24/7 Wall St. on CNBC Today (GE, GOOG, YHOO)

You can watch the CNBC video interview here.   Shortly after 2:00 PM EST I was a guest on CNBC disussing the Citigroup analyst call calling for General Electric (GE-NYSE) to bust part of itself up.  The truth is that this analyst call has run the stock because of a $45.00 value that was placed.  This is a thought, but the truth is that the market is just not that inefficient.

When I went to appear at the studio I thought the direction of this was going to be the underlying value of General Elecric, but that was only a part.  In the second half of the show, the values and performance went in a completely different direction.

Nick Heymann, the analyst from Prudential who was on in a different location, suggested the GE’s NBC could become part of Google (GOOG-NASDAQ).  My opinion is that this would just create company that is just another conglomerate and would diversify two pure-plays, but it got me thinking.  Jeff Immelt has signaled that he’d unlock value if someone else could do it better, but he also noted recently the safety in being diversified among many lines.  When I heard the Google angle, I had a thought even if it was more for conjecture.  Instead of just selling off NBC to Google (once again, Heymann’s theory), there is something that GE could do.  Instead of just selling the media unit GE could spin-off NBC and the underlying Internet properties to shareholders in a pure spin-off. 

Now take this a step further.  GE could acquire Yahoo! (YHOO-NASDAQ) as part of the spin-off, and the best part of it is that GE could do either a dual class or just deliver say 75% of the media and internet operations to existing shareholders.  This would be a defensive move and an aggressive move simultaneously.  And by the way, I do not expect this to really happen.  But in today’s "give back to shareholders" and "go for growth" demands that Wall Street has this would be a strong and bold game changing strategy.

Also, before falling too in love with merger craze and spin-outs investors need to realize that GE is actually up 50% in the last 3 years and if you go back 5 and 6 years we were in a recession and Jeff Immelt replaced Jack Welch only the week before September 11.  The 24 months after that were not his fault and were not the fault of the company. 

The Citigroup call does point out some of the hidden and underlying value.  But it also reminds me of a story about hard labor prison workers.  The prisoners are breaking up rocks with sledge hammers and they ask the guard foreman why they are breaking up the rocks into such small pieces.  He says it’s to make concrete, and they ask what the concrete will be used for.  The answer: "To make imitation rocks!" 

Jon C. Ogg
April 27, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.