Feeds

Marconi not drowning but waving

Makes shore, gasps for air

  • alert
  • submit to reddit

Security for virtualized datacentres

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

Security and trust: The backbone of doing business over the internet

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
JINGS! Microsoft Bing called Scots indyref RIGHT!
Redmond sporran metrics get one in the ten ring
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Sony says year's losses will be FOUR TIMES DEEPER than thought
Losses of more than $2 BILLION loom over troubled Japanese corp
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Why Oracle CEO Larry Ellison had to go ... Except he hasn't
Silicon Valley's veteran seadog in piratical Putin impression
Big Content Australia just blew a big hole in its credibility
AHEDA's research on average content prices did not expose methodology, so appears less than rigourous
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.