a timely reminder for investers in the likes of Alcatel, Ericsson and, perhaps most glaringly of all, Cable and Wireless.
<<Well, we warned htem, didn't we?>>
Marconi
FT.com site; Dec 16, 2002
Marconi: The Sequel bears too many of the hallmarks of its predecessor for comfort. Shareholders, long superceded by the creditors, have now passed the baton to debt holders via a debt-for-equity swap. For the remaining equity holders, it would take more than nine shares (which peaked at £12.50) just to buy a second-class stamp. But bondholders cannot afford to be smug - especially if their portfolios contain other Marconi lookalikes. The company they have inherited boasts an implied enterprise value of more than £10bn (just one-twentieth of which is its market capitalisation), or about 10 times sales. That compares with an EV/sales ratio of two times for Nokia.
The sins of Marconi are all too widespread, especially within the telecoms and telecoms equipment sectors. State-held France Telecom, because of government unwillingness to see its stake diluted, also opted to fund acquisitions with cash rather than paper - never a good idea during a bubble.
What has been learnt? Even at Marconi, rather less than might have been hoped. Telecoms experience is conspicuous by its absence among the new management line-up. Equally widespread is Marconi's inability to predict break-even sales levels: an especially worrisome problem when top-line growth is in such short supply. Marconi has, again, revised down its core operating costs to meet the crimped new sales expectations - proof, if more were needed, that break-even numbers in restructuring stories are not watertight. This is a timely reminder for investers in the likes of Alcatel, Ericsson and, perhaps most glaringly of all, Cable and Wireless. The latter also appears to have missed the Marconi how-not-to masterclass on timely dissemination of information to investors. Many more skipped the one on realising maximum break-up value rather than fire sale prices. That is a pity: the demise of an industrial icon should at least leave a legacy of showing others where not to tread. |
