Peter Kafka

Recent Posts by Peter Kafka

GE Ready for a French Haircut: Vivendi to Write Down NBC

What’s the value of media conglomerate in a recession? Less than it was a few years ago.

Last week, Time Warner (TWX) announced a $25 billion write-down. Now NBC Universal’s parent company, GE (GE), may be looking at one of its own, courtesy of Vivendi, which owns a 20 percent stake in the broadcast network/movie studio/cable TV outfit.

Vivendi will be writing down the value of its equity, which it acquired in 2004. A spokeswoman quoted in a Dow Jones piece says the write-down  will be “lower than the EUR2.3 billion [$3.1 billion] gain the company booked in the third quarter from the creation of Activision Blizzard Inc,” which leaves an awful lot of wriggle room.

As recently as last November, Vivendi’s stake was supposedly worth somewhere in the $6 billion to $8 billion range, which implies a value of of $30 billion to $40 billion for the entire unit. But Vivendi and GE disagree about the value of the NBCU, and the two companies have a complicated relationship, with competing put/call options in the stake.

NBCU reported operating income of $3.1 billion on revenue of $15.4 billion in 2007. Through the first nine months of 2008, the unit had posted operating income of $2.3 billion on $12.5 billion; those numbers included a big boost from the 2008 Beijing Olympics.