Feeds

Marconi not drowning but waving

Makes shore, gasps for air

  • alert
  • submit to reddit

Build a business case: developing custom apps

ComputerWire: IT Industry Intelligence

Marconi Plc is staking its future on becoming a key player in the markets of optical networks and broadband systems now that it has hammered out an agreement with its creditors that will see them become the owners of the business, with existing shareholders relegated to a 0.5% holding.

The troubled London, UK-based telecoms equipment maker said an upturn in the markets it serves is not expected until the end of 2003, but said its new robust balance sheet will enable it to survive even if a recovery in spending is delayed until the end of 2004.

In a complex deal, Marconi will lose the burden of 4bn pounds ($6.1bn) in net debt and re-emerge with cash resources of 635m pounds ($971.5m) under an arrangement that will see Marconi Plc "liquidated" on a solvent basis and a new Marconi Corp takes its place. Shares in the new company will be quoted on the London stock exchange, with ADRs in the US.

Marconi was brought to its knees by a previous management who, flush with cash, embarked on an acquisition spree designed to turn it into a global supplier of end-to-end telecoms systems. With its over-ambition stoked by stock market enthusiasts, the company once had a valuation of 35bn pounds ($53.5bn). When the carriers started cutting spending last year, the old Marconi was doomed.

Its new vision, which was outlined by chief executive Mike Parton, involves concentrating on its core strength in optical networks and broadband systems, products on which it can also offer services. It has a strong position with incumbents such as MT Group Plc and Telecom Italia SpA, and argues that it has relatively low exposure to financially weak operators.

In Europe, it said it has a strong incumbent position in SDH, and a growing share in DWDM where it plans to increase its 11% share to 14%. It said that optical networks will be the major contributor to its core operation, providing 40% of revenue.

Under its business plan, it forecasts that revenue will rise from 2.6bn ($3.9bn) in 2004, increasing modestly each year to reach 3.4bn ($5.2bn) in 2007. But it also believes it can survive a year's delay to the recovery and generate cash over most of the period under a "sensitized" business plan where revenue would rise from 2.3bn pounds ($3.5bn) to 3.2bn pounds ($4.9bn) over the period.

Where such projections have much value at a time when, as Parton admits, it is difficult to predict the next quarter, must be in doubt. What is certain is that savage cost-cutting will continue.

Operating costs are to be brought down from 890m pounds ($1.4bn) in the last quarter of the current financial year to 520m ($795.6m) during the 2004 financial year, which suggests a lot more jobs will go at the company.

In the US, it plans to sell off its operations that supply power systems for telecoms operators and its NA access business, which sells digital loop carriers and voice video and data platforms. However, it intends to retain its BBRS operation that sells carrier-class multi-service switches.

The reorganization will be completed by the beginning of 2003, and then the only question will be how long the new slim-line Marconi can survive the wave of consolidation expected among service suppliers.

© ComputerWire

Boost IT visibility and business value

More from The Register

next story
Kate Bush: Don't make me HAVE CONTACT with your iPHONE
Can't face sea of wobbling fondle implements. What happened to lighters, eh?
Video of US journalist 'beheading' pulled from social media
Yanked footage featured British-accented attacker and US journo James Foley
Caught red-handed: UK cops, PCSOs, specials behaving badly… on social media
No Mr Fuzz, don't ask a crime victim to be your pal on Facebook
Ballmer leaves Microsoft board to spend more time with his b-balls
From Clippy to Clippers: Hi, I see you're running an NBA team now ...
Online tat bazaar eBay coughs to YET ANOTHER outage
Web-based flea market struck dumb by size and scale of fail
Amazon takes swipe at PayPal, Square with card reader for mobes
Etailer plans to undercut rivals with low transaction fee offer
Assange™: Hey world, I'M STILL HERE, ignore that Snowden guy
Press conference: ME ME ME ME ME ME ME (cont'd pg 94)
Call of Duty daddy considers launching own movie studio
Activision Blizzard might like quality control of a CoD film
US regulators OK sale of IBM's x86 server biz to Lenovo
Now all that remains is for gov't offices to ban the boxes
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Rethinking backup and recovery in the modern data center
Combining intelligence, operational analytics, and automation to enable efficient, data-driven IT organizations using the HP ABR approach.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.