Marconi to sell manufacturing plants and focus on technology

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The Independent Online

Marconi, the former GEC, which has transformed itself into a telecoms equipment group, yesterday said it would sell off most of its manufacturing capacity.

Marconi, the former GEC, which has transformed itself into a telecoms equipment group, yesterday said it would sell off most of its manufacturing capacity.

It will dispose of factories at five sites around the world, including two in Britain employing 1,200 people. The company said the plants for sale produce standard electronic equipment it did not need to make itself.

The sell-off was seen as part of Marconi's intended evolution into a lean New Economy powerhouse. In November last year it sold its defence business in order to focus on hi-tech equipment and services.

Mike Parton, chief executive of Marconi's communications division, said: "This is all about making Marconi a stronger, faster competitor. We will focus where we add the greatest value for customers - developing new products and fulfilling orders as quickly as possible."

The transaction will be structured as an outsourcing deal, as the factories involved will continue to supply Marconi. The divestment will allow it to concentrate on research and development and managing the supply chain.

However, the company will continue to manufacture its more sophisticated communications products itself, such as optical systems. Mark Davies Jones, an analyst at Schroder Salomon Smith Barney, said: "Outsourcing is a long-term trend. Marconi has only recently put the new business together, so they are moving pretty fast in defining their manufacturing strategy."

Analysts said Marconi was behind some rivals in telecoms, such as Nortel of the US, in outsourcing manufacturing. Cisco, the hugely profitable American internet infrastructure company, is seen as the champion of the practice. In Europe, Nokia, the mobile phone handset group, is regarded as at the forefront of this "lean company" model.

Marconi said outsourcing most of its production would allow it to react faster to the rapidly changing volume requirements of its customers. The purchasers of the factories will be free to supply other companies, allowing both Marconi and its new supplier to benefit from greater economies of scale.

The sell-off involves UK factories in Coventry and Liverpool. Marconi said it would ensure that the buyer of all the factories would retain the 2,900 employees in the UK and overseas. However, unions yesterday said they were concerned about the long-term security of these jobs.

The 2,200 jobs to be created at a new Marconi plant in Ansty, near Coventry, announced earlier this year, will not be affected as the plant will be making high level products.

In recent years a number of companies, such as Flextronics and Celistica, both of the US, have successfully specialised in providing outsourced electronic manufacturing services.

These companies were seen yesterday as among likely buyers of the Marconi factories. Talks had already begun with potential partners, the British company said. Morgan Stanley Dean Witter, the US investment bank, is handling the process.

As well as the money raised from the factory sales, Marconi will also free up the working capital and future investment that would otherwise be required at these plants.

The company's communications equipment division employs 20,000 of Marconi's 49,000-strong global workforce. About 8,000 others work in its related communications services and mobile businesses. Its other divisions include information systems, which makes medical imaging equipment and database management tools, and a unit that acts as an emerging technologies incubator. Marconi still owns a number of mature businesses, such as a fan manufacturer, which it plans to sell.