Feeds

Marconi not drowning but waving

Makes shore, gasps for air

  • alert
  • submit to reddit

High performance access to file storage

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

High performance access to file storage

More from The Register

next story
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
prev story

Whitepapers

Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
SANS - Survey on application security programs
In this whitepaper learn about the state of application security programs and practices of 488 surveyed respondents, and discover how mature and effective these programs are.