Marconi plans more job cuts; sales down

Beleaguered telecom equipment maker Marconi announced plans to reduce its yearly core operating costs by an additional $112 million to $719 million.

The move comes on top of earlier cost saving measures that the company says should cut operating costs to $831 million by the close of its current fiscal year in March 2003.

By reducing costs, Marconi hopes to move its sales break-even point down to $3.04 billion per year.

To achieve this goal, the company announced cost cutting measures in several areas.

“The main areas of savings include further headcount reductions and rationalizations of products, sights, sales and marketing as well as planned outsourcing arrangements,” said Mike Donovon, Marconi’s chief operating officer.

Currently, Marconi’s headcount for its core business stands at 17,300. The company has in place plans to reduce that number to 14,600 during the next few months. Once the target operating cost is reached, Marconi said it expects to have its core headcount down to 14,000.

The planned reductions were announced yesterday along with Marconi’s results for the six months ending Sept. 30.

The company’s numbers show that it is still struggling with the worldwide slowdown in communications spending. Marconi said its core sales from the first quarter to the second declined 6%, a figure the company painted in a positive light.

For the half, the company’s core group, which is comprised of optical, broadband routing and switching, access, outside plant and power and other networking equipment as well as network services, posted sales of 992 million pounds, or approximately $1.58 billion, down from 1.45 billion pounds, or $2.31 billion, for the same period a year ago.

Optical networking equipment was the company’s biggest seller during the half, bringing in 242 million pounds, or $386 million. European access equipment came in second at 128 million pounds, or $204 million.

Operating loss for the group, including exceptional items was $375 million. If these exceptional items are factored out, though, the company’s core gross profit was $268.5 million.

By geography, Marconi’s Europe, middle east, Africa sales fared best in the first half, with sales holding steady between Q1 and Q2 at 285 million pounds each.

Marconi’s weakest market was the U.S, where sales fell from $244.6 million in the first quarter to $227 million in the second. Total U.S. sales for the first half were down more than 36% year over year.