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Thursday, 27 September, 2001, 15:49 GMT 16:49 UK
Marconi shares hit all-time low
Shares in Marconi, the crisis-hit UK telecoms equipment maker, have fallen to a fresh all-time low.

The latest fall came one day after City analysts advised clients that the shares were virtually worthless.

It's on the way to zero. Why would you want to buy a stock like that now?

Tom Hougaard, Financial Spreads
Investors, who have bought shares in Marconi for up to 1,250p, saw the price of one share close at 17p - down from 24.5p at Wednesday's close.

"It's on the way to zero. Why would you want to buy a stock like that now?" said Tom Hougaard, analyst at City bookmaker Financial Spreads.

Only a takeover deal or massive cash injection is likely to save the firm's stock from falling further, analysts at investment bank Dresdner Kleinwort Wasserstein had said.

'Purely diplomatic'

"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.

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

Marconi statement

After the latest falls, one dealer said: "Maybe there's some intrinsic value in the company, but at the moment the sums don't add up, essentially the company is worthless."

Marconi's market value is less than 480m, down from 30bn last year and much smaller than its debts of 4.4bn.

'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.

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:

26 Sep 01 | Business
City analysts gloomy over Marconi
11 Sep 01 | Business
Marconi's share slide halted
05 Sep 01 | Business
Marconi shares collapse
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