(FORTUNE Magazine) – The Fed chairman says global markets are calming. Two European drug companies are in merger talks. Several U.S. firms announce stock splits, and the Dow's up 132 to close at 8915. It's time to wrap up the day's events at cable's CNBC, and as longtime anchor Sue Herera banters with market guru Joe Kernen, they joke that they can't wait for CNBC's parent company, General Electric, to split its shares.

A moment later a handwritten fax lands on Herera's desk:

SUE/JOE BE PATIENT! JACK P.S. I'M ALWAYS WATCHING!

"Jack" is Jack Welch, chairman and CEO of GE, who calls himself a "CNBC groupie." Launched only a decade ago, CNBC has become Welch's favorite TV network for a good reason--it's a great business, one that soon will become the most profitable media property that GE owns. Yes, you read that right. Earnings at GE's No. 1-rated network, NBC, while still topping $400 million, are shrinking as programming costs rise and the network's audience share declines. And while MSNBC, GE's cable-and-Internet venture with Microsoft, has potential, it's losing money as it battles for viewers and advertisers with competing all-news outlets.

By contrast, CNBC is thriving. "It's our stalwart anticyclical weapon," says Bob Wright, NBC's CEO. From a lowly stepchick of the glamorous peacock, CNBC has developed into a high-growth, high-margin business that dominates the financial-news category on cable and is preparing to make a big splash on the Internet. While it's still a niche channel, reaching fewer than 300,000 homes in a typical daytime minute--viewing in offices isn't measured--CNBC will bring in revenues of nearly $400 million in 1999, up 30% over last year, and earn pretax profits of $200 million, up 42%. Those are impressive margins and growth rates for an established cable network in a world of ever-expanding channel choices. What's more, Welch and Wright say CNBC has just begun to tap its potential. Says Wright: "It's our fastest-growing entity, and it's fighting with the [broadcast] network for supremacy as the most profitable part of the company. And it will beat the network because it has a growing, solid audience, and its value to advertisers is without question."

Without much fanfare CNBC has emerged as one of the hottest networks on cable, a more valuable property than any broadcast outlet and in some respects the network with the best business model around--although you'd get a spirited debate about that from the likes of Disney's Michael Eisner on behalf of ESPN, Time Warner's Ted Turner for CNN, and Viacom's Sumner Redstone for Nickelodeon or MTV. For one thing, those networks today all generate higher ratings, considerably more revenues, and bigger profits than CNBC. ESPN is the industry leader, with revenues of $1.2 billion and cash flow of about $460 million last year, according to Paul Kagan Associates. Nickelodeon is the runner-up, with $802 million in revenue and $408 million in cash flow, Kagan estimates, while CNN, including Headline News, had revenue estimated at $676 million and cash flow of $276 million. Fast-forward a few years, though. ESPN, CNN, and Nickelodeon all face increasing competition in their categories from challengers like Fox in sports, MSNBC and Fox in news, and the Cartoon Channel, Fox Family Channel, and Disney Channel in the congested market for kids. (Only MTV dominates its niche as thoroughly as CNBC does, and its future depends on fickle teenagers.) Over time, ESPN, CNN, and Nickelodeon will have to fight not just for viewers and advertisers but for programming; inevitably, they will have to pay more for the rights to big-time sports events, the salaries of popular news stars, and the services of the writers and animators who can entertain kids. To take the most extreme example, ESPN has agreed to spend about $4.8 billion over eight years for cable rights to the NFL, which delivers just 20 or so nights of programming a year.

Now consider CNBC's business model. That stock ticker that scrolls across the screen costs a few million bucks a year. There's the car service needed to shuttle pundits from Wall Street to the network's studios in Fort Lee, N.J. The personalities like Herera and Kernen, who are vital to CNBC's appeal, are well paid by journalistic standards, but they don't command the gigantic paychecks that go to network news stars or CNN bigwigs like Larry King. All told, the annual tab for programming at CNBC comes to about $100 million, roughly what it costs ESPN to put on four NFL games or what NBC pays to license eight episodes of ER. It's not that CNBC executives are cheap--they recently invested close to $2 million to create custom-built, proprietary software to put real-time stock charts on the air in seconds--but they can manage their expenses. Of cable's big guns, only MTV, which is fueled by music videos provided free by record companies, has as good a handle on programming costs.

