Mike Parton

If you're going to survive in this market, you'd better know your customers. Apparently Marconi didn't.

In April, Marconi Communications reorganized into three divisions: networks, wireless and enterprise. The intent of the reorganization was to get closer to its customer base, not to cut divisions, says Mike Parton, CEO of Marconi's networks division. “We've segmented our expertise so we can become even more professional and more focused in front of the customer,” he says.

Marconi also trimmed the fat. The company plans to outsource significant portions of its manufacturing capabilities and has announced it will cut about 3000 employees in the next year.

“Definitely this is a different world than it was six months ago,” Parton says. Marconi is scaling back under-performing segments, such as the ATM enterprise business, and will cultivate more promising areas, such as optical networking, broadband, switching and routing.

No product lines have been abandoned. Yet. “We are always re-evaluating our investment in our product sets, and we are always looking to build upon areas where we are very strong,” Parton says.

One of Marconi's strongest areas is optical networking, particularly in Europe where Marconi sells into “virtually every PTT,” Parton says. The U.S. accounts for about 35% of sales, but Marconi has ramped up its U.S. efforts. The company is pushing its optical equipment in the U.S. and has focused on top-tier customers rather than competitive local exchange carriers. Marconi limits vendor financing to $500 million, which has kept it out of the CLEC market.

“We were not prepared to offer the financing to close the deal,” Parton says. “With the benefit of hindsight, we definitely made the right decision.”

Though Marconi's stock has plummeted from $40 per share last September to about $10, Parton claims his company is outperforming the U.S.-centric vendors in its market segment. “The whole sector has been tainted by some of the excesses — things like vendor financing — that are not necessarily applicable to all companies in the sector. Maybe that's why our stock price has outperformed the others,” he says.

But analysts are concerned that Marconi will have a profit warning in a few months because it hasn't written down its inventories.

“We are not a big player in the North American market,” Parton says. “When operators say they are cutting back, it's not our revenues they're cutting back. It's all opportunity for Marconi — even if we only get 10% market share, it's growth.”