Marconi lowers guidance, sells medical unit to Philips
London-based Marconi Plc. will cut another 4,000 jobs and revised its annual guidance, it reported yesterday after requesting a temporary suspension of its trading.
The telecom-equipment company also sold its medical systems unit to Royal Philips Electronics for $1.1 billion, causing Moody's Investors Service to put its A3 ratings on review for a possible downgrade.
Marconi yesterday requested the suspension for the duration of its board meeting and a subsequent announcement, "to ensure that investors have full information before trading."
After the meeting, Marconi requested a resumption in trading as of today and announced it would lay off another 4,000 people, including 1,000 managers, for a total of 10,000 people. The layoffs will leave the company with 40,000 workers.
It also said it expects sales for the year ending March 31, 2002, to be 15 percent lower than 2001, and operating profit to fall 50 percent. Marconi says it will accelerate its cost-cutting actions with the job cuts and with closing "a number of existing facilities and increasingly concentrate its activities on major sites," it says in a statement. Its profits as of the year ending March 31, 2001, were $155 million, with net assets of about $740 million. It was targeting a year-end net debt of 2.5 billion pounds or $350 billion, it says.
To reduce its net debt, Marconi sold its medical systems unit to Philips for $1.1 billion — less than it had expected, Moody reports. The transaction will close in fourth quarter of this year, subject to regulatory approvals. Moody's says it put Marconi's A3 ratings for senior debt on review for a potential downgrade because the price was less than expected and because of Marconi's revised trading outlook.
Conversely, Moody's confirmed Philips' A3 ratings for senior debt and the Prime-2 rating for short-term debt, following the announcement — partly because "Philips took advantage of a good opportunity with the potential for a fast payback even after restructuring cost," Moody's says. The transaction shouldn't affect management's conservative capital strategy, it adds.