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Wednesday, 5 September, 2001, 16:13 GMT 17:13 UK
Marconi shares collapse
Shares in Marconi, the crisis-hit telecoms equipment maker, have slumped 28% to close at just 38 pence, wiping £400m off the firm's value in one day.
The FTSE 100 company, which carried out a disastrous switch to telecoms from defence, has now lost 95% of its value since the end of last year.
The latest blow came after analysts slashed their outlook for the troubled firm and questioned its ability to meet debt reduction targets.
Shareholders have also expressed their fury at the possible £1m pay-off to the departing chief executive, Lord Simpson.
'Disgusting and appalling'
The once burgeoning Marconi had already shocked the markets on Tuesday by announcing 2,000 job cuts on top of 8,000 announced earlier this year.
In a statement revealing a shake-up aimed at restoring profitability, Marconi said that chairman Sir Roger Hurn and Lord Simpson had resigned with immediate effect.
But it later emerged that Lord Simpson could receive a pay-off of up to £1m pounds, despite the sharp decline in the company's fortunes.
Shareholders told BBC Radio 4's Today programme that they considered the potential pay-off to be "disgusting" and "appalling".
Lord Simpson's expected pay-off of £1m is roughly equivalent to one year's salary and benefits, while Sir Roger is expected to receive up to £300,000.
The fact that the pay-off is part of a contractual agreement did little to alleviate the bad feeling.
In an editorial, the Daily Telegraph newspaper said that the company should pay Lord Simpson until the end of the month and then let him sue the company if he wanted any more money.
But city workers were more sympathetic, saying that Lord Simpson's salary would have already been heavily depleted by the fall in the Marconi share price.
The dramatic collapse in the firm's share price continued on Wednesday, with Marconi shares closing at 38p, compared with £12.50 in September last year.
The job cuts were condemned by union leaders, who said they had been given no warning of the announcement.
"It was completely unexpected," said Danny Carrigan, chairman of Marconi's trade union committee. "The company is clearly in turmoil."
Union leaders have pledged to fight any compulsory redundancies when they meet on Wednesday.
Manufacturing Science and Finance (MSF) union representative Roger Jeary said: "We will not stand by and see people forced out of work.
"We are quite clear - if members wish to oppose job losses we will support them in their opposition."
About 600 of the cuts will be made in the UK, 1,000 in the US and the remainder in continental Europe, central America and Asia Pacific, the firm said.
The shake-up follows an operational review launched in July after Marconi announced that, because of "much tougher" market conditions, operating profits for the year to the end of March would come in at half the previous forecast.
The measures represent "a decisive response to the dramatic shift in the fortunes of the global telecoms industry", said Mike Parton, Marconi's new chief executive.
The shares, which have since halved again, threatening Marconi's place among the elite FTSE 100 club of leading listed UK firms, fell to 42p on Wednesday.
The company's latest statement revealed that, thanks largely to a 25% slump in sales of network equipment, Marconi ran at a £227m loss in the April-to-June quarter.
A current upturn in sales, "albeit below expectations," combined with savings made from job losses and rationalisations already announced, should see the firm break even between July and September, the briefing said.
The company predicted that the measures unveiled on Tuesday will lead to annual cost savings of £250m, on top of the £350m achieved through earlier job and plant cuts.
Outgoing chairman Sir Roger Hurn, who had revealed intentions to retire before July's profits warning debacle, said Mr Parton, former head of Marconi's networks division boasted a "wealth of industry experience".
"The new Marconi executive team brings together an outstanding combination of skills to lead Marconi through the challenges ahead," Sir Roger added.
He also praised outgoing chief executive Lord Simpson for the strategic shift which transformed the broad-ranging GEC business into a telecoms-focused Marconi.
But the appointment of an existing employee to chief executive, and the promotion of existing director Mike Donovan to chief operating officer, received a cool response from City analysts, who had been expecting Marconi to appoint chiefs from outside the firm.
"It is a dangerous game they are playing," said Robin Hardy at WestLB Panmure.
"But they correctly surmised that they could do nothing with that management in place."
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