Read the memos Comcast sent employees about its plans to spin off its media business
Comcast just announced plans to spin off its media and entertainment units from its broadband and wireless business.
Shares jumped more than 25% in premarket trading on Monday after the announcement.
In a memo shared with its employees, the company spoke of both units' "great business prospects" and "strong balance sheets." Its co-CEOs also outlined the planned leadership structure.
The spun-off media and entertainment company, which will be called NBCUniversal, will be led by current Comcast co-CEO Mike Cavanagh, while Comcast, which will house the broadband and wireless sides, will be run by Michael Angelakis, a Comcast advisor. Comcast co-CEO Brian Roberts said he'd remain involved with both businesses.
Comcast's stock has declined in recent years as it has shed broadband subscribers and racked up streaming losses. Wall Street has not bought the narrative that media and cable distribution are a winning combination.
During a call with analysts, Roberts laid out a rosier view of the logic for the split. He said that since Comcast acquired NBCU more than 15 years ago, both businesses have become able to compete independently.
NBCU is a diversified global entertainment company spanning news, movie and TV studios, theme parks, and the streaming business through Peacock. Meanwhile, Comcast's tech business had grown into a leading broadband provider.
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"They have the right assets, you've heard about the leadership and strategic focus, and the financial strength that we hope to have to succeed as stand-alone companies," Roberts said.
Forrester analyst Mike Proulx said the spin increases Peacock's potential for an acquisition by Netflix, after the paid streaming leader lost out on acquiring Warner Bros. Discovery.
"Do not rule out another attempt, despite Netflix's public comments dialing back M&A," he said.
However, Comcast execs stressed the split move was not a step toward an eventual sale.
"The plan for NBCUniversal and Sky is to invest for growth," Cavanagh said on the analyst call.
This is Comcast's second big move to separate some of its media assets.
It already spun off most of its cable channels, including MSNBC (now MS NOW), CNBC, and the Golf Channel.
Other media giants have wrestled with what to do about their traditional TV channels, which have been part of a declining sector as people cut the cord and migrate to streaming services. Warner Bros. Discovery planned to spin off its TV networks, like CNN and TNT, into a separate company before Paramount moved to acquire the whole company. And Disney has mulled selling off TV and cable channels.
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