(FORTUNE Magazine) – 'We've got to get more wampum," Jack Welch declared. It was early March 1999, and Welch was addressing a crowd of business executives at New York City's 92nd Street Y. They had come to hear about Welch's management legacy, but at the end the questions turned to the market. Welch complained that he couldn't do deals with "real money" when everyone else was using highflying stock. "That means we have to have seven more dot-coms," he said, "so that we can trade our paper with someone else's paper. And we're doing that."

Across the continent the wheels were in motion. Executives at GE's NBC division were talking with Chris Kitze, the founder of Xoom.com, a publicly traded Internet direct-marketing company in San Francisco. How would Kitze, NBC asked, like to merge his Xoom with some of NBC's Internet properties, like Snap.com and AccessHollywood.com? Kitze thought it over, then agreed. Eight months later the new entity, NBC Internet, went public. Suddenly Welch had his wampum. Now all he needed was a business to back it up.

The result is NBCi.com, a portal that as of Feb. 28 offers jerky streaming video of MSNBC and Bloomberg news; animated shorts; and something called the NBCi dashboard, a column of boxes that can be dragged around the screen, each with a different feature such as local weather, sports scores, or search. Picture MyYahoo as easily configurable as a jigsaw puzzle. It's frenetic and a bit confusing. But it's just a first step.

NBC and GE plan to turn NBCi into the No. 1 site on the Web. How? By concentrating on broadband surfers, the 3% of Internet users who connect with cable modems or digital subscriber lines. Today broadband means fast but often glitch-filled video and audio. As technology improves, so should the reliability of sending streaming data, until eventually broadband becomes as stable as, well, what you see on your TV. And NBC has 50 years' experience making programs for that box. The thinking goes: If NBC can push its 155 million weekly viewers to check out NBCi and apply its entertainment skills to persuade them to stay, then when broadband becomes dominant on the Web, so will NBCi.

"The Internet is moving from Internet 1.0 to Internet 2.0," says NBCi CEO Kitze. "It's as powerful as the change from DOS to Windows. So Yahoo is the king of DOS. Well, I got news for you: WordPerfect was the king under DOS as well. Broadband is really about high-speed usage and high-speed access. NBC clearly knows a lot about that."

Call it a clicks-and-clickers strategy: NBCi is trying, to some extent, to blend its operations with the network's. Over the next four years NBCi will spend $100 million annually hawking itself on NBC, MSNBC, and CNBC. NBC is promising good placement for NBCi ads, sticking them into shows popular with young Webheads, like Late Night With Conan O'Brien. NBCi will be selling ads too--not in typical Internet banners, but in broadband spots that resemble 30-second TV commercials. (NBC and NBCi hope this will enable them to sell packages to advertisers.) For people already accustomed to shopping through their television, ValueVision, a home-shopping network 40% owned by NBC and GE Equity, will promote NBCi to its viewers. A dedicated window on NBCi.com's shopping section is devoted to Webcasts of ValueVision, where surfers can buy everything from $16 Al Roker "Sunny & Muggy" coffee mugs to $15,000 Piaget 18-carat diamond-dial watches. NBCi keeps 2% of the sales. And all of this, of course, will carry the NBC brand. Says NBC CEO Robert Wright: "Most Internet brands are pretty thin. We're getting out there with a brand that's already established."

To make sure NBCi works, Welch has packed the board with big names. Besides Welch and Wright (who is chairman), there are NBC West Coast President Scott Sassa and Clear Channel Communications CEO L. Lowry Mays--decidedly old-media guys. To get Wall Street's attention, though, NBCi needed a new-media CEO, and Kitze got the nod. "Chris had done a good job with Wall Street and with doing what you need to do to be a player with an Internet stock," says Tom Rogers, former head of NBC's multimedia division and now CEO of publishing company Primedia. "We didn't want this entity to smell or feel as if it were a unit of a traditional company, with the limitations of style and speed that might impose." Flip through the company's SEC filings, however, and you quickly realize who's in control. Even though GE nominates only six of the 13 directors and owns 44% of the stock--the minority stake keeps NBCi's losses off GE's income statement--GE has the sole right to fire the CEO. If Kitze can't pull it off, GE can pull him. But is this really the formula for wooing investors?

