Marconi Talks Takeover

A deal pairing up Huawei Technologies Co. Ltd. and Marconi Corp. plc (Nasdaq: MRCIY; London: MONI) looks more likely than ever, given what Marconi announced today and what Light Reading reported last week.

In a statement released to the London Stock Exchange today, Marconi said it has indeed been involved in M&A discussions, part of its plan to "pursue all strategic options with the objective of maximising shareholder value." The rest of the statement reads as follows:
These options include, amongst a range of alternatives, discussions with third parties about potential business combinations. The discussions are at a preliminary stage and there can be no assurance that an offer will ultimately take place.

. A spokesman for Marconi declined to reveal the identity of these "third parties."

didn't mention Huawei as the party to whom it had talked, but several sources say the combination makes perfect sense and has analyst support (see Could Huawei Buy Marconi?). If it made a move soon, Huawei could get Marconi at a knockdown price and bring with it a number of European carrier accounts, a key goal in its own international expansion strategy (see Huawei Plans to Triple Euro Business). Both vendors have a link to BT that can't be ignored. After being named as a primary supplier in BT's access and transmission categories, Huawei needs a strong services and support team to back up its 21CN success -- and needs it fast. BT has an aggressive project timetable, as it wants to switch off its current voice and data networks in 2010.

Marconi has more experience with BT's current networks and culture than any other supplier and has an extensive support contract with BT (see BT Renews $656M Marconi Deal). And, after being bested by Huawei in BT's 21CN, Marconi is now figuring out how to live without a huge chunk of revenues (see Marconi in Turmoil and Marconi to Cut 800 Jobs).

As reported by Light Reading on Friday, one way Marconi will live without those big BT revenues is to slim down further -- an activity that will no doubt make it even more attractive as an acquisition target (see Marconi: M&A Moves Next?).

A Light Reading source says Marconi has asked a telecom M&A specialist, Daniels & Associates, to find a buyer for its wireless network planning and optimization business, which has just announced a new customer (see Marconi Optimizes Orascom).

That unit has its revenues included in the "access products" revenue line that totaled £32 million (US$56.9 million) in sales in the most recent quarter (see Marconi Reports Q1 Loss). Marconi, as of Friday, wouldn't comment on its M&A activity, though it did reveal that its wireless business unit currently employs just over 300 people, mostly in the Dallas area.

When contacted by Light Reading, Huawei declined to comment on what it called “market rumour and speculation.”

The London Sunday Times reported today that Huawei could splash out around £600 million ($1.07 billion) for Marconi, if a deal were reached.

Shares in Marconi had soared, relatively speaking, in Monday trading, climbing $1.42 (14.56%) to $11.17.

— Phil Harvey, News Editor, Light Reading, and Justin Springham, Senior Editor, Europe, Unstrung

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