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Marconi - what future?

Give it to me straight, doc...
Written by Tony Hallett, Contributor

Give it to me straight, doc...

It's a company that's been on the surgeon's table and been on the critical list. But with debt slashed and money to restructure is there still a place in telecoms for Marconi? Tony Hallett investigates... Marconi has rarely been out of the headlines over the past couple of years. That aside, there are two obvious questions that should top any list - first, why should we care about them, and second, assuming we do care, what's the prognosis? Marconi, the name, should stand for something. Just as Thomas Edison pioneered telegraphy, the light bulb and the phonograph and is a prize GE brand, so Marconi, given the work Guglielmo Marconi did with radio, should be imbued with meaning in terms of communications. So it was that when the UK's GEC decided to concentrate on telecoms, spinning off its defence and other businesses, fully taking on the Marconi brand, few had a bad thing to say about the company's prospects. And when competitors - often cast in the 'national champion' mould - started buying up data networking companies, Marconi followed suit. Just as Canada's Nortel bought Bay Networks, America's Lucent bought Ascend and France's Alcatel bought Newbridge Networks, Marconi picked up one of the few big data networking players still on the shelf, Fore Systems. Only that was all during the internet and telecoms bubble. Since those dizzy heights reputations and stocks have fallen - and Marconi's has fallen more than most. The company used to employ almost 50,000 people. Today it's more like 15,000. Its share price is measured in pence, not pounds, and then only in low single digits. And whereas it used to compete across a range of areas, now it can only hope to make a living by picking its fights carefully. For anyone with half an interest in business, technology and the UK, Marconi is a story. For some telecoms and network operators, it is still a possible supplier. And Marconi will talk up its position. Stephan Kindt, VP Optical Networks Marketing, said: "We look forward confidently. We will continue investing to give our customers world-leading technology." And any company representative will point out Marconi remains Europe's largest supplier of SDH (Synchronous Digital Hierarchy) equipment, used to transport data over often huge fibre networks, and hasn't lost any contracts over the past, turbulent year. But even with a refinancing deal done - providing capital for restructuring but leaving original shareholders all but empty-handed - there is an imperative to move SDH customers over to a newer, more efficient optical technology called DWDM, or dense wave division multiplexing. Asked whether the company can migrate customers, Kindt says there are 30 DWDM contracts in place and the fact over half aren't with existing SDH customers shows the strength of Marconi's offering. And there are other contract wins. Last month the US Federal Government purchased Marconi's most advanced switch-router. The wider argument is that large enterprises and telcos, in particular, are emerging from two of the worst years they can remember and that while the reduction in capital expenditure in North America has been severe, in Europe - Marconi's main market - many operators have remained on more of an even keel. Stephane Teral, MD Advisory Services at industry analysts RHK, has followed the market for Marconi and as he puts it: "There are signs of a service provider recovery." He points to the fact that SDH will be used to support DSL roll outs, for example. Others aren't so kind. There are fewer analysts willing to comment on Marconi these days, mostly because its importance has waned. Ask Marconi's Kindt whether an Alcatel or a Nortel will win the optical market long-term, and he talks about being "responsive" and "nimble" to stay competitive. However, Richard Windsor, communications equipment analyst at Nomura, talks about "losing substantial market share, especially to Alcatel". He calls Marconi's last quarterly update "awful" and adds: "How much are they going to lose this time round if everyone else is talking about 15 per cent?" There is no hiding the lower profile of the company and the folly of the Fore acquisition, whose technology now broadly makes up the Broadband Routing and Switching business. There may still be life in the old dog yet and the data and voice we send and receive may for a long time travel over Marconi equipment. But with a number of communications equipment providers about to emerge from Chapter 11 protection this month, service providers are still counting on getting bargain basement prices. Will the Marconi name survive another hundred years?
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