Marconi has announced a H1 loss of more than GPB5 billion, due to write-downs and lower sales.
The UK telecoms equipment maker has suffered losses of GBP5.1 billion in the first six months of 2001, considerably worse than the GBP66 million loss of the same period last year. Marconi has done its best to cut costs and reduce its debt burden, but the company has been struck by a 25% drop in sales in its integral communications business.
The majority of the damage was done in the first three months, when Marconi made a loss of GBP227 million. The company attempted to retrieve the situation, with management changes and 10,000 job cuts, but the continued revenue slide has held the company back.
Although Marconi has returned to an operating profit, making GBP5 million in the second three months, its debt soared to GBP4.28 billion. If the company is to stand any chance of survival it is vital that this burden is lifted before banks get too nervous. Marconi, already in talks with its banks regarding refinancing, has promised that this massive debt will be reduced to GBP2.7-3.2 billion by the end of the financial year, through further cost cutting and streamlining.
However, the problem could have been avoided entirely had Marconi not made so many cash purchases during the technology boom. Vodafone, which has also suffered as a result of acquisitions, escaped serious damage to its H1 performance as it paid with its own shares.
The future of the floundering firm looks very uncertain. Even the company itself has refused to speculate on its outlook for the rest of the year. Market conditions remain uneasy and the company’s debt is still high. Even if the slight operating profit is enough to persuade its banks to refinance its debt, there is still a long road ahead of the company before it nears stability.
