The chairman and chief executive of Marconi announced their resignations today as the battered telecommunications company said it would lay off an additional 2,000 employees.
The surprise announcement underscored the severity of Marconi's financial problems amid the turmoil in global high–tech industries. The cuts amount to about five percent of the company's global work force and come on top of 8,000 layoffs announced earlier this year.
Marconi, which rattled investors in July by temporarily suspending trading of its shares and issuing a profit warning, has seen its share price plunge by more than 95 percent from a peak of 12.50 pounds in 1999.
Having completed a review of all its operations, the company on Tuesday disclosed mounting debts and an operating loss of 227 million pounds (dlrs 329 million) for the first quarter ending June 30.
Marconi reported a 12 percent drop in first–quarter sales to £1.13 billion pounds ($1.64 billion) from £1.29bn a year ago, and it warned that an operating loss was likely for the first half of the current fiscal year.
Chairman Roger Hurn and Chief Executive George Simpson have both stepped down, Marconi said. Their removal came just two months after the resignation of deputy chief executive John Mayo, who had been tapped to take over from Simpson as chief executive.
Mike Parton, who heads Marconi's Networks division, has been named the new chief executive, while Derek Bonham, a senior non–executive director, will serve as interim chairman until a new chairman is appointed, the company said.
"Our operational review is a decisive response to the dramatic shift in the fortunes of the global telecoms industry," Mr Parton said. "I do believe there is a place in this market for Marconi and that we will be successful."
The company's share price edged up by 0.5 pence to 54 pence on the Stock Exchange.
Mark Horn of London brokerage Canaccord Capital (Europe) Ltd. said Marconi shares would be trading at much higher levels if not for management's lack of credibility.
"The market has become more than disenchanted with management. They kept giving these forecasts saying, 'It's all OK. Don't worry about it.' Then they'd come out with profit warnings," said Horn, head of European research at Canaccord.
"They were complacent, and they've paid the price."
Marconi, which changed its name in 1999 from The General Electric Co. PLC, has a large presence in the United States due to its acquisition two years ago of Cleveland–based Reltec Corp. and Fore Systems Inc., headquartered in Pittsburgh.
The company aims to slash costs in its core network communications business by cutting 2,000 additional jobs. Mr Parton said 1,000 of the jobs would be eliminated in the United States, 600 in Britain and the remaining 400 in continental Europe, Central America and Asia.
The company expects to trim its global work force to around 29,000 by next March, down 26 percent from the 39,000 people employed as of March 31.
"To be perfectly honest, I am stunned by this announcement. Normally we would get some kind of a hint that this was going to happen," said Danny Carrigan, national Officer at the Amalgamated Engineering and Electrical Union.
Marconi expects the fresh job cuts and associated expenses to cost around £450 million.Reuse content