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Thursday, 16 May, 2002, 17:08 GMT 18:08 UK
Marconi's weak signal
The poor souls who still hold Marconi shares - now, quite literally, barely worth the paper they are printed on - must be feeling pretty embattled these days.
The current price tag on their securities is more than 99% down on the £12.50 peak less than three years ago.
The £5.7bn loss the company has racked up in the 12 months to March includes a massive write-off of companies bought - for mountains of cash, not shares - at the peak of the tech boom.
Management has been thrown out on its ear, along with most of the staff and a large chunk of the remaining business.
Unfortunately, they may be wrong, and many analysts now believe the company's days as an independent force are numbered.
The reasons can be found in Thursday's statement of results.
The company was expected to unveil a business plan designed to produce a return to financial health.
But a day earlier, it warned investors that it was holding the plan back, while it continues to talk to the creditors to whom it owes £2.9bn.
And with the results themselves, Marconi dropped a bombshell: like so many other crippled telecoms players, it is mulling swapping its debt for equity.
That would effectively all but wipe out what little value remains for shareholders.
The result was entirely predictable: Marconi shares in London slid from their 8.5p opening level to seven pence.
Back to the roots
The rest of the news was hardly more encouraging.
Sales are continuing to fall, the company is not even producing enough cash to make an operating profit, and demand for its most hi-tech products - which cratered as telecoms companies ran into the sand from 2000 onwards - shows no sign of recovering.
All of which leaves the company in a sticky situation, according to Dresdner Kleinwort Wasserstein analyst Per Lindberg.
The general belief among Marconi watchers is that the business plan has simply been thrown out by the banks that control its debt.
Mr Lindberg says one strategy probably under consideration is the closure of almost the whole company.
"The company is simply bleeding too much in costs," he told BBC News Online.
That would leave a privately-held rump making the slightly old-fashioned but still profitable SDH networking equipment, which predates the company's late 1990s transformation from a stodgy but reliable defence firm to a go-ahead telecoms play.
The market for the more expensive, newer kit - the central focus of the strategic shift - is nowhere to be seen, after all, as cautious investors make sure that telecoms operators, Marconi's customers, cut back on spending.
And how long it lasts from here is entirely up to them, Mr Lindberg told BBC News Online.
"They have £4.1bn in payments due in this fiscal year, and a deficit of £2.4bn," he said.
"If you also take down the goodwill to next to nothing, this is as insolvent as any business should ever be able to become."
Marconi is still trying to sell off non-core bits of itself to continue reducing its debt, and on Thursday announced plans to float a defence communications subsidiary in Milan.
A daring tactic, given the current unpopularity of tech stocks - and even more daring since the last set of results disclosed that it was trying to find a trade buyer for the unit.
In other words, no-one wants to take it off Marconi's hands - so a flotation is hardly likely to produce much of an upside.
"Everyone will understand that Marconi is so distressed it would do anything to get a higher price," Mr Lindberg said.
If that were not bad enough, Marconi's sad situation also means that customers may soon be jumping ship.
Central to the firm's survival is a five-year contract with BT Group, the UK's biggest telecoms operator.
But well-sourced whispers are spreading around the market that BT is urgently planning an exit from the contract.
After all, say traders who follow the company, who would want to rely on Marconi in its current state being around even a year from now?
Room at the top?
Whether or not that turns out to be the case, the days of Marconi's current management - who, after all, only took over from the combination of chief executive designate John Mayo and his boss Lord Simpson in September - are probably numbered too.
Creditors are thought to be keen to bring in outside help, in the shape of renowned corporate turnaround specialist David James, the man credited with rescuing the UK's Millennium Dome from an early closure.
Current Marconi chief executive Mike Parton and chairman Derek Bonham are not happy about this, it seems.
But the heavy indebtedness means that the banks are calling the shots.
Messrs Parton and Bonham's days - let alone those of a proud company with a long history - may now be numbered.
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