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Marconi Heads for Spring Relaunch

Despite shareholder squawking and lenders' ongoing squabbling over the value of its bailout, Marconi plc (Nasdaq/London: MONI) seems to be headed for rebirth. In a threefold announcement today, the company said a revamped Marconi could be on the public markets by spring.

Topping today's announcements were modifications to its grand refinancing plan, initially unveiled in August, which call for Marconi to forego shareholder remuneration in favor of a debt-for-equity swap that will put the company in the hands of its banks and lenders (see Marconi: The Deal Is Done).

In a conference call today, Marconi execs said some of the restructuring terms with the banks and lenders have been modified, particularly in the areas involving "cost reductions and cash-generation initiatives." In a long and droning presentation, they explained the specifics, which defy understanding by those lacking graduate degrees in finance. Bottom line? Shareholder equity will still be 5 percent when the deal is done, which is now scheduled for March 15 -- a bit later then the original January deadline.

Marconi said details of the company's new equity issue and the accompanying plan for relaunch on worldwide public markets will be available in a January announcement.

In what appears to be an ongoing shuffling of heads at Marconi, the firm also announced a new board chairman, John Devaney, who replaces Derek Bonham and will head up the board of the new Marconi Corp., once it's hatched.

Meanwhile, the firm reports financial progress. Total sales for the six months ended September 30, 2002, were £1.1 billion (US$1.76 billion), down from £2.58 billion (US$4.1 billion) for the same period last year. But total loss after taxation is down nearly 86 percent year-over-year. For the same six months in 2001, total loss was £5.07 billion (US$8 billion); this year, it's a paltry £730 million, (US$1.16 billion).

Marconi attributes its improved figures to ongoing cost-cutting. Headcount's been reduced to about 17,300 as of the end of November. A further 2,700 have been notified and will leave their jobs within the next few months, execs said today. In the end, about 14,000 employees are expected to make up the core business census. At the start of 2001, Marconi employed about 50,000 people.

Marconi's goal is to achieve a run rate of £450 million (US$716 million) by the end of next fiscal year. Presently, the company's run rate is £635 million (US$1.01 billion).

Products are also on the auction block. While execs wouldn't be specific, they made it clear that the sale of certain assets of the division called Marconi Capital, which includes UMTS gear made in Italy, are under discussion with unidentified parties.

There's been speculation in the past that Marconi might sell its U.S.-based business, but today's announcements didn't give any hint of that; the U.S. core business has gotten its own share of projected margins, and U.S. sales accounted for nearly 30 percent of Marconi's revenues for the past six months, compared with 57 percent from Europe, 9 percent from Asia-Pac, and 4 percent from the Caribbean and Latin America.

Still, the company hasn't shown growth in revenues from any region but Europe for the last six months. Mike Parton, chief executive of Marconi plc, said telecom prospects in Europe were "a mixed bag," that pricing pressure is up in Asia-Pac and Southern Europe, and that the market in the Americas remains "tough." Only Australia was cited as "interesting."

On the plus side, Marconi says it's seen growth from its top 20 worldwide customers over the past six months -- a morsel that seems to have satisfied some ravenous market-watchers. At press time, shares were still trading at just .07, but they were up .02 (40%).

— Mary Jander, Senior Editor, Light Reading
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