The financially troubled Racal Electronics Plc, having attempted to rid itself of its data products division, has taken on US Investment Bank Merrill Lynch to sort out its telecommunications business. The decision that Merrill Lynch has made is to merge Racal’s two telecoms businesses into one, under the name Racal Telecom and to diversify out of their specialist niche markets. Racal’s management seems to have taken a back seat to the investment banks, as Goldman Sachs is making all the company’s data products decisions. The networks services division was formed in 1988 for a managed network service contract for the UK government, and has continued to offer managed network services. The telecommunications infrastructure business, Racal BR telecoms, was bought from British Rail in 1995 for 132m pounds (CI No 2,808). It has control over 11,000 miles of trunk cable, in which Racal has already provisioned an investment of 100m pounds, to modify the network for Synchronous Digital Hierarchy and Asynchronous Transfer Mode transmission. Racal’s new strategy is to act as a Telco’s Telco that can re-sell trunk capacity to other telecommunications companies, and also offer wide ranging services as well. Whether the merging of the two divisions is where the changes are going to stop, seems to be up to Merrill Lynch, which has still not decided if it is going to seek an outside partner for Racal Telecom as originally declared (CI No 3,174). Racal Telecom has also announced plans to use its infrastructure in conjunction with Vodafone Group Plc, for the launch of its Cellular Telephone service, Racal Cellular, which will be lower cost as the calls are routed over its national network, rather than the PSTN. The whole strategy of the group seems to hinge on making its data products division attractive enough to get rid of, although how likely that is to happen is a matter for speculation. It is launching a range of Wide Area Network products, which it believes will add to the bottom line in around four months. In an industry that is increasingly dominated by the big three, Cisco Systems Inc, Bay Networks Inc and 3Com Corp, Racal is unlikely to make significant technological advances or profits, with a relatively small revenue of only 281m pounds.
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