Marconi shares continue to slide
Shares in telecoms equipment firm Marconi slumped again today as its failure to land a lucrative contract from BT continued to alarm investors.
The company lost around £100m (€147.8m) of its value, adding to the £400m (€591m) wiped out yesterday in the wake of the news that BT had chosen eight of Marconi’s rivals to equip a £10bn (€14.8bn) overhaul of its network.
As well as sparking a crisis of confidence in the City, the snub raised union fears that up to 3,000 jobs out of a 10,000-strong workforce could be lost.
The announcement from the company’s biggest customer represented a huge setback to Marconi, which had been showing signs of recovery following its life-saving financial restructuring in 2003.
Some analysts pondering the future of the company now believe Marconi may have to put itself up for sale in order to get the scale to compete effectively.
It lost out in the bid process on price, even though chief executive Mike Parton said the products “performed extremely well technically”.
JP Morgan analyst Mark Davies-Jones described the loss of the BT business as a “brutal blow” and said he expected Marconi to announce its response to the news at its annual results presentation on May 17.
He added in a note published today: “This is the opportunity that has been absolutely central to Marconi’s plans for the last couple of years.”
“The damage to the company goes beyond the loss of business at BT – morale at Marconi will presumably plumb new lows, other customers may well think again about placing business with the company, and the reduction in revenue outlook is likely to require a fresh round of cost cutting.”
BT awarded the contracts to Fujitsu, Huawei, Alcatel, Cisco, Siemens, Lucent, Ericsson and Ciena as it embarks on a five-year project to deliver a “21st Century Network” capable of running traditional voice services with the same technology used for the transfer of data.
The telecoms giant said the awards followed two years of discussions with more than 300 potential technology suppliers. It said the winners had “provided world class responses across a range of different criteria”.
The company employs around 4,500 people in the UK, including at bases at Coventry, Liverpool and Beeston near Nottingham.
Marconi completed life-saving £4.7bn (€6.9bn) debt restructuring in 2003 and has impressed investors with an improving trend for sales since then.
The company had earlier been plunged into financial crisis after a costly switch from electronics to telecoms as it paid for companies at peak prices during the tech boom. Existing shareholders were left with virtually nothing following the restructuring.
Today’s share price fall – down 14% or 40p at 258p – left Marconi below the level when it re-listed as a newly restructured company in May 2003. The stock closed 38% lower on Thursday night.
