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Last Updated: Tuesday, 3 May, 2005, 13:56 GMT 14:56 UK
Job losses now likely at Marconi
Marconi workers
BT accounts for 25% of Marconi's work in the UK
Marconi has given another warning that job losses are now likely at the company, following its recent failure to win a major contract from BT.

Shares in Marconi fell heavily last week after the telecoms equipment group lost out on part of a 10bn deal.

Marconi said on Tuesday that it would shortly announce how many of its 4,500 UK staff would be losing their jobs.

Its shares rose 7.5% in afternoon trade, as the company said it would review all options for its business.

Marconi employs 4,500 at UK sites including Coventry, Liverpool, Basildon, and Beeston near Nottingham.

'Headcount reduction'

"The company clearly recognises the need to refocus its business in the light of BT's decision and recent trends in the global telecoms equipment market," Marconi said in a statement.

The board will continue therefore to pursue all strategic options with the objective of maximising shareholder value
Marconi statement

"In addition to this, management is reviewing the resource and headcount in each of its activities, particularly in the UK, and will announce shortly the result of this review together with the associated cost savings and level of headcount reduction."

Marconi generates about 25% of its work in the UK from BT.

It first warned last week that its failure to win a part of the BT deal was likely to have "a jobs impact".

Possible sale?

There has also been speculation that the board of Marconi may now welcome a takeover approach.

"The board will continue therefore to pursue all strategic options with the objective of maximising shareholder value," added its statement.

Telecoms analyst Mark Davies-Jones of JP Morgan said Tuesday's statement from Marconi was designed to sooth the markets.

"It was obviously designed to stop the rot [of the declining share price], before it comes back with more information," he said.

Mr Davies-Jones added that there would be "plenty" of companies interested in buying parts of Marconi, but he thought it unlikely that anyone would wish to takeover and continue to run the firm as a whole.

Continuing recovery

The BT blow is also likely to affect Marconi's ongoing recovery after it secured a life-saving financial rescue package two years ago.

The company, which formed itself from the once-mighty UK industrial giant GEC, was on the verge of collapse in 2000 when the bottom fell out of the telecoms and technology markets.

It saw a sharp decline in orders following a switch of focus from electronics to telecoms.

Since its restructuring, the company has made steady progress, wiping out its 669.5m debt mountain ahead of schedule.

And it recently clinched a major deal with Huawei Technologies, giving it an inroad into China and the rest of Asia.

Marconi will continue to supply equipment and services to BT under existing contracts, including a 90m-a-year deal that runs until 2008.

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