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Cisco? No Thanks, Says Marconi

Deputy CEO says a Cisco takeover is unlikely -- and unwelcome

June 4, 2001

3 Min Read
Cisco? No Thanks, Says Marconi

ATLANTA -- Supercomm 2001 -- During a panel discussion on the immediate future of the telecom business, the deputy CEO of Marconi Communications PLC (Nasdaq/London: MONI) denied reports of a merger bid from Cisco Systems Inc. (Nasdaq: CSCO) and told industry analysts that such a merger isn't desirable.

"There's no benefit to us in merging with a company that specializes in enterprise boxes," said John Mayo, during Marconi's pre-show "Prescription for Success" forum this afternoon at Supercomm 2001.

Marconi's chief focus, Mayo says, is on the service provider environment, while Cisco is focused on the enterprise. Mayo is scheduled to take over as CEO from present CEO Lord Simpson on July 19, 2001.

"I can understand where [Cisco] might be interested in the quality of our technology and in our presence outside the U.S.," Mayo noted. But he added that he didn't believe Cisco CEO John Chambers had actually broached the subject. "I can't believe that if Chambers had it in mind he would first talk to a journalist," Mayo said.

Rumors started early this morning, when Reuters news service reported that a U.K. newspaper yesterday said Cisco "was weighing up whether to make a 12 billion pound [$16.97 billion] bid for Marconi." Reuters, noting that the newspaper report was "unsourced," quoted it to the effect that "Cisco's chief executive, John Chambers, had told advisers to delay making an approach to Marconi until it had completed a restructuring programme."

The news seemed to stimulate the share price of both companies. By close of U.S. business today, Marconi shares were trading at 10.35, up 0.35 (3.50%); Cisco's shares were trading at 19.73, up 0.88 (4.67%).

But Marconi, if flattered, seems unmoved. Later on in the panel discussion, Mayo, the former CFO of Marconi and an ex-investment banker, also noted that Cisco's expenditures on mergers and acquisitions of "$25 billion, at 200 percent of sales" compared poorly against Marconi's more conservative expenditures of "2.7 times sales."

"The success of mergers and acquisitions depends on the terms, whether they're crazy or not. Also, it's important to consider whether you can integrate a common culture," he noted.

Mayo's comments were the high point of an otherwise unprepossessing presentation of the results of a survey of enterprise and carrier customers that Marconi commissioned.

According to Mayo, Marconi believes that even though service providers are trying to delay capital expenditures as long as possible, they won't be able to sustain the stance much longer. By the end of the year, he says, carriers will be forced to start spending on infrastructure upgrades or risk losing their licenses in some European locations due to inadequate service performance.

He said Marconi expects to see 5 percent growth in enterprise spending and 10 percent growth in carrier spending over the next 12 months.

Cisco declined to comment on the report, dismissing it as "rumors and speculation."

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com For more information on Supercomm 2001, please visit the Light Reading Supercomm 2001 Site.

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