CEO admits Marconi now vulnerable
Deputy forced out, CEO stays, Cisco, Alcatel in frame
By Peter Bale, FTMarketWatch
Last Update: 5:09 AM ET July 8, 2001
LONDON (FTMW) - Marconi's chief executive, who survived a shock
boardroom coup in which his deputy was forced out, admits the telecoms
equipment maker is now vulnerable.
After the worst week of his business
career and an even worse week for
Marconi (UK:MONI: news, alerts)
(MONI: news, msgs, alerts)
investors, Lord George Simpson is
talking the talk, saying he's
determined to restore value for
shareholders who've seen their
Marconi shares fall more than 60
percent in three days.
In an interview with London's
Sunday Business, Simpson
acknowledges Marconi is at risk of
takeover after the collapse in its
share price after last week's
bungled warning that profits would
slump 50 percent this year. He hinted he was open to offers.
"This is a horrible market. There is going to be a widespread telecoms operators and
telecoms equipment manufacturers; we will play a role in that consolidation, as sure as
night follows day," Simpson was quoted as saying.
"But we are big enough, we have sufficient value within the company to ensure that
there will be no distress sale; that is not what this is all about. But we are determined to
restore value for our shareholders," said Simpson, having last week insisted that
Marconi's strategy - led by he and Mayo - was on track.
Talk to me
Simpson said Marconi wasn't talking to competitors yet and didn't identify any potential
partners.
Cisco (CSCO: news, msgs, alerts) has previously been mooted as a potential partner
for Marconi and then there is arch-rival, France's Alcatel (FR:013000: news, alerts)
(ALA: news, msgs, alerts) - but both companies have problems of their own in the
sharply contracting market for telecoms equipment as a downturn spreads to Europe
from the United States.
Simpson damned Mayo with faint praise after he was forced out late on Friday after a
revolt from shareholders. Mayo had been expected to take over from Simpson in two
weeks, allowing Simpson to move up to Chairman, replacing Sir Roger Hurn. See
resignation story.
Mayo, said Simpson, was a "fantastically talented guy" who could spot long-term value
and a great deal-maker, but "the company felt that a different set of skills were
needed."
It is clear, however, that leading shareholders faced the Marconi board with a tough
choice on Friday: fire Mayo, Simpson or both. Someone had to take responsibility for
the profit warning and the consequences to confidence of a daylong suspension of its
shares. Ultimately, Mayo lost the contest and Simpson says with a remit to get the
future of the company sorted out.
"I don't think he (Mayo) was happy about going," Simpson said with delicious
understatement in the interview with Richard Wachman.
But his comments to Sunday Business suggest Simpson may not yet fully appreciate
the scale of shareholder fury, acknowledging that despite the day-long suspension on
Wednesday the Marconi board didn't actually discuss the profit warning until the
evening.
One down, one to go?
Shareholders may not be satisfied with only Mayo's scalp. Institutional shareholders
remain furious -- Marconi's founding father Lord Weinstock reportedly engineered the
Mayo ouster -- and ordinary shareholders are fed up with Marconi and its lack of
transparency and delays in facing up to the slowdown.
More than 500 votes came in to an FTMarketWatch reader poll even before Mayo quit
on Friday. Seventy-five percent of the votes said both Simpson and Mayo should go.
That's just a hint of the level of anger among shareholders large and small. See story on
anger among individual and institutional shareholders before Mayo went.
Mayo was clearly out-flanked. The day before he
had, as a gesture of confidence in Marconi and by
implication his strategy, bought 200,000 Marconi
shares at a near-record-low price of 111 pence.
It closed on Friday at 104 pence, just off sub-100
pence lows. That compares with its 245 pence price
just before the warning and a 52-week high of
£12.76 repeat £12.76 in August. Marconi has the
dubious honour of being the first blue-chip FTSE
100 stock to join the "90 percent club" of tech, telecom and media stocks to shed 90
percent of their value since the height of the market early last year.
Peter Bale is editor-in-chief of FTMarketWatch.com in London.
Front Page | Message Boards | Mobile | MarketPlace | Free Membership
Feedback | Letters to the Editor | Company Info | Advertising Media Kit | Licensing
Make CBS.MarketWatch.com your Home Page
Partner Sites
CBSNews.com | CBS.com | FTMarketWatch.com | FT.com | BigCharts.com
© 1997-2001 MarketWatch.com, Inc. All rights reserved. Disclaimer. See our updated Privacy Policy.
CBS and the CBS "eye device" are registered trademarks of CBS Inc.
Intraday data provided by S&P Comstock and subject to terms of use.
Historical and current end-of-day data provided by FT Interactive Data.
Intraday data is at least 15-minutes delayed. All quotes are in local exchange time.
SEHK intraday data is provided by S&P Comstock and is at least 60-minutes delayed. |