So far, the answer is a resounding no. Since NBCi went public in late November, the company has lost 33% of its value; at a recent $50.69, its market capitalization stood at $2.6 billion. Yahoo, by comparison, has risen 46% since NBCi went public, and Lycos is down 6%. While Yahoo trades at 47 times 2000 revenues, NBCi trades at 15. Analysts who cover NBCi are convinced that it just hasn't told its story well and rate the stock a "buy" or "strong buy." But regular investors remain leery.

The problem, it appears, is that to be valued as an Internet stock, you have to be an Internet company. And no one is buying the notion that NBCi is anything more than a pawn of NBC--a slow-footed old-media giant more interested in building a currency than in building a business. Certainly history doesn't help NBC's case. The Time Warner (parent of FORTUNE's publisher) attempt at building a portal, called Pathfinder, turned into an Internet turkey. And Disney has found that all its media know-how hasn't been enough to make its Go Network a credible Yahoo competitor.

Investors aren't convinced that NBC can do much better with its Internet play, especially not with the collection of sites that make up NBCi. Besides Snap.com and Xoom.com, there's videoclip library VideoSeeker; NBC's local-content sites, called Interactive Neighborhood; and TV tie-in site NBC.com. (There's also a nonoperating 10% stake in CNBC.com.) It's more a collection of URLs than of e-cogs and i-gears. "This is definitely one of these mythical synergy plays," says David Card, a senior analyst at technology research firm Jupiter Communications in New York. Together, those properties pulled in 16.7 million viewers in January. While that made NBCi the seventh-most-visited property on the Web, it still drew 60% fewer surfers than AOL or Yahoo, and between 50% and 25% fewer than second-tier portals like Lycos, Excite@Home, and Go.

And all those competitors have their own broadband strategies in the works, though few are ready to talk about them. An executive at Excite, which has 1.2 million broadband subscribers through its @Home cable service, laughed when asked about NBCi's declaration of intent to be the first broadband portal. "We've being doing this since 1996," says Richard Gingras, Excite@Home general manager of broadband services. "NBCi? Where was NBCi then?"

In 1996, NBCi wasn't even a thought in Chris Kitze's head. Kitze, a tall 40-year-old with a boyish face and a taste for two-toned Top-Siders, calls himself an "entrepreneur by DNA." He spent the late 1980s and early 1990s starting and selling two CD-ROM companies, getting out of both before the market for CD-ROMs tanked. In April 1995, in the infancy of the Internet, he started Point Communications, a company that reviewed Websites and served as a directory. Within six months it was snapped up by Lycos for 8% of Lycos' stock, worth $20 million at its IPO. Kitze joined the company as vice president of marketing and immediately started suggesting companies to acquire. He was shot down almost every time. After Lycos went public, he says he even tried to persuade CEO Bob Davis to sell out to Yahoo. No luck. So in June 1996, Kitze quit and moved to Lake Tahoe. It was, he decided, time to retire: "I got fed up with bringing so many deals to the doormat and nothing happening."

It was a short retirement. Within weeks, Kitze was selling his Lycos shares to buy software and clip art that people could use to decorate their Websites for the first incarnation of Xoom. When Xoom launched in September 1996, it had little success hawking Microsoft Office-like software for $29.95 a month. "We discovered very quickly that on the Web, the right price is free," Kitze says. So he rented an e-mail list from Naveen Jain, founder of InfoSpace and an early investor in Xoom, and spammed everyone on it. He invited readers to download free clip art from Xoom.com; if they liked what they saw and didn't want to spend their time downloading, they could buy a diskful of clip art instead. In late 1997, Kitze started giving out free home pages to the Xoomers if they agreed to receive e-mailed sales pitches from Xoom. By the end of 1997 the company had $841,000 in revenues, more than one-third from e-commerce (this while most Internet sites were dependent on advertising dollars). Freed from Lycos, Kitze spent millions in cash, debt, and stock buying companies, running up a $14.4 million deficit by the end of 1998. But he had also attracted 5.4 million members. By last March, Xoom was the 13th-most-visited Web property.

