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VoIP Systems

Ericsson/Marconi: The Fallout

Hundreds of staff at Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) are set to lose their jobs once the British firm completes the sale of its telecom equipment business to Ericsson AB (Nasdaq: ERICY). (See Ericsson Buys Bulk of Marconi.)

At present, Marconi has 9,121 on staff, according to a spokesman, of which 357 are already due to be made redundant as part of the headcount reductions announced earlier this year. Of the remaining 8,764 employees, 6,671 will transfer to Ericsson, while the other 2,093 staff will work for Telent plc, the new name Marconi will adopt once the sale is completed in January 2006.

Ericsson CEO Carl-Henric Svanberg told a conference call that because the Marconi business being acquired is currently running at a loss, "rationalization is necessary for profitability," and that between 15 percent and 20 percent of those transferring (i.e., between 1,000 and 1,334 people) "could be affected."

He said, though, that it was too early to say where those cuts might be made. Ericsson is taking on staff in the U.K., Germany, Italy, and the U.S.

Svanberg added that the Marconi brand "is a big name, and we will use it," but he couldn't say how at present. He also said that Ericsson didn't need Marconi's technology to deliver the intelligent nodes of BT Group plc's (NYSE: BT; London: BTA) 21CN project. (See BT Picks Ericsson for 21CN.)

"BT made a very thorough assessment of its suppliers, and we have the technology to deliver what BT needs. This acquisition is not significant for the BT contract in itself… We would have delivered without it," stated the CEO.

However, when pressed, he declined to comment on whether Ericsson would incorporate any Marconi technology as part of its delivery to BT. Ericsson is yet to outline exactly how it will meet the softswitching and more extensive IMS (IP Multimedia Subsystem) needs of BT's i-nodes. (See Ericsson to Bring Partners to 21CN Party.)

So will Ericsson make any further acquisitions? Svanberg said R&D remains Ericsson's main growth strategy, "but there are times when an acquisition can add value. Marconi is an example of that. But we're not changing our approach" and embarking on a series of acquisitions.

As for the resale agreement Marconi currently has with Huawei Technologies Co. Ltd., Marconi's CEO Mike Parton said that Telent wouldn't be able to retain that agreement as "we will have no sales people." Svanberg said Ericsson would review that relationship, but he couldn't comment further at this point. (See Marconi, Huawei Sign Agreement.)

— Ray Le Maistre, International News Editor, Light Reading

kentishman 12/5/2012 | 2:56:04 AM
re: Ericsson/Marconi: The Fallout It occurs to me that with BT splitting off their copper access network from the rest of the business into an organisation of 35K employees called OPENREACH
see http://www.btplc.com/News/Arti...

to service LLU. There is a strong synergy between this activity and TELENT. Which provides most of the manpower for building and maintaining the Access Network. It would seem likely that the two businesses could be better run as one service business looking after the copper wires etc. It doesn't require much imagination to see that this combined business would be a bit like Transco for Gas and National Grid for Electricity. (Sorry this is a very UK view). Anybody else think this might be the eventual outcome.

I am sure their are some VC's out there running their slide rules over this one.
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