Massive fall-out from Marconi share collapse
FTSE suffers, DTi cries, trade union not happy
Updated Marconi's huge profit warning last night and its announcement that another 4000 jobs were to go have had huge knock-on effects both on the market and politically.
The telecoms equipment company's shares were suspended when it said profits would be halved thanks to a "severe downturn" in the telecoms market. When the ban was lifted a few hours ago, its share price slumped over 50 per cent, wiping £3 billion off the company's value.
Not only that but it has also taken the FTSE 100 index down 47 points to 5555. Other telecoms manufacturers immediately saw their share prices slip. Alcatel fell seven per cent; Philips four per cent; Siemens three per cent; Spirent six per cent.
The surprise 4000 job losses - just under eight per cent of its remaining workforce after April's sacking of 3000 staff - has sparked the DTi to say it "very much regrets the possibility of job losses" in the UK.
"It is not yet clear what the impact will be but obviously we will be monitoring the situation and talking to the company," it said.
Well, we can tell the DTi what the impact will be: between 1500 and 1600 jobs gone in the UK - 40 per cent of the total - according to the MSF union.
This is precisely the same proportion as in April. Staff in Marconi's sites in Coventry, Liverpool, Nottingham and Poole will find out later today whether they are for the chop. The cuts will also be split between 3000 Average Joes and Josephines and 1000 management. No senior execs are off though.
[We understand that almost all the losses will stem from the closure of the Poole branch. Some staff will be offered jobs in Coventry and Liverpool.]
Marconi said hard market conditions would mean sales down 15 per cent on last year, with a 50 per cent cut on profits. CEO Lord Simpson - who is due to stand down this year and take up the post of chairman - tried to calm down panicking shareholders and City bods. "Can I make it absolutely clear, Marconi is financially sound," he claimed. Few believed him, and some extremely annoyed big shareholders started making noises about getting rid of the guy altogether.
Simpson was once the darling of the City. When he took over as CEO in 1996, shares stood at 309p. Following his restructuring of the company into a telecoms group, shares reached a peak of 1250p in September 2000.
But that was in the Internet boom. Now the demand for new telecoms gear has slumped and taken the company with it. Shares currently stand at 112.5p. Not only that but the rumours last month that Cisco was going to make a £12 billion bid for the company will no doubt re-emerge, although probably with a lower figure attached to it.
It's been a long, long fall for the company that came out of the once all-conquering GEC. ®