NBC, meanwhile, was trying to find something to do with the 12th-most-visited property, Snap.com, a portal started in 1997 by CNET. NBC bought its way into Snap in June 1998, spending $38 million ($6 million in cash and $32 million in guaranteed debt) for 60% of the company. But despite spending $42 million on advertising over the next year (on NBC, of course), Snap pulled in only $19 million in revenues. At the same time, Jack Welch had started declaring his need for "wampum." Tom Rogers, who was guiding NBC's Web strategy at the time, dug up some Internet properties he could sell. Because MSNBC.com was part-owned by Microsoft, Rogers couldn't touch it. So he decided to use Snap and the others as bait. "We were trying to create, on a cash-free basis, a company of scale that could be an Internet currency," he says. He talked to Lycos, theglobe.com, and others but settled on Xoom because of Kitze's knowledge of direct marketing, and because, Rogers says, he felt Xoom was a company over which NBC could have "sufficient direction and control." Last year NBCi had pro forma revenues of $74 million and a loss of $160 million. Analysts think it will do $173 million in revenues this year and lose another $525 million, including depreciation and amortization costs. Catherine Skelly, an analyst at Gruntal & Co., thinks NBCi will turn a profit by 2004.

Kitze may have combined the balance sheets, but can he combine NBC's competing agendas? Can NBCi be both wampum for GE and a company that will out-Yahoo Yahoo? So far Kitze has worked quickly to build NBCi, spending its wampum freely. Since the merger four months ago, he has bought three tiny technology companies and acquired business-to-business site Allbusiness.com for $225 million in stock--a price that values Allbusiness.com at an astonishing 56 times 2000 revenues. Kitze insists that the latter is a key part of NBCi's next move, a business-to-business portal.

But he has also had to do plenty of deals with "the family." That's the term Marty Yudkovitz, who took Rogers' place at NBC, calls the different branches of GE. "Any one individual in the family has a good game going," he says. "But when the family locks arms, we become a compelling, attractive partner for people." In February, NBC, NBCi, and family member ValueVision cut a deal with health site SelfCare, trading cash and ad time for equity. In January, NBCi and ValueVision took minority stakes in electronics hawker Roxy.com. And in December, NBC, NBCi, GE Equity, and ValueVision bought 19.9% of DSL provider Telocity.

All those deals touch on NBCi's business, some more than others. So being wampum can have its good points: With GE, for instance, Kitze gets quick access to executives in GE's $2 billion Internet portfolio and friends with fat wallets who can help make small deals bigger. When NBCi.com hit the Net, it announced alliances with 23 content providers. Many were already partners with or partly owned by GE--A&E Networks and the History Channel, for example, are joint ventures of NBC, and GE Capital and NBC were early investors in music site Launch.com.

Telocity is a good example of how NBCi can benefit from its GE connections. Last summer, when NBC and Xoom were in negotiations, Edmond Sanctis, now NBCi's COO, heard about the company, which provided plug-and-play DSL service. He talked with executives at the Cupertino, Calif., company, found out they were raising money, then flew to New York, PowerPoint presentation prepared. He met with NBC's Yudkovitz and some GE executives and pitched the company. Yudkovitz brought in ValueVision. Within months Telocity had a deal in place with NBC, NBCi, ValueVision, and GE (and GE's satellite business). Sanctis figures that without NBC and GE in the deal, NBCi could have wrangled some sort of limited agreement with Telocity. Now and for the next 15 years, whenever someone flips on the Internet through Telocity, up pops NBCi.

But the other side to being part of a family is that sometimes you're asked to give back. And there's every indication that Kitze will have to do plenty of Web pulling for GE and NBC. Steven Spinner, senior vice president of business development at NBCi, says he already gets five to ten calls a week from people at GE Capital wanting to know what he thinks about this or that Internet company. And when NBCi gets involved in a deal with its GE partners, it gets their backing at a price.

A case in point is NBC's recent deal with Polo Ralph Lauren. Polo wanted to start an e-commerce operation and, after hearing about NBC's Web plans, approached NBC about going into business. Executives at the network agreed and called in NBCi and ValueVision for help. As the final deal stands, Polo gets 50% of Polo.com, and NBC family members get the other half. NBCi gets 10% of Polo.com in exchange for ad space on its Website, valued at $40 million, and it makes Polo.com an anchor tenant in the NBCi.com shopping section. That's prime shopping space. Typically NBCi would take a cut of sales from whoever parked there. But with Polo.com it won't see a cent until the company turns a profit. And even then NBCi will have to wait for Polo to take its 10% to 15% royalty on sales first.

Expect more deals like Polo.com: NBC's Yudkovitz thinks he has hit on a perfect formula. "There's no reason why you can't start adding business after business after business," he says.

Despite that kind of talk, Kitze insists that NBCi won't get pulled in all directions, and that it will be run as an independent public company. He'll entertain investment ideas from GE and NBC, but only as long as they hew to his broadband portal goal. "We're nobody's wampum," he declares. GE might not agree.