Marconi confirms it is open to offers after BT contract disaster

Marconi's rapid demise accelerated yesterday when the company confirmed it was exploring a possible sale or break-up, following last Thursday's devastating decision by BT Group not to award the equipment maker any of its £10bn network upgrade contracts.

Marconi's rapid demise accelerated yesterday when the company confirmed it was exploring a possible sale or break-up, following last Thursday's devastating decision by BT Group not to award the equipment maker any of its £10bn network upgrade contracts.

Marconi said it was also reviewing the number of people it employs in the UK, with the management meeting unions this week to discuss the crisis. Up to 2,000 jobs could be affected over the next three to five years, although the immediate number of short-term job losses is expected to be less than that.

The formal confirmation that it was pursuing "all strategic options with the objective of maximising shareholder value" gave Marconi's shares some support after losing half their value during trading on Thursday and Friday last week. The shares rose 7.5 per cent to 282.5p.

Marconi, led by its chief executive Mike Parton who last year cashed in £8.3m of free share options, has retained Morgan Stanley to advise it on its future.

Likely buyers include Alcatel of France, Siemens of Germany and Sweden's Ericsson

In January Marconi announced a joint distribution agreement with Huawei Technologies, the Chinese company that was one of the main beneficiaries of BT's contract announcement on Thursday. It too is likely to play some part in deciding Marconi's future. Both companies yesterday said that January's agreement remained in place and would not be affected by Marconi's failure to land any of BT's new business.

Marconi tried to strike as optimistic a note as possible yesterday. It said full year results, to be announced on 17 May, would be in line with expectations and that it had net cash on its balance sheet of £300m. It also said that its pension liabilities had reduced while there had been a "significant" increase in the value of its unrecognised deferred tax assets, which were valued at £659m a year ago. These could be attractive to potential buyers with profitable UK businesses.

Analysts at Goldman Sachs have estimated that a break-up value of Marconi would value the company's shares at about 280p each. The investment bank had been expecting new business worth £450m for Marconi over the next five years from BT's new network upgrade programme, which had now been reduced to zero. However, Marconi could still end up supplying about 4,000 service engineers at the peak of BT's upgrade project, according to Goldman Sachs, although this is likely to be low-margin business.