Profit ‘dip’ over, but Sept 11 effects hard to predict: Marconi

Marconi has experienced a rough time financially over the last six months, says the company's Telecom account manager, John Butt.

Marconi has experienced a rough time financially over the last six months, says the company’s Telecom account manager, John Butt.

But he trusts that particular dip is over. “We just finished the latest quarter [ended September 30] with £5 million operating profit.” Significant write-downs of the value of assets brought the company back to a break-even position.

The outcome of the terrorist attacks of September 11 in the US have yet to be felt, however, and Butt — and forecasters at the London head office — are making no confident predictions.

Butt blames much of the past two quarters’ decline on “massive overcapacity” in bandwidth installed by telecommunications providers, particularly in Europe. “They all went for the low-hanging fruit” — the large companies with an urgent need — and some of them obviously lost out.

That led to loaning of spare capacity and equipment by the over-provisioned suppliers to other telcos — a commitment which the receiving companies could not afford to repay. Many failed — an example close to home being Australian telco One.Tel.

In due course, second-hand equipment from these dead providers streamed on to the market, creating difficult conditions for sellers of new equipment, like Marconi.

The dip only lasted six months, he says, and Marconi was less hard-hit than a number of its rivals.

Even so, in September the company’s top two executives quit after cutting an additional 2000 jobs on top of 8000 axed already this year.

That followed an operating loss of £227 million in the first quarter, to the end of June 30.

Butt says despite the unpredictability of the effect of September 11 on the US and other economies, one study has shown that projected growth in the communications market will be affected less than is widely anticipated. It is suggested that the difference between an economy in recession and a buoyant economy is, for a communications seller, the difference between 80% growth in the coming year and 120%, he says.

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