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Shares in telecoms group Marconi slipped more than five per cent at lunchtime following a slump in sales and the prospect of another massive round of job cuts.

In a trading statement issued this morning, the troubled company reported group sales in Q3 of £1.04 billion, compared to £1.7 billion during the same period last year.

This resulted in an operating loss to its core telecoms business of £130 million, a figure at the bottom end of analyst's expectations. Group sales during the third quarter were £1,041 million compared to £1,689 million during the same period last year. Operating losses for the group amounted to £103 million.

During the quarter Marconi did manage to scale back its debts to £3.5 billion down from £4.3 in September 2001. The debts were racked up during Marconi's ill-advised expansion into the telecomms equipment market at a time when the market had peaked and, with hindsight, it was possible to see sales were slipping.

The company is set to axe a further 4,000 jobs over the next year as part of plans to save £200 million each quarter, enabling it to breakeven on quarterly sales of £675 million by March 2003. Around 1,000 of those jobs could be lost in the UK with the rest coming from Marconi's international operations.

Over the last year Marconi's core telecoms eqipment workforce has contracted by 23 per cent to around 30,000.

Telecom operators are continuing to keep a tight rein on capital expenditure, delaying new network rollouts. During its third quarter, Marconi experienced a 43 per cent year-on-year decrease in core orders received and 37 per cent decrease in core sales.

Optical Networks sales in the UK were hit by lower levels of spending among second tier operators. Sales to BT were also down and accounted for approximately 11 per cent of core sales in the quarter compared to approximately 21 per cent in the third quarter last year. Mobile sales were stable but Marconi's broadband switching and access was hard hit during the quarter.

The latest round of cuts will leave Marconi with a 26,000 workforce in its telecoms business, and disposals of its non-core business will result in Marconi as a whole employing far fewer people.

At 31 December 2001, Marconi employed approximately 41,000 people worldwide compared to approximately 49,000 at 30 September 2001. The planned disposal of Marconi's optical components, commerce systems, data systems and general domestic appliances will result in a further reduction of approximately 9,200 employees.

Looking ahead, the company reported that market conditions "remain difficult" with "continued uncertainty" regarding any possible upturn.

By lunchtime shares in Marconi were down 5.81 per cent (2.25p) at 36.75p. ®

Additional reporting by Tim Richardson

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