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Marconi Debuts on Nasdaq

Light Reading
News Analysis
Light Reading
10/17/2000

Mention "Marconi" to most Americans and they're more likely to think of prepackaged cheesy pasta than a European-based telecom powerhouse.

But that could change as Marconi Communications PLC (Nasdaq/London: MONI) began trading American Depository Receipts (ADRs) on the Nasdaq in the U.S. this morning.

The company has already moved its operational headquarters to the U.S. and has garnered 42 percent of its sales from the U.S. market. But it’s still relatively unknown on this side of the Atlantic.

That’s where the tracking stock comes into play. Even though the stock isn’t adding any additional cash to the company’s coffers, it is expected to help boost the bottom line in the long term.

"The listing hasn’t had any immediate impact on the company’s valuation," says James Heal, technology analyst at Commerzbank in London. "This is more about raising the company’s profile in the U.S. Hopefully, it will help them attract new employees and keep the ones they already have."

Marconi competes against some heavy hitting International names already established in North America: Alcatel SA (NYSE: ALA), Cisco Systems Inc. (Nasdaq: CSCO), Lucent Technologies Inc. (NYSE: LU), and Nortel Networks Corp. (NYSE/Toronto: NT). The company’s core technology, which revolves around optical SDH (synchronous digital hierarchy) and ring-based DWDM (dense wavelength-division multiplexing) topologies is better suited for European networks, where distances between the network hops are shorter. It doesn’t have much expertise in building equipment for long-haul networks. But the company has penetrated the U.S. markets in fiber access systems, says Heal.

One potential benefit of a Nasdaq listing is it could help the company acquire startups. “It certainly gives them another acquisition currency in terms of options,” adds Heal.

So far, the stock is down 3.16 percent to $24.94 a share, since it began trading this morning. This is in line with the Nasdaq composite, which is also down about 3.10 percent.

“Of course, they happened to pick one of the worst weeks that they could have to debut,” says Heal. “The whole market is concerned about margin pressure, but as long as they continue to execute well and keep up their sales momentum things should continue to go well.”

-- Marguerite Reardon, senior editor, Light Reading, http://www.lightreading.com

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