As for the revenue side, CNBC collects a steady stream of fees from cable and satellite operators, about 17 cents to 19 cents a month for each of the network's 68.5 million subscribers. Those subscriber fees are a big reason well-established cable networks have become better businesses than broadcasters; they also make cable networks less vulnerable to advertising downturns. Next year CNBC wants to hike its fees by a hefty 4.5 cents to 7 cents a month. Executives say they will be able to charge more because CNBC's programming is more popular, and because NBC has decided to show some Olympic Games coverage on CNBC and MSNBC as well as on the broadcast network.

On the advertising side, CNBC has only recently begun to realize the value of its airtime. So, at least, argues Bill Bolster, the blustery, hard-charging, 55-year-old executive who stormed into CNBC in 1996 as the fourth president in its brief history. (Startups aren't easy, even for GE.) A local TV guy who ran top-performing stations in his native Iowa and St. Louis before taking over WNBC-TV in New York, Bolster knows ad sales inside out; he was appalled to find that no one had really focused on selling ads at CNBC, perhaps because it had been so much work to get the network on the air. Without useful audience research or a cohesive sales strategy, CNBC practically gave its time away: You could buy 30-second spots for less than $1,000. "They were selling the Wall Street Journal at USA Today rates," Bolster says. "It didn't make sense to me."

Bolster pulled out all the stops to drive up pricing. He argued that Nielsen fails to measure CNBC's audience, since so many people watch it in offices. He commissioned Mendelsohn Media Research to study its viewers and found they had a median household net worth of $980,700. (You need to read the fine print to see that the survey was done among Wall Street Journal readers who also watch CNBC.) He gave free airtime to Prudential's real estate arm to sell a $3.5 million Florida waterfront estate and boasted afterward that the commercials turned up more than 400 qualified buyers. He tried top-down marketing, sending out a videotape, framed picture, and personal thanks to every CEO who appeared on CNBC.

Today a typical spot on Market Wrap, the network's top-rated show, sells for $4,000 to $5,000, and a handful of advertisers pay nearly twice that much. (The fact that ratings have doubled hasn't hurt.) "As the world of finance has become pop culture, CNBC has benefited," says Tim Spengler, a media buyer at Western Initiative Media in Los Angeles. Bolster's now hammering his ad sales staff to seek more. "It's still undervalued," he says. While CNBC currently charges about $20 for each 1,000 advertising impressions, which is close to the top of the cable market, the network's rates are still way below those charged by business newspapers and magazines (like this one), where the cost per 1,000 climbs from $75 to $100. That's where Bolster wants to take CNBC.

A recession on Wall Street could, of course, bring an abrupt halt to those plans, since more than half of CNBC's ad revenues come from financial services. Still, most industry experts think CNBC has plenty of room to grow. If the stock markets expand their trading hours, for example, CNBC will extend its business coverage into prime time, where it now runs talk shows with Geraldo Rivera and Chris Matthews. "They do have a terrific business model," says Francis L'Esperance, a managing director at investment banker Veronis Suhler & Associates. "Most of their programming comes to them. They're not traveling around the world, covering big stories. And they reach a very attractive demographic for advertisers--hard-to-reach males and, generally speaking, upscale Americans."

Interestingly, neither Jack Welch nor Bob Wright can take credit for dreaming up the idea of a business news channel. The concept was the brainchild of a former minister and children's TV producer named Glen Taylor, who put the Financial News Network on the air from Santa Monica, Calif.--now there's a great location for covering Wall Street--on Nov. 30, 1981. It was a ragtag operation, recalls Bill Griffeth, now a CNBC anchor, then an FNN producer. "We weren't paid for six weeks," he says. Sue Herera, fresh out of college, didn't know a straddle from a contango when she signed on as an $11,000-a-year reporter covering commodities. "We worked on card tables and folding chairs," Herera says. "The roof leaked onto the set."

