Marconi delivers solid operational performance
despite difficult market conditions
17 May 2001
REVIEW OF OPERATIONS
COMMUNICATIONS
Sales for Communications, which comprises Networks, Services, Mobile and other businesses, increased by 38 per cent to £4.7 billion, or 23 per cent on a like-for-like basis.
Communications accounted for 73 per cent of the Group?s operating profit, before goodwill amortisation and exceptional items, and recorded 15 per cent growth (35 per cent like-for-like) to £592 million despite the difficult market conditions in the second half.
NETWORKS
Communications Networks is made up of three principal businesses: Optical Networks, Access Systems and Broadband Switching. Sales of this group of businesses increased 41 per cent (22 per cent like-for-like) to £3,207 million, underpinned by strong growth in Optical Networks and Access Systems. Operating profit, before goodwill amortisation and exceptional items, increased to £461 million from £381 million, representing growth of 21 per cent or 37 per cent like-for-like.
Optical Networks achieved 40 per cent like-for-like sales growth. This was driven mainly by the strong UK demand for 10-gigabit/second SDH systems broadening throughout Europe and into Asia-Pacific. In the year to March 2001, we shipped more than 1,800 10-gigabit/second systems to 28 customers in the UK, Europe and Asia Pacific.
Our DWDM portfolio started to make a contribution with the first major network deployments. Twenty customers took delivery of 2.5G and 10G DWDM from Marconi during the year. In March alone we shipped 350 10G transponders ? a key interface that many of our competitors cannot yet deliver.
Our Access Systems portfolio covers three modalities ? wireless, fibre and copper ? plus two support technologies ? software, and outside power and plant. Overall, this portfolio reported strong like-for-like growth of 22 per cent, accelerating from 19 per cent in the first half.
Software and outside plant and power showed strong growth, as did our wireless business. Marconi Germany, formerly Bosch Public Networks, increased wireless access sales in its domestic market primarily as a result of a new contract with VIAG, as well as expanding international sales with new contracts from Vodafone and Retevision.
In our fibre access business, sales slowed as market conditions led customers to focus on solutions with faster paybacks. This trend benefited our business for copper-based products, which showed good sales growth. [Harry's Note: Might explain the move up in ADCT and strength in AFCI.]
Sales of our Broadband Switching business increased to £427 million, growth of 1 per cent on a reported basis, but a decline of 16 per cent like-for-like. This business is undertaking a transition away from highly competitive markets serving enterprise customers. We are concentrating our commercial and technical resources in supporting customers who need carrier-class networks, and we have started to ship a new range of MPLS-based products.
[Harry's note: Interesting given the slow down in Cap Ex for carriers. It indicates there is money there if a company has the right product]
Marking our progress in this transition, Broadband Switching sales were split approximately equally between service providers and enterprise customers, compared with the split of 15 per cent service provider versus 85 per cent enterprise when we acquired this business.
Other small Communications Networks businesses contributed a further £111 million to sales.
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