The much-anticipated deal for Comcast (NASDAQ:CMCSA) to take control of the NBC Universal division of GE (NYSE:GE) may die next week . Vivendi, which owns 20% of NBCU, believes that the entertainment and news company is worth much more than GE does.

According to the FT, “General Electric and Vivendi are at least $1bn apart in their valuation of the French group’s stake.”

It will be a challenge for GE to operate a business that it clearly wants to sell.

Comcast has hinted that it would keep NBCU CEO Jeff Zucker at the head of the company, although he does not seem to have done much to improve the operation’s value since he took over. NBCU has faced the same pressures that other large media companies have, but it has not been as brutal about cutting costs or dumping underperforming units as its competition has. NBCU has also not moved as much of its business to the internet as some of its rivals have. Zucker has done a good job of building a successful group of cable networks.

GE will be faced with an extremely difficult problem if the Comcast deal dies. Through the first three quarters of this year, NBCU revenue has dropped from $12.5 billion in 2008 to $11.2 billion. Operating income is down $2.3 billion to $1.7 billion. NBCU will not have the benefits of a national election or Olympics to improve its sales in 2010. That will leave it the alternatives of sharply reducing costs or maintaining weak margins.

GE has counted on divesting its entertainment business so that it can focus on its core infrastructure and industrial assets. It may have NBCU on its hands for a year or more. It will have to live with the fact that it would not give Vivendi an extra few hundred million dollars to be rid of a company it should probably never have owned in the first place.

For more information on GE, see the 24/7 Wall St. 500

Douglas A. McIntyre

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