Loss of BT contract spelled the end for Marconi

The writing was on the wall for Marconi after the loss of its contract with BT earlier this year.

The loss of confidence by its biggest customer highlighted the view that Marconi was too small to compete with heavyweights such as Ericsson and Siemens.

This triggered a barrage of speculation about a takeover – meaning today’s announcement by Ericsson came as little surprise.

The Swedish telecoms giant paid £1.2bn (€1.8bn) for most of Marconi’s assets, just a fraction of the £35bn (€51.7bn) the firm was worth in its heyday.

According to chief executive Mike Parton, this was the best deal for the company. Because of its size, Marconi would not have been able to take part in the consolidation of the telecoms sector enjoyed by its larger rivals.

This view was shared by analyst Michael Philpott at IT consulting firm Ovum. He believed it was a positive move, pointing out that much of Marconi’s research and development resources will move to Ericsson, the pension deficit has been made up and shareholders will get a fair price.

“Some job losses will be inevitable, but not on the same scale as might have been expected with some of the other deals that were being talked about,” he said.

“All in all, we believe the merger of the two companies will create a more powerful European competitor.”

The once powerful company was founded by Italian inventor and Nobel Prize winner Guglielmo Marconi, who sent the first wireless message.

More than 100 years later, poor management and the worldwide slump in the telecoms market were blamed for the dramatic fall in its fortunes.

Many blamed the firm’s original problems on former chief Lord Simpson of Dunkeld, the rugby-loving Scottish boss took over the helm in 1996 from industrialist Lord Weinstock.

Lord Weinstock was applauded for his 33 years building GEC, as the business was formerly known, into an enormous industrial conglomerate. It became the 25th largest company in Britain, with interests in defence, telecoms and medicine.

But when Labour-supporting peer Lord Simpson took over he dramatically changed the company, selling off most of the old business and spending billions moving the firm away from being a conservative player and into the fashionable and fast-moving communications market.

The defence business was demerged into the then British Aerospace, and money was piled into buying high-tech firms such as Reltec and Fore Systems.

The firm was renamed Marconi and investors piled into the stock – sending shares to a peak of more than £12 (€17.70).

But then the tech bubble burst, the world economy stalled and trading became tough as demand fell.

Shares in the group slid, wiping billions off its value and leading the group to lose its place in the FTSE 100 Index. Thousands of jobs were cut as a result.

Later on, the company appeared to be making headway after a major financial restructuring – but the loss of the BT contract wiped out any hopes the firm may return to its former glory.