NBCU operation that has anything to do with GE’s infrastructure, industrial or financial businesses. As GE’s earnings have gotten more disappointing, the calls for finding a new home or NBCU have gotten louder.

About a month ago, word leaked out that the nation’s largest cable company, Comcast (CMCSA), wanted to buy NBCU. As details emerged, it looked like the structure that GE and Comcast would use is one in which Comcast would own the majority of the company and handle management. GE would retain a stake that the cable firm would buy out over time.

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The problem with dual ownership is deciding on management and asset value. Comcast will probably have to put several billion in cash into the venture to get its majority ownership, because its cable programming properties are not worth anywhere close to those of NBCU.

The NBCU transaction is complicated by the fact that Vivendi almost certainly wants cash for its 20% before Comcast and GE can close a transaction. The rumor is that the French are holding out for $8 billion, which would give NBCU a value of $40 billion. According to GE’s last 10Q, NBCU had revenue of $4.1 billion and operating income of $732 million in the third quarter. NBCU is on track to make a little over $2 billion in 2009, so $40 billion is a rich valuation.
Wall Street cannot figure out what Comcast can do with NBCU that GE can’t and has punished the cable company’s stock appropriately. Over the last month, its shares are down 5%, while the Dow is up 2%.

Comcast clearly believes that owning content and a content distribution infrastructure have some “synergy.” If that is true, the benefits are not obvious. Time Warner (TWX) spun off Time Warner Cable (TWC) because the combination of content and cable distribution were not obvious to its board. There are rumors that Cablevision (CVC) will also spin out its programming operations to public shareholders, or sell them. Comcast may have a strategy, but it is clearly against the tide. The industry does not seem to value the combination of video content assets and distribution channels as a winning mix for one company.

You would think that programmers would want their distribution partners to be neutral on content. Comcast is proposing that it be both producer and carrier. Some of the owners of the other channels that run on the Comcast cable systems may not feel the same way.

Comcast probably has a secret plan for NBCU, but no one else can figure it out.

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