Marconi outsources IT systems in £450m US deal

The telecoms equipment maker Marconi yesterday signed a £450m IT deal with Computer Sciences Corporation that will see the US group take care of its IT systems in a move designed to cut costs.

Marconi, which recently completed its financial restructuring, estimated the outsourcing deal will save it about £4.5m a year for the next 10 years.

It is paying CSC £450m over the course of the next 10 years to manage its IT systems, maintain its computer servers and run its IT help desk.

About 360 of Marconi's IT staff will transfer to CSC while a further 46 will transfer to BT, a subcontractor to CSC under this specific arrangement. The telecoms group, which is Marconi's single biggest customer, will provide networking services to Marconi including voice and conferencing services.

Mike Donovan, Marconi's chief operating officer, said: "Following fast on the successful completion of our financial restructuring and relisting, this agreement will contribute significantly to our already committed cost reduction and efficiency programme."

Shares in the restructured Marconi started trading again last week after the group's debt-for-equity swap, which saw shareholders left with just 0.5 per cent of the company, won approval. The stock closed unchanged at 57.25p last night.

Mr Donovan said the deal would help Marconi sharpen its focus on its core business while giving it an upfront cash injection and a "more efficient IT infrastructure and support".

Under the terms of the deal, CSC will also buy most of Marconi's IT assets worldwide for £26.3m in cash. Marconi expects to have the money before the end of next month.

The move comes as the telecoms equipment maker continues to try to slash costs out of its business in the face of deteriorating market conditions.

Earlier this month, Marconi said sales in the core business were £426m in the three months to 31 March - a 4 per cent fall from the previous quarter and well beneath the £693m in the same quarter a year before.

Marconi, which is due to report its financial figures in full tomorrow, said trading conditions were getting worse not better and had still to bottom out. Mike Parton, the chief executive, said recently he would not be confident in calling the bottom of the market until he had seen at least two quarters of flat, rather than falling, sales.

The £450m deal with Marconi boosts CSC's order intake for the first quarter to $3.5bn (£2.1bn) and is expected to be positive for CSC's earnings per share.