Company of the week

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The Independent Online
GEC's shares rose as much as 12 per cent after the company said it was in "intense" discussions about mergers and acquisitions with other global defence firms, heightening speculation about the long-awaited consolidation of the European defence industry.

Lord Simpson, chief executive said such acquisitions could take place within "weeks or months", and GEC had talked to all the major global players: it is looking for high-margin, high-technology acquisitions to cut its dependence on its more traditional business, such as making home appliances. It seeks to expand defence electronics - ie. making electronic controls for Tomahawk missiles - and telephone switching software.

"It's about driving more software into the business, becoming more of a systems integrator," said Andy Chambers, an analyst with SG Securities. Chambers sees one to two acquisitions in this high-technology area. Defence electronics is GEC's largest business, with about half its sales. GEC has already increased its new technology business this year. In June, it took full control of GPT, the UK's largest telecommunications equipment maker, after buying back the 40 percent stake of its joint-venture partner Siemens. It also bought Tracor Inc, which makes software and electronics for Trident submarines and Tomahawks.

GEC said both moves reflect its "increasing focus on high-technology".

Britain's largest manufacturer increased its first-half profit 11 percent in the first half to September as income grew at its telecommunications and electronics divisions. Profit rose to pounds 312m from pounds 280m. Sales rose 9 per cent to pounds 3.3bn.

Operating profit at its Marconi unit - phone switching and radio comms gear, rose 15 per cent to pounds 105m. GEC said there was a one-time gain of pounds 965m from net gains on floating Alstom and selling Siemens GEC Communication Systems.

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