Huawei looking to buy Marconi

Stuart Corner
Saturday, 10 September 2005 14:28

IT Industry - Deals

According to reports in two UK newspapers, the Sunday Times and the Financial Times, Huawei Technologies, China's biggest maker of telecommunications equipment, is considering buying UK telecoms manufacturer Marconi for around $US1 billion. The news sent Marconi shares up by 17 percent. Marconi re-iterated an earlier statement that it was pursuing "all strategic options," including talks with others about "potential business combinations."

Marconi lost out on a bid for a major role in BT's multibillion dollar 21CN project, and Huawei was named then as a possible buyer. Shortly after losing the deal, Marconi announced it would trim its workforce by 800. Commenting on the news Ovum said: "When Marconi lost out in the BT 21CN contract the market's automatic reaction was 'Marconi's finished'. And yet the company itself came out fighting by instantly changing its strategy to target the up and coming second tier European operator market. After less than six months though the company looks to be sat in its corner, defeated."

Ovum suggested: "There are some parts of [Marconi] that will be of value to a company such as Huawei, mainly its sales and service workforce, but others, such as R&D, which are not. Heavy redundancies may therefore be forthcoming if this deal [goes] ahead."

Marconi and Huawei signed a partnership deal in May under which Marconi will market Huawei's network technology in Europe and Huawei will sell Marconi's wireless equipment in Asia.