Marconi to check out of European internet hotel plan

Marconi has abandoned ambitious plans to roll out a network of centres to host websites in Europe and Asia. The troubled telecoms equipment maker blamed the downturn in the internet economy, but this is another blow to the company once hailed as UK champion of the new economy.

A Marconi spokesman said: "The sector is going in the wrong direction. We will continue managed hosting services in North America, but plans for Europe and Asia have been put on ice. The market is very cyclical, so we may return to them."

Two weeks ago, chief executive Lord Simpson and chairman Sir Roger Hurn resigned after the company was forced to issue its second profits warning this year. The year's job losses so far total 10,000. On Friday Marconi's shares closed at 20p, their lowest for nearly 25 years, amid concerns about the company's £4.4bn debt and the deteriorating telecoms market.

Marconi's web-hosting is through its profitable managed services division. The new chief executive Mike Parton is planning to sell off slices of the company not considered core to reduce Marconi's borrowing to £3.2bn by next March. Disposals could include Marconi's commerce systems division, which makes, among other things, components for printers. Marconi's spokesman said managed services was core.

Marconi isn't the first British company to pull out of web hosting, in buildings known as "internet hotels". Earlier this month, the quoted disaster recovery specialist Guardian IT announced a similar move, warning that supply was outstripping demand by three to one. The chief executive Peter MacLean said that, for the remaining players, "the future looked particularly bleak".

Marconi's former chief executive Lord Simpson is still in negotiations with the company's new chairman Derek Bonham over his controversial £1m pay-off.

This has angered shareholders, hurt by the 97 per cent fall in Marconi shares this year. A decision on the pay-off is expected in two weeks.