Marconi squeezes out profit but still faces massive debts

NEWS Marconi turned a massive loss last quarter into a small profit for the quarter ended 30 September, yet the telecom equipment maker still faces a hostile stock market and very volatile share prices. Marconi stock is now falling victim to retail investor betting, according to Richard Windsor, analyst at Nomura. "Marconi stocks have deteriorated into penny betting stock and that's where volatility comes from. If you take away its debt what's left has low equity value which is extremely volatile," he said. The company has appointed a new CEO, Mark Parton - previously boss of the network division. His primary challenge will be to cut costs and reduce the £4.28bn debt-mountain. Debts have been cut from £4.44b at the end of the last quarter. Bernt Ostergaard, an analyst at Giga Web telecommunications, said Marconi's future looks dark as it becomes obvious the company is unable to repay heavy loans to bond holders. Ostergaard said: "Marconi is hovering on the edge of bankruptcy. "Under normal circumstances Marconi would have been bought up years ago. I can foresee a scenario where it merges with someone else and shareholders agree to switch their worthless shares for another company's slightly less worthless shares." On 30 September Marconi had reduced its debt to £4.28bn partly through a further 630 job losses, making the total since 1 April 2001 6,600. The company plans to reduce its debt mountain to between £2.7bn and £3.2bn by the end of March 2002. Group sales during the second quarter were down 24 per cent from the same period last year to £1,444m. Sales in the core of the group were down 33 per cent to £893m. Orders in the core business for the second quarter also fell by 33 per cent compared to 2000.