Marconi responds to Huawei acquisition report

Marconi has issued a formal statement this morning in response to a Sunday London Times report that the equipment vendor is in discussions with its partner, Huawei Technologies, to be acquired.

“As previously announced on 3rd May 2005, Marconi…is continuing to pursue all strategic options with the objective of maximising shareholder value,” Marconi said in response to what it called “press speculation.” “These options include, amongst a range of alternatives, discussions with third parties about potential business combinations. The discussions are at a preliminary stage, and there can be no assurance that an offer will ultimately take place.”

According to the London Times, Huawei is expected to offer more than £600 million (or about $1.06 billion) to buy Marconi. Last week the vendor reported a net loss of £36 million and a slight year-over-year decline in first-quarter revenue to £285 million.

Marconi has been reeling since it failed to win a piece of British Telecom’s $19 billion-dollar “21st Century Network” initiative despite being an incumbent supplier to BT. In April, Huawei was named as a supplier multiservice access and optical networking gear for that initiative, along with other vendors.

“The news is probably a relief for Marconi's long-suffering share-holders…but will be less welcome by many of Marconi's employees,” said Michael Philpott, Current Analysis analyst, in a statement issued this morning. “There are some parts of the company that will be of value to a company such as Huawei, manly its sales and service workforce, but others, such as R&D, are not. Heavy redundancies may therefore be forthcoming if this deal [goes] ahead."

"When Marconi lost out in the BT 21CN contract, the market's automatic reaction was 'Marconi's finished,'" Philpott added. "And yet the company itself came out fighting by instantly changing its strategy to target the up and coming second tier European operator market. After less than six months though the company looks to be sat in its corner, defeated."