Marconi tries to heal wounds

Shares in beleaguered telecom giant Marconi have recovered slightly after the company said it was confident of its prospects in the medium term.

Marconi will be well-positioned to benefit from the market upturn when it occurs

Marconi chairman Sir Roger Hurn

In a letter to shareholders, Marconi chairman Sir Roger Hurn emphasised the strength of the telecom giant's financial position.

He said it had committed banking facilities through to March 2003 of about £4.5bn, in addition to its long-term bond funding.

"With its reduced cost-base, the added flexibility of its outsourced manufacturing facilities, its technology and skilled workforce and strong incumbent customer base, Marconi will be well-positioned to benefit from the market upturn when it occurs," Sir Roger added.

Marconi shares rose 4.5 pence to 111p in early trading in London.

Catastrophic

In his letter, Sir Roger attempts to explain the chain of events which led to last week's catastrophic collapse in Marconi's share price.

He said the extraordinary decision to suspend trading in the company's shares for an entire day - a step previously taken by only a handful of companies in deep financial trouble - was linked to the sale of Marconi's medical business.

Essentially, Marconi could not have risked announcing the sale to the markets - and a possible jump in its share price - while at the same time sitting on information about the full extent of its problems.

"In the early hours of the morning of the 4th of July, the company entered into an agreement with Philips for the sale of the company's medical systems business," Sir Roger says in his letter to shareholders.

"Under the rules of the UK Listing Authority, the company was obliged to announce the sale without delay.

"We were advised by our brokers, in order to prevent a false market in our shares, that we could not permit trading in the company's shares on the basis of an announcement of a major disposal, without also, at the same time, informing the market of the company's trading position."

Union fury

The decision to suspend the shares and the profit warning which followed decimated Marconi's share price, wiping £3bn off the company's market value - the biggest fall in a single day's trading in stock market history.

Union members are angry that the company has decided to close their plant with the loss of 570 very valuable high-tech jobs in Dorset

Glyn Thomas, MSF union

It also sent shockwaves through world markets and led to the resignation of Marconi's chief executive-designate John Mayo.

Two groups of US shareholders have launched legal action against Marconi for allegedly misleading them over its true financial outlook.

The company also provoked the fury of unions by announcing 4,000 job losses worldwide.

Mass meeting

The white-collar MSF union held a mass meeting at Marconi's factory at Poole, Dorset on Thursday morning, to work out a response to the cuts.

The factory has been earmarked for closure as part of 1,600 UK job losses announced by the company.

Union representatives will also meet management at the plant on Thursday afternoon.

MSF sector secretary Glyn Thomas said: "Union members are angry that the company has decided to close their plant with the loss of 570 very valuable high-tech jobs in Dorset.

He added: "I will be conveying this anger to the local management to reduce the job loss count."

Take the money

But according to one worker at the Poole plant, most employees were resigned to their fate.

"The morale is very low, but the realistic option is to take the money while it is relatively good, let us get the best deal we can, there are many jobs out there," he said.

"I have had several offers since it was announced. If the closure is fought and delayed we may get a worse deal."