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July 3, 1990

GEC SAYS GPT, PLESSEY SEMICONDUCTORS ARE SAFE, HOSKYNS IS NEARLY SOLD

By CBR Staff Writer

Its been quite a year for GEC on the acquisition and joint venture front this year. It has its GEC Alsthom joint venture, its joint venture in consumer products with the US General Electric Co, GEC Plessey Telecom which was considered a joint venture at the interim stage, but for the last six months has been counted as a subsidiary, and, last but by no means least, Ferranti Defence, which is treated as a subsidiary. GEC admits all this has had a material effect on its figures but as to what the specific effects have been it is not telling. Anyway, pre-tax profits were up 9% to UKP872m (presumably not a margin Lord Weinstock likes) on turnover up 32% to UKP8,786m. As for turnover, GEC emphasised that sales to continental Europe were up 11% to 26% of total, and turnover derived from continental Europe rose 20% to 27%, but operating profit in this region was up 10% and shows potential for improvement. Of interest for Computergram devotees, GEC Plessey Telecom’s performance was not considered satisfactory over the year, because British Telecom pulled the plug on its orders. However, Lord Weinstock commented that whereas it used to be impossible to do anything with Plessey management, now that Siemens was in the picture things would be smoother. GEC says it has no intention of selling its stake in this business to Siemens, but it is in the process of negotiating a series of agreements with Siemens on technology and trading. In particular GPT and Siemens are merging their public switching technology and are persuading the German Bundespost, British Telecom and Mercury to take the new hybrid on board as a European standard (it will be a surprise if it doesn’t look exactly like EWSD and very little like System X). GEC and Siemens are talking about further collaboration in telecommunications. As for the Plessey acquisition by GEC and Siemens, GEC paid UKP950m for an undisclosed percentage of the Plessey assets, and Plessey has contributed UKP33m to the group’s profits over the past six months. However, despite such profits being less than anticipated, Lord Weinstock said he was not disappointed.

Eastern Europeans can’t pay

As for press gossip that GEC and Siemens are drifting apart, any distance between the two was attributed to the acquisition of Plessey which meant that a lot of co-operation had to go out the window. Furthermore, Lord Weinstock said that the two were hampered in their collaboration by the UK Office of Fair Trading, and that they have to move slowly into markets together to avoid arousing suspicions that they are building a monopoly. Plessey Semiconductors was said to have made a small profit but was held back by the UK market which has subsequently strengthened: Lord Weinstock said the company was financially viable and was necessary for the systems business, adding that GEC was determined to make a go of chips this time. Similarly, he seemed loyal to the Gallium Arsenide research and development being carried out at Marconi Instruments where profits were minimal – management has been changed. The sale of Hoskyns is said to be near to a conclusion, but GEC has waited to get the buyer most agreeable to Hoskyns management. On the issue of the defence market, Weinstock asked NATO to remember what happened after the years of appeasement in the late 1930s – defence now counts for less than 20% of GEC group sales. Commenting on the East European market, he quipped we already find enough customers who can’t pay without going looking for more.

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