Jeremy Warner's Outlook: Marconi is finally dealt the killer blow - and by British Telecom of all companies

Markets oblivious to French "non" vote; GlaxoSmithKline back on the front foot

Marconi wasn't even pretending to put a brave face on it yesterday. Failure to win even so much as a penny's worth of orders from one of the biggest telecommunications contracts ever put out to tender - British Telecom's £10bn Twenty First Century Network Programme - is a bitter blow to the sadly depleted remnants of Lord Weinstock's industrial empire as it struggles to rise from the ashes of insolvency.

To add insult to injury, all eight of the companies selected for this ground breaking investment in cutting edge telecommunications technology are foreign concerns. Marconi, the only UK domiciled player with a snowball in Hades chance of a prime contracting role, has been frozen out.

It is hard to imagine this happening almost anywhere else in the world. In these fast globalising times, BT must place its orders where it can see the best possible commercial advantage. And it is surely the case that if Marconi cannot compete on price, technology and deliverability with the low cost producers of the Far East, then it doesn't matter how many favours it is able to extract from the national incumbent, it will eventually fail anyway.

Yet that is not an argument which would be readily appreciated elsewhere in Europe, where it is a racing certainty that when the telecoms incumbent comes to embark on similar investment, the lion's share will go to the local equipment maker.

BT reasonably points out that most of those selected have manufacturing facilities in Britain and that telecoms equipment is now a truly global industry. Even if work had been awarded to Marconi, as likely as not it would have been carried out in the US or the Far East. Special favours for local suppliers belong to a bygone age, and a good thing too, many would say.

Even so, Mike Parton, Marconi's chief executive, might have expected just a little mercy. Not to win anything at all from this pioneering British contract doesn't bode well for Marconi's chances when similar, overseas orders come to be placed. In Europe and elsewhere it will be seen as an extraordinary repudiation. If even the British won't buy Marconi, then why should anyone else?

Still, there are consolations, for Mr Parton and three of his codirectors at least. The company may now be dead in the water again, but not before each of them managed to dump substantial quantities of the free shares they received as part of a performance related bonus plan. Mr Parton alone raised nearly £8.8m at prices nearly double what the shares fell to after yesterday's battering.

There is no suggestion of insider dealing here. Marconi honestly believed until the last moment that it would get something out of the BT contract. Yet it leaves a bad taste in the mouth none the less. The late Lord Weinstock and his followers were wiped out by the debt for equity swap that had to be engineered to save the company from insolvency. A whole new generation of shareholders have now suffered crippling losses. Perhaps the best Mr Parton can do for them now is prepare the company for sale, for it is hard to see how Marconi can have any kind of an independent future after this. Regrettably, he won't get anything like the price he was lucky enough to sell out at.

Markets oblivious to French "non" vote

There's only one election that really matters in Europe right now, and it's not the one that happens next week in Britain. Rather, it is the French referendum on the EU constitution on 29 May. That, at least, is the fashionable thing to say at lunch tables up and down the City.

The general election seems to be a closer contest than anyone thought likely, yet there is still not much doubt about the outcome, and I suspect that when push comes to shove, it'll prove more of a walkover for Labour than the pundits are saying, not with standing the shenanigans over the legal advice for going to war.

The prospect of a "non" vote in France, on the other hand, is being widely billed as the greatest upset for Europe's political elites since the Second World War, with potentially catastrophic or hugely beneficial consequences, depending on who you happen to be listening to at the time. This is, of course, a gross exaggeration. Indeed, I doubt a no vote in France is of any long-term significance at all, though plainly it would be the death of the present constitutional proposal. I take comfort in this view from the financial markets, whose reaction thus far to the growing likelihood of a French "non" has been precisely zero.

The calm with which financial markets view this potential "catastrophe" for Europe is in marked contrast to the hysterical predictions of the politicians, which range from the comparatively modest forecast of a sharp rise in interest rates to the end of the single currency or even the European project as we know it. If any of these outcomes were even remotely likely, there would already be mayhem in the markets.

Spreads have widened marginally in recent months, but this is down more to the loosening of the Stability and Growth Pact rules and some specific national concerns than referendum prompted doubts about the future of the single currency. Italy in particular, seems to be in a state of political, fiscal and economic meltdown. In the circumstances, it's a wonder Italy's long term interest rates haven't diverged more significantly than they have, given the not to be lightly dismissed risk of default.

So what are the likely consequences of a French no? Prospects for further enlargement will suffer a knock, and European decision making will become even more difficult and protracted than it is already. Yet eventually there will be another stab at constitutional reform, and next time, perhaps, there may be a more acceptable compromise than the messy fudge which is the present proposal.

Those that argue the consequences of a no vote can only be beneficial seem equally off beam, ignoring as they do the fact that if the French vote no it will not be because they want to unleash free market reform in Europe but to the contrary because the constitution as it stands is regarded as too liberal and insufficiently protective of the French social model. In any case, a no vote may be indicative less of rising euroscepticism in France and more of dissatisfaction across a whole range of domestic issues, many of which have little to do with the European Union.

It's a nice line to think that events in France may be of more significance than what's happening here on our own doorstep, but the lack of reaction from markets suggests strongly that they are not. Indeed, from Tony Blair's point of view, a French no vote is the best possible outcome. He won't then have to face his own no.

GlaxoSmithKline back on the front foot

GlaxoSmithKline seems finally to be moving back onto the front foot again after years of sorely testing the market's faith in the merger which created this pharmaceuticals goliath. First-quarter earnings were better than the market consensus, while the settlement with regulators over a faulty production plant in Puerto Rico was more favourable than anyone dared hope.

More importantly for the long term, the company has one of the most promising pipelines in the business, including cervarix, a cervical cancer vaccine which Jean Pierre-Garnier, the chief executive, confidently predicts will become the world's best ever selling vaccine. Unfortunately, the same cannot be said of AstraZeneca, many of whose big hopes for the future have fallen by the way side. As a cash cow while present patents last with considerable potential for the eradication of duplicated costs, Astra may none the less make an attractive takeover proposition.

Would JP dare? His new chairman, Sir Christopher Gent, is the genius behind the creation of Vodafone and therefore a mergers addict by background. Their tails are up and the markets might back them. Whether the Government would tolerate Britain's last two global pharma giants becoming just one is another matter.

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