Marconi spots pockets of recovery in telecoms market

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The Independent Online

The telecoms equipment maker Marconi yesterday pointed to a recovery in trading after it reported a 6 per cent rise in second-quarter sales and predicted "a further slight increase" in sales this quarter.

While the company said conditions in its main markets remained "challenging", it said it was starting to see "pockets of increased demand" in some areas.

Mike Parton, the company's chief executive, said: "Whereas previously we said our sales in quarter three would be stable, we now think they'll grow again slightly." He said Marconi was particularly benefiting from the roll-out of broadband internet services in the United States and increased spending from mobile phone operators in Germany, as well as stable markets in general.

Shares in the company closed up 13.15 per cent, or 71p, at 611p last night on hopes that a recovery in trading was now firmly in Marconi's grasp as customers started to spend more on technology.

Marconi yesterday reported sales of £389m in the second quarter to 30 September - a rise of 6 per cent from the £367m of sales recorded in the first quarter.

Analysts at Dresdner Kleinwort Wasserstein said: "It is worth highlighting that Marconi's historical seasonality has been a quarter on quarter decrease in Q3."

The company reported an operating loss of £62m in the second quarter - down from a loss of £87m in the first quarter of the year, giving a total loss of £149m for the six months. Marconi also lifted its targets on margins yesterday and is now looking for a gross margin of 27-29 per cent by next March compared with previous guidance of 27 per cent. It is also looking at selling off a couple of businesses in the US.

The recovery story has not been lost on investors. Since the company completed its financial restructuring in May, the shares have more than doubled.

Mr Parton said: "Our markets are still difficult to predict beyond the current quarter. However, I believe our optimism for the longer term looks increasingly justified."

He remained cautious on the short term, however. "I think many of our customers have still got challenges and that will give volatility in the market," he said.