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Wednesday, 26 September, 2001, 18:24 GMT 19:24 UK
City analysts gloomy over Marconi
Marconi graphic
Marconi shareholders, who have bought shares in the firm for up to 1,250p, could see stock in the beleaguered telecoms equipment maker fall close to zero, City analysts have warned.

Only a takeover deal or major cash injection is likely to save the firm's stock, which closed at 24.5p on Wednesday, from falling further, analysts at investment bank Dresdner Kleinwort Wasserstein have said.

We believe our strategic plan is the right one that we need to survive

Marconi statement
"Marconi is unlikely to survive unless a major rescue package is provided by a strategic backer," the bank said in a note to clients.

While the bank gave Marconi shares a target range of between zero and 10p, the upper estimates were "purely diplomatic", a source told BBC News Online.

'Right plan'

Marconi, however, on Wednesday restated its faith in a revival plan involving factory closures, asset sales and 10,000 job cuts.

"We believe our strategic plan is the right one that we need to survive," a company spokesman said.

Other analysts have sketched out a more promising future for the firm under a new management team unveiled three weeks ago.

Last week new chief executive Mike Parton announced a "breakthrough" deal to boost bandwidth for the US telecoms consortium Iris.

Marconi's closing share price on Wednesday, 1.75p down on the day, compares with an intra-day low of 19p hit on Friday.

Debt concerns

DKW said their concerns stemmed from the level of Marconi's debt mountain, said to have reached 4.4bn.

The downturn in the telecoms market may leave Marconi unable to meet interest payments.

"It will probably be 2003 before companies like Marconi and Alcatel see normal conditions again," the source said.

"But the amount of debt Marconi has means it will have to earn a huge amount of money just to pay the interest alone."

A failure at the company would leave it in the hands of bond holders and bankers, who have preferential rights to remaining assets.

"We are not saying the underlying businesses will not recover to a healthy profitability," the source said. "We are talking about the overall position of the company,

The report said: "The central question for investors of Marconi ought to centre around the salvage value under new ownership rather than if the company can return to positive cash flow on its own."

Marconi on Wednesday progressed efforts to knock 1.2bn from its debt mountain by selling a 1.5% stake in French media firm Lagardere for 43.2m.

See also:

11 Sep 01 | Business
Marconi's share slide halted
05 Sep 01 | Business
Marconi shares collapse
05 Sep 01 | Business
Tough task ahead for Marconi duo
08 Jul 01 | Business
Marconi braced for takeover bids
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