Marconi Investors in No Mood for Centenary of Triumph (Update2)
By Simon Clark and Cecile Daurat
London, Dec. 11 (Bloomberg) -- A century ago tomorrow, Guglielmo Marconi made history when he sent a radio signal across the Atlantic Ocean.
In Rome, Princess Elettra Marconi, Guglielmo's 71-year-old daughter, will mark the event with Italy's president and prime minister. His grandson will attend a U.K. ceremony in Cornwall at the site of the first transmission.
Investors in Marconi Plc, the company that bears his name, will lick their wounds. Shares have crashed 94 percent to 46 pence (66 cents) this year. Marconi wouldn't say whether its executives will appear at any of the commemorations.
``I'd prefer to celebrate when Marconi's share price is measured in pounds rather than pence,'' said Roberto Brasca, a fund manager at Anima SpA in Milan, which owns 1.25 million shares in the company.
Marconi, whose interests once spanned missiles, communications systems and stove tops, reported a loss of 5.1 billion pounds in the six months to Sept. 30, three years after it returned to making equipment for phone networks by selling off assets and buying two U.S. rivals.
When the telecommunications boom sputtered out, Marconi was undone by the same industry its founder created: instantaneous communication.
``Things went wrong,'' said Ray Kenny, who runs a cheese shop in London's financial district and owns Marconi shares.
Guglielmo Marconi, whose father was a wealthy Italian and whose Irish mother was a member of the prosperous Jameson whiskey family, was obsessed with increasing the range of radio communication.
Radio Waves
His transmission on Dec. 12, 1901, at the age of 27 sent three short beeps -- Morse code for the letter ``S'' -- from a wooden transmitter tower in Cornwall to St. John's in Newfoundland. He rigged up an antenna-equipped kite in a storm over the Atlantic coast to act as receiver.
Marconi's company rapidly established itself after developing the technology that allowed ships to keep in touch with the shore -- including alerting other ships to the 1912 sinking of the Titanic. His invention also made television possible, and he was one of the founders of the British Broadcasting Corp.
For Marconi's radio waves, ``Neither day nor night made any difference, fog nor rain nor snow would not interfere with them,'' according to the company's first prospectus. Radio gave mariners ``a new sense and a new friend, which would make navigation infinitely easier and safer.''
Buying American
In 1968, Lord Arnold Weinstock bought the company from Marconi and merged it into his General Electric Co. -- no relation to the U.S. giant. Weinstock ran GEC for 33 years, expanding the company into such diversifications as military hardware and kitchen accessories.
The company's latest transformation was engineered by Weinstock's successor, Lord George Simpson, who inherited a 3 billion pound pile of cash when he took over in 1996. In 1999 he changed the name to Marconi, to symbolize a new strategy.
Like the company's founder, Simpson crossed the Atlantic -- less successfully.
``General Electric was an old elephant sitting on a mountain of cash,'' said Alex Scott, an analyst at Seven Investment Management. ``The cash was used on U.S. purchases that now look overpriced.''
As the share prices of telecommunications stocks soared in 1999, Simpson spent $6.6 billion on Cleveland-based Reltec Corp., whose technology carries bits of information across networks, and Pittsburgh-based Fore Systems Inc., whose switches direct those bits towards their final destination. He sold a defense equipment unit to help fund the acquisitions.
Junk Rating
Marconi was left with slim pickings for U.S. acquisitions after larger rivals Nortel Networks Corp., Alcatel SA and Lucent Technologies Inc. had already made their purchases.
This year, sales plummeted as customers including BT Group Plc slashed investment in new equipment as their share prices dived and debt mounted.
Marconi's first-half 5.1 billion pound loss included 3.41 billion pounds to write down the value of purchases, mostly of Fore and Reltec.
Marconi's misfortunes were made worse by poor communication with investors. In July it reversed a May forecast that sales would rise, months after rivals said demand for their products was waning.
The company's market capitalization slumped to 1.2 billion pounds from a peak of 35 billion pounds in September 2000. Debt has doubled in a year and a half to 4.3 billion pounds as of Sept. 30, more than three times its market value.
`A Technologist'
Moody's Investors Service and Standard & Poor's have since cut Marconi's credit rating to junk, and its 1 billion euros of 6.375 percent bonds maturing in 2010 were recently quoted at 43 percent of face value, according to Morgan Stanley Dean Witter & Co.
The fate of Marconi and its investors is now in the hands of Michael Parton, a 15-year veteran at the company who took over from Simpson as chief executive in September.
``He's the best possible man they can have,'' Ray Kenny said from behind the counter in his London cheese shop. ``He's a technologist and he's going to take the company back to basics.''
Parton plans to cut debt as much as 37 percent by April through the sale of more assets and reducing the workforce by 10,000. He wants to focus further on phone gear, though he doesn't expect a pickup in demand next year.
Commemorative Coin
Marconi's non-equipment assets include Commerce Systems, which makes fuel pumps, a share in a joint venture with the U.S. General Electric Co. that makes washing machines and a unit making optical components.
Parton has said the company is searching for partners to share costs of running units. Marconi may also be looking for a buyer for the whole company, though it would be difficult to sell the business before it reduces debt and demand for its products improves, analysts say. Marconi declined to comment, saying it is considering all options.
Under Parton, Marconi has started negotiations with banks including Barclays Plc, to extend credit lines expiring in 2003. That would ease concerns that customers, scared off by Marconi's losses, may turn to larger rivals such as Alcatel SA, analysts said.
The company is expected to announce tomorrow a joint venture with BT to convert U.K. pay phones into Internet terminals, the New York Times reported. The plan to convert 30,000 pay phones over three years will cost Marconi about $142 million, the paper said, citing unidentified people close to the companies.
Simpson made some investments that celebrate the company's founder. Marconi helped fund a museum at Poldhu in Cornwall, from where the first signal was broadcast, and built the award-winning Web site marconicalling.com. It also sponsored a book on Marconi's Atlantic leap and helped Britain's royal mint design a commemorative two-pound coin.
``My grandfather made the first transatlantic wireless connection ever even as critics said it was impossible,'' Guglielmo Marconi, the inventor's grandson, said in an interview. ``It was a great achievement.''
Added Anima's Brasca: ``Marconi was a great man. His name deserves a brilliant company, so let's hope they make it.''
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