Marconi's Chairman, Chief Executive Quit
As Firm Unveils Profit Warning, Job Cuts
A WALL STREET JOURNAL ONLINE News Roundup
LONDON -- The chairman and chief executive of Marconi PLC announced their resignations Tuesday as the troubled British telecommunications company said it would lay off an additional 2,000 employees, or about 5% of its work force.
The surprise announcement underscored the severity of Marconi's financial problems amid the abrupt decline in global high-tech industries. Marconi had already shaken markets with a profit warning in July.
The group has finally made a clean breast of its problems: four billion pounds in special charges, a new CEO and chairman, another round of job cuts. But it has still not shown how it is going to mend its finances. Cash is draining out of the business and debt has mounted yet again.
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Chairman Roger Hurn and Chief Executive George Simpson both stepped down with immediate effect, Marconi said.
Having completed a review of all its operations, the company disclosed mounting debts and an operating loss of 227 million pounds ($329 million or 299.4 million euros) for the first quarter ended June 30.
Marconi reported a 12% drop in first-quarter sales to 1.13 billion pounds from 1.29 billion pounds a year earlier, and it warned that an operating loss was likely for the first half of the current fiscal year.
Mike Parton, who heads Marconi's Networks division, has been named the new chief executive, while Derek Bonham, a senior nonexecutive director, will serve as interim chairman until a new chairman is appointed, the company said.
"Our operational review is a decisive response to the dramatic shift in the fortunes of the global telecoms industry," Mr. Parton said. "I do believe there is a place in this market for Marconi and that we will be successful."
Marconi Holders Slam Management but CEO, Directors Are Re-Elected (July 19)
U.K.'s Marconi Falls Off Telecom Pedestal as Warning Brings It in Line With Sector (July 9)
Marconi aims to slash costs in its core network communications business by cutting 2,000 jobs on top of the 8,000 already slated for elimination. Mr. Parton said 1,000 jobs would be cut in the U.S., 600 in Britain and the remaining 400 in continental Europe, Central America and Asia.
The company expects to trim its global work force to around 29,000 by next March, down 26% from the 39,000 people employed as of March 31.
"To be perfectly honest, I am stunned by this announcement. Normally we would get some kind of a hint that this was going to happen," said Danny Carrigan, national Officer at the Amalgamated Engineering and Electrical Union.
Marconi expects the additional job cuts and associated expenses to cost it around 450 million pounds during the current fiscal year, it said.
Marconi also said it will increase its provisions for bad debts and write off assets worth as much as 3.5 billion pounds. Company debt stood at 4.4 billion pounds last month, compared with 3.2 billion pounds at the end of March, Marconi said.
The company hopes to obtain regulatory approval to sell its Medical Systems business by year end, a deal that would help it trim its debts by 780 million pounds. Marconi said it want to reduce its debt burden to as little as 2.7 billion pounds by next March.
As a result of this target and its revised sales and profit expectations, the company said it has decided to halt dividend payments for the current fiscal year. Future dividend policy will be reviewed in light of trading results, it said.
The combined effect of these cost cutting measures should enable Marconi to reverse its operating losses by the second quarter of next year, it said. |
