Jeffs and Their Mutts

It's a hotly rumored corporate dalliance—that of CEOs Jeff Bewkes of Time Warner and Jeff Immelt of GE, parent of NBC Universal. No doubt their forefathers, the Warner brothers and Thomas Edison, are rolling in their graves. Back in their day, red-blooded businessmen were fighters, not lovers. Edison, who founded GE and controlled essential motion-picture patents, practically forced the Warners to pull the plug on their earliest foray into the movie business when the brothers couldn't afford to pay Edison's high fees on equipment to run their fledgling film-rental company.

But times change. If Edison and the Warners couldn't afford friendly business dealings, Immelt and Bewkes may find it prohibitively costly to their careers to avoid cozying up. The two Jeffs have watched their stocks turn into, well, mutts (corny pun intended). And so they have begun preliminary efforts to explore a commingling of their entertainment assets—combining GE's NBC Universal with Time Warner—in hopes of eventually igniting investor enthusiasm and pumping up their stock prices, according to media-industry executives familiar with the developments but not authorized to comment.

Time Warner and GE executives have been considering such nuptials since the late 1990s. The then CEOs Gerald Levin of Time Warner and Jack Welch of GE came the closest before getting cold feet. Their immediate successors, Richard Parsons and Immelt, considered reviving a deal, according to the NEWSWEEK sources. Now, those executives say, the idea is among the most intriguing in a range of topics that came up in a conversation between Immelt and Bewkes. A GE spokesman denies the subject arose; Time Warner declined to comment on this story.

In the past, Immelt has emphatically denied any interest in divesting NBC Universal, which, in addition to NBC and Universal Studios, includes the surging cable networks USA and Sci Fi. The two sides are not currently negotiating, according to the NEWSWEEK sources. At the same time, however, these executives indicate that things are most likely to heat up in the fall, after NBC Universal wraps up coverage of the Summer Olympics in China—an undertaking in which the industrial giant and the media unit have massive financial interests at stake. That also would give Bewkes several more months to try to achieve his top priority: ferreting out a deal that unlocks whatever value remains in AOL and rids him of the troubled Internet unit.

Two of the largest and most prominent members of corporate America, Time Warner and GE were prototypes of what once seemed an ideal business model: the conglomerate. A diversified behemoth with interests that ranged from jet engines and plastics to the "Today" show and CT scans, GE reigned for years as a paragon of corporate management. Meanwhile, Time Warner helped pioneer the "vertically integrated" media empire, controlling the means to make and deliver a sprawling array of news and entertainment offerings—including the Warner Bros. movies, HBO, CNN and Time.

Yet in the new millennium, conglomerates have fallen out of favor on Wall Street. Compounding the problem for Time Warner and GE have been an assortment of specific woes. In Time Warner's case, it was the near-fatal combination in 2001 with AOL. For GE, it's been the lackluster performance of its insurance business, its iconic appliance-making unit and its mammoth financial-services subsidiary. So far, the two companies' continuing efforts to boost their stock prices—Time Warner is spinning off its cable operations; GE has sold its insurance business and now has its appliances division on the block—have been underwhelming.