Marconi shares slump as it axes jobs

More than £3bn has been wiped off the stock market value of UK telecoms giant Marconi following a profits warning and the announcement of 4,000 job cuts.

This week's losers

ARM - down 23%

Logica - down 18.8%

Alcatel - down 14.8%

Ericsson - down 10%

Spirent - down 21%

Colt - down 15%

The company's share price dropped by a massive 54%, from 245p to 112.5, as the London markets closed on Thursday.

Meanwhile, workers at Marconi are waiting to learn where the jobs axe will fall.

The company has confirmed that it is proposing to close its plant in Poole, Dorset which employs 570 jobs.

About eighty of the workers are expected to be transferred to a plant in Coventry.

Unions believe about 1,600 jobs will go in total in the UK, out of a workforce of 20,000. It also has factories in Coventry, Dorset, Essex and Liverpool.

The company revealed the cuts on Wednesday in an effort to save £350m a year in costs, in response to "much tougher" market conditions.

Chief executive Lord Simpson described the last six months as "probably the worst in the history of the industry".

Marconi, which employs about 50,000 people worldwide, has not officially said where the job cuts would come.

Market fears

Analysts said Marconi's decision to suspend trading in its shares ahead of Wednesday's announcement added to market fears about its prospects.

It is extremely rare for a company to suspend trading in its shares for an entire day.

Jeremy Batstone, of Natwest Stockbrokers, said: "It's very difficult to say how much of the share price downturn is down to how the news was handled rather than the warning itself."

But others were less optimistic about an early recovery in Marconi stock.

Redundancy costs

The job cuts will bring to about 10,000 the number of jobs axed by Marconi this year.

Yet another company has found that when it comes to dumping workers the Brits are the easiest pickings

Keith Hazlewood, national secretary, GMB union

The GMB union, which represents 1,000 Marconi workers across the country, condemned the cuts.

The union's Keith Hazlewood said: "Yet another company has found that when it comes to dumping workers the Brits are the easiest pickings.

"The GMB urges a move towards strong legislation to protect our workers against this kind of corporate crime.

"In the mean time we are talking to our members at Marconi to see what action they want to take."

Marconi, whose shares hit £13.50 last year, said operating profit would be down 50% this year.

It has been hit by a severe downturn in the global market for telecoms equipment that has also taken a heavy toll on international rivals such as Nortel Networks, Alcatel and Ericsson.

Other tech stocks

The collapse in Marconi's share price sent technology and telecom stocks tumbling across Europe, for the second day running.

The company is just one stock, it has gone down 50%, but the effect on the FTSE as a whole is much smaller

David Page, Investec

In London, chip designer ARM was down 8%, Logica was down 6%.

Elsewhere, Alcatel was down 7%, Ericsson dropped 9.7%, Nokia was down 4% and Siemens was down 3%.

London's FTSE 100 index closed down 50.9 at 5549.6.

US anger

US stocks also took a pounding as the markets opened on Thursday, following the Marconi profit warning and general weakness in European technology stocks.

Many American investors were angry that Marconi made its announcment on the 4th of July public holiday.

Marconi plunged $3.73 to $3.39, a 53% drop, in early trading on New York's Nasdaq market.

Other telecom shares fell, including equipment makers JDS Uniphase, down 2.5% and Nortel Networks, which was down 2%.

Internet systems giant Cisco, which at one stage was rumoured to be considering a take-over of Marconi, was down 6%.

Small investors

David Page, economist at City stockbroker Investec, said small investors in the UK, with high-risk tech-based ISA's, would be hit by the fall in technology stocks.

But he said the impact on pension funds that invest part of their cash in Marconi would be relatively small.

"The company is just one stock, it has gone down 50%, but the effect on the FTSE as a whole is much smaller. "

Government reaction

Downing Street said the Government regrets the job losses by Marconi but added that it is a matter for the company.

The Prime Minister's office said the Employment Service will offer any assistance, and will help the company with any request for retraining.

The Government was given advance notice of the announcement, within the last 24 hours.