General Electric shares staged what is known as a “technical breakout” Tuesday. But it is the company’s break with conventional thinking in teaming with Pearson on a bid for Dow Jones that has Wall Street’s attention.
All the chart geeks talked about the trend line breaking through the January peak of $38.26 and how that keyed a surge to a five-year high of $39.29 on more than double the average trading volume.
But was that simple momentum, or the handiwork of investors cheered by the thought of GE sticking to its traditional guns?
Takeover talks, first reported last weekend by the Wall Street Journal, are ongoing but the companies won’t address them publicly. The extraordinary tandem was formed amid growing sentiment that GE should ankle the media and entertainment biz and as Rupert Murdoch’s rich offer remains the subject of intense debate among the Bancroft family, which controls Dow Jones.
Pearson and GE each could gain by elbowing out Murdoch. Pearson owns the Financial Times and GE’s CNBC would face competition from Murdoch’s planned all-business TV channel. And if the global media mogul were to let his prize slip away after weeks of scrutiny, it would be a historic blow.
Just as intriguing is the notion that GE, which is known for its aggressive cost-cutting and rigid efficiencies, would find itself funneling money into that unpopular market segment: newspapers. Beset by classified advertising meltdowns, Internet news cycles and aging readerships, newspapers (as the rancorous Tribune auction recently showed) still boast strong margins but are viewed as suspect investments in many quarters.
The push comes a few days after an unusual session at 30 Rock, when NBC U topper Jeff Zucker hosted a meeting of GE analysts to make the case that the company will be profitable and “will not be a drag on GE,” in his words.
Among the presenters were all the division heads at NBC U, including CNBC chief Mark Hoffman, who would be involved in the Pearson-GE tie-up. Though it is low-rated, CNBC is hugely profitable for NBC U, as are its entertainment cable networks such as Bravo, Sci Fi and USA.
The division’s old-media asset, NBC, reps less than 10% of the division’s revenue, Zucker emphasized, and “is not a driver of our bottom line.” Which is why it’s fascinating to consider GE topper Jeff Immelt adding a property such as Dow Jones, reportedly at a pricetag at or above Murdoch’s offer.