Then the real problems began. The day before FNN's public stock offering in 1982, Taylor quit when it was revealed that small businesses he owned faced 40 lawsuits filed by supposed creditors. Believe it or not, FNN fared no better with its next CEO, Earl Brian, a Vietnam war hero, Duke-educated neurosurgeon, and former cabinet secretary to Gov. Ronald Reagan in California, who cooked the books when things went sour at FNN. He ran afoul of the SEC and was eventually convicted of bank fraud, securities fraud, and conspiracy for trying to conceal FNN's financial woes in the late 1980s. Having only recently exhausted all his appeals, Brian is scheduled to begin serving a 47-month prison term in June.

Welch, Wright, and NBC cable czar Tom Rogers do get credit for sensing FNN's vulnerability--and more important, for deciding that NBC had to get into cable as a hedge against the decline of the broadcasting business. They launched CNBC in 1989 as the Consumer News and Business Channel, a hodgepodge of tips on how to invest and spend money. "We would give the winners and losers on the stock market, and then we'd cut to a reporter in a grocery store who would talk about how to pick a good melon," says David Zaslav, head of distribution for NBC Cable. The original CNBC didn't even run a stock ticker.

Because gaining distribution is vital in cable, two GE-funded acquisitions were key to CNBC's growth. First, NBC bought Tempo, a floundering cable channel, for about $20 million from Tele-Communications Inc. and John Malone, and ultimately converted its six million subscribers to CNBC. Malone, who then dominated the industry, became a CNBC supporter. Even more important, NBC bought FNN's subscriber base of about 30 million homes for $155 million in 1991 when the channel was sold at a bankruptcy court auction. It was more than NBC wanted to pay and put off CNBC's breakeven point by a couple of years. "We weren't breaking champagne bottles open that night," Wright says. But GE eliminated potential competitors Dow Jones and Westinghouse (now CBS), which had formed a joint venture to bid for the network--and today would love to own an asset like CNBC. Besides, CNBC is now repaying NBC as the network struggles. Wright says of CNBC's Bolster, "He is carrying the ER and Jerry Seinfeld burdens on his shoulders."

Eighteen months ago NBC and Dow Jones struck a deal to combine their overseas financial news channels and give CNBC access to the reporters and editorial product of the Wall Street Journal and Barron's. It's one of the many ways in which Wright and Bolster have tried to make sure that CNBC doesn't become a commodity that can be displaced by competitors like CNNfn (owned by Time Warner, FORTUNE's parent) and Bloomberg Television. Neither CNNfn, which is in 11.5 million homes, nor Bloomberg, with nine million subscribers, has sufficient carriage to be rated by Nielsen. "We are going to significantly widen our distribution," says Lou Dobbs, president of CNNfn. "We are more committed, more determined, more enthusiastic than ever."

On the Internet, where distribution is not such an issue, CNNfn is way ahead of CNBC: It has become a market leader in an arena crowded with such rivals as AOL and Yahoo finance sites, as well as CBS Marketwatch.com, theStreet.com, and the Wall Street Journal Interactive Edition (not to mention Money and FORTUNE). CNBC won't launch its full-service Website until the fall.

Bolster is betting that CNBC can rise above the clamor by driving viewers from cable to the Web by, for example, starting an interview on TV and continuing it as a chat online. As it becomes easier to send video over the Internet, both CNBC and CNNfn will benefit because of their access to business news footage. Beyond that, Bolster says, CNBC has personality. "You have no idea who the people are who are writing behind those walls on those Websites," he says. "You're going to go on the CNBC Website and see columns by Ron Insana and Sue Herera, and visit chat rooms with Maria Bartiromo and Joe Kernen."

Of course, the competitive landscape for business news could be transformed overnight if GE decides to combine NBC, CNBC, and MSNBC with a new partner. It's not an impossibility. Recently, for example, Welch and Wright held exploratory talks with Time Warner CEO Gerald Levin and deputy chairman Ted Turner about ways to combine GE's media properties with Time Warner's cable networks and magazines. The talks quickly broke down over issues of control, regulation, and GE's asking price, said to be in excess of $20 billion. It's also widely known that Welch and Wright have considered combining NBC and Dow Jones, should Dow Jones become available. Nothing's imminent, but who knows? Bolster & Co. may arrive at work one morning and find they're making the news, not just covering it.