UPDATE 1-Marconi takes off on Cisco bid report
(Adds comments from industry sources, updates share price)
By Jean Yoon, UK technology correspondent
LONDON, June 4 (Reuters) - Shares in UK telecoms equipment
maker Marconi Plc roared ahead on Monday on a report that U.S.
group Cisco Systems Inc was casting its eye over the company
with a view to a 12 billion pound ($17 billion) bid.
An industry source told Reuters that Cisco, the world's
biggest maker of networking gear for the Internet, ran its ruler
over Marconi's business a few weeks ago but that the extent of
any subsequent talks was unclear.
Analysts accept the logic of Cisco seeking to strengthen its
foothold in the European telecoms equipment market, but question
whether Marconi is the right target.
They said larger players like France's Alcatel
and U.S. group Lucent Technologies Inc -- whose
merger talks collapsed last week -- may be better bets because
they would bring a bigger chunk of the market with them.
"Cisco can buy Marconi to get a rung on the ladder in the
European telecoms equipment market but that doesn't achieve it
on the global stage. It's not big enough," said Robin Hardy, an
analyst at WestLB Panmure.
"It's not worth it unless you can pick it up for a song," he
said. Nortel Networks Corp has a 23 percent share of the
global telecoms equipment market, Alcatel 20 percent, Lucent 11
percent and Marconi five, according to WestLB Panmure.
Shares in Marconi were up 5.6 percent at 357 pence at 1321
GMT, valuing the group at some 10 billion pounds ($14.19
billion). However, the stock is 72 percent down on a peak above
12 pounds last August.
Industry observers say predators like Cisco may be waiting
for Marconi's shares to dip below three pounds to make it more
affordable.
Britain's Sunday Business reported in an unsourced article
at the weekend that Cisco's Chief Executive John Chambers had
told the company's advisers to delay approaching Marconi until
the UK group had completed a restructuring programme.
Marconi said it had no comment on Monday.
FIGHTING FIT
Analysts agreed that Cisco or any other interested party
should wait until the diversified British group, which is in the
midst of an overhaul, becomes leaner and fitter.
Marconi, which specialises in optical components for
telecoms networks, plans a series of disposals and 3,000 layoffs
-- more than five percent of its workforce.
Marconi's Chief Executive George Simpson said last month the
group was in talks about selling or floating its medical systems
business, reportedly worth up to 1.5 billion pounds.
The company has also widened options for its fibre-optic
network operator Ipsaris to include a sale, float or merger.
Marconi, whose pre-tax profit barely rose in the year to
March 31, forecast its market would pick up at the end of this
year.
"The company is only worth a look after it restructures,"
said one London-based analyst. "After cleaning up, the price (12
billion pounds) is, on an acquisition basis, not unreasonable."
WestLB Panmure's Hardy said Marconi was on track to
recovery. "It's not that highly leveraged and disposals are
lined up to halve its debt. It doesn't need to be rescued."
RELIEF FOR MARCONI
Market watchers said the rise in Marconi shares was partly a
result of relief that the link-up between rivals Alcatel and
Lucent had fallen through.
"Marconi was one of the main potential losers of a possible
Alcatel/Lucent deal, if that deal had gone through it could have
been a big problem for Marconi," said Commerzbank strategist
Rolf Elgeti.
Marconi, which has underperformed the UK information
technology hardware index <.FTTH> by seven percent in the year
to date and the FTSE All Share index <.FTAS> by 45 percent, has
had a difficult year with a build-up in inventories and a
deteriorating cash position.
(Additional reporting by Keiron Henderson andArindam Nag)
($1=.7049 Pound)
REUTERS
Rtr 10:18 06-04-01
Copyright 2001, Reuters News Service |
