Marconi, the telecoms equipment maker, said last night that it was cutting a further 4,000 jobs, after admitting market conditions during the three months to June had been "much tougher than expected" and that operating profits for the current year would be half last year's.
"Whilst customers continue to show operational interest in solutions and continue to request information, in recent weeks it has become clear that financial constraints in the service providers, particularly in Europe, are now causing that interest not to convert into firm orders at the usual rate," Marconi said in a statement.
Shares in Marconi had been suspended yesterday morning ahead of the announcement. Marconi's directors were meeting for the first time after the end of the first quarter of its financial year to consider current trading and the outlook for the rest of the year.
Marconi announced early in the morning that it had agreed to sell its Medical Systems business to Royal Philips Electronics for $1.1bn (£781m) cash, although that figure was well beneath market expectations.
The trading statement, which did not emerge until almost 7pm, said the slowdown would "impact this financial year more strongly than indicated by our previous guidance and current market expectations". Marconi said it expected sales for the year ending 31 March 2002 to be about 15 per cent lower than the previous year and operating profit before exceptional items to be down by by about 50 per cent.
It expected to report an "approximately break-even position at the operating profit level in the first half and to record a stronger second half, when the benefit of major cost reductions will have a significantly greater impact".
Marconi said it planned to withdraw from a number of its existing facilities and concentrate its activities on major sites. The move is expected to reduce the company's workforce globally by a further 3,000 jobs, on top of job cuts announced in April. It also said it would reduce the number of management positions by 1,000.
Marconi said the move would save it a further £150m on an annualised basis and £75m in the current financial year. It said it would have to take a further exceptional charge of £150m, bringing total restructuring charges for the current year to £550m.
Shares in Marconi, which closed down 6.8 per cent at 245p on Tuesday night, did not trade at all yesterday. This morning they are expected to fall sharply. Cantor Index, a spreadbetting firm, was quoting a price of 180-190p last night.
Panic over what Marconi's trading statement would contain knocked a raft of technology and telecoms shares across Europe yesterday. Spirent, a telecoms testing business, lost 9 per cent, while Dimension Data, the South African computer services business which issued its warning on Tuesday, fell a further 14.8 per cent.
In April, Marconi announced plans to cut 3,000 jobs over the coming 12 months, including 1,500 in the UK.
Analysts had mixed reactions to the news Marconi was selling its Medical Systems business to Philips. While they had hoped the company would get as much as £1.5bn for the unit, they were encouraged that the funds raised from the disposal would go towards reducing Marconi's debt which, at the end of March, stood at £3.2bn.Reuse content