Industry
Marshall jobs at risk in Marconi takeover
Auteur : post-gazette.com
Du : 01/11/2005
Workers at Marshall-based Marconi Data Networks, wracked in recent years by a series of reorganizations that have pared jobs by the hundreds, are bracing for even more cuts now that their British parent is being acquired by Swedish telecommunications
Stockholm-based Ericsson, ending months of speculation and a bidding war among international telecom firms, yesterday said it plans to pick up a large chunk of sputtering Marconi Corp. for about $2.1 billion.
The deal, which is expected to close by Jan. 1, calls for Ericsson to buy about 75 percent of Marconi's businesses, which will become known as Telent PLC.
About 1,000 jobs are expected to be slashed across Marconi's global work force of nearly 9,000, including the locally based U.S. unit that employs about 500 full-time staffers and contractors at its Marshall campus and accounts for about a fifth of Marconi's $2.1 billion in annual sales.
Ericsson declined to be more specific about the operations in Marshall. "The U.S. operations are important, but we have no details at this moment," said Kathy Egan, an Ericsson spokeswoman.
Analysts and industry insiders, however, believe the local unit, which was once the promising computer networking firm Fore Systems, could be hit hard.
The division -- the region's high-tech star only a decade ago, complete with an architecturally inventive campus -- has steadily shrunk since it was scooped up by Marconi for $4.5 billion in 1999 at the height of the tech boom.
Plagued by culture problems, a tanked telecom industry and a product -- high-speed networking switches -- that never seemed to take off, Marconi Data Networks failed to gain a solid footing under its British owners. After the buyout and the nearly simultaneous telecom industry busts, the company and the local operations went through a difficult 20-month restructuring period that steadily cut local jobs, which once stood as high as 1,800.
As rumors swirled in the past month of bids by Ericsson, Huawei Technologies Inc. of China and Paris-based Alcaltel, industry insiders were betting that any Marconi buyout by an international firm would exclude the Data Networks unit, which also includes offices in Boston and Vienna, Va., a Washington, D.C., suburb.
The division's largest customer is the federal government, which relies on Marconi to provide security-sensitive infrastructure for its computer networks. Analysts estimate that the government has installed about $1.5 billion worth of Marconi network equipment over the years and wondered if the government would allow a foreign concern to own a company that provides such critical technology.
Many anticipated that Data Networks would be spun off and sold on its own after its London parent hung out a for sale sign earlier this year. But when the Ericsson buyout rumors were confirmed yesterday, Data Networks remained on the list of assets to be bought.
It's unlikely any answers on the fate of the U.S. division, which has the fattest profit margins of Marconi's businesses, will emerge tomorrow when Ericsson Chief Executive Officer Carl-Henric Svanberg joins Marconi CEO Mike Parton on a visit to the Marshall campus.
What is expected, analysts say, is that Ericsson, the world's largest wireless provider, will use the Marconi buyout to further its footprint in an increasingly complicated telecom arena, in which wireless and landline telephone technologies are converging.
Ericsson's strength is supplying wireless infrastructure, while Marconi's strength is supplying traditional landline networks and equipment to European behemoths such as British Telecom.
By picking up Marconi's products and services, Ericsson hopes to further its position in Europe by being able sell itself as a comprehensive telecom supplier, helping companies provide voice, video and data services over both wireless and land-based networks, analysts said.
"The economic reality of this deal was that Marconi was available for a fairly low price," said Mark Bieberich, director of communications infrastructure at the Boston-based research firm, The Yankee Group. "For a company like Ericsson, that's looking to expand its product portfolio, this made economic sense."
Ericsson's interest in the United States, where the blending of cellular and landline technologies is not as far along, is less clear.
About the only plum that Data Networks brings with it is its federal government business, which accounts for the bulk of the division's roughly $250 million in annual revenue.
But the future of that business, Mr. Bieberich said, depends on the unit's ability to help the government migrate from computer networking technology developed by the former Fore researchers to newer, more efficient Internet technology that the local unit is still fine-tuning.
The local operation, analysts and insiders say, is the victim of bad timing and lost bets.
When Marconi bought Fore Systems at the height of the high-flying, high-priced tech boom, the technology and talent the London firm craved promised to revolutionize the way that telephone companies delivered service.
Fore was built around new online networking technology, known as ATM, for asynchronous transfer mode, that was faster and better than the existing technology at the time, sending voice, video and data simultaneously.
But the ATM technology never took off, in part because much larger competitors such as Juniper Networks and Cisco Systems bet early and more heavily on the newer Internet networking technology that rapidly became the standard for the private sector.
Ultimately, Marconi was stuck with a very expensive piece of equipment and no one to sell it to. "Data Networks was left holding the bag," said one former employee who declined to be named. "They just lost momentum, it was nobody's fault, it just happened that way."
Stockholm-based Ericsson, ending months of speculation and a bidding war among international telecom firms, yesterday said it plans to pick up a large chunk of sputtering Marconi Corp. for about $2.1 billion.
The deal, which is expected to close by Jan. 1, calls for Ericsson to buy about 75 percent of Marconi's businesses, which will become known as Telent PLC.
About 1,000 jobs are expected to be slashed across Marconi's global work force of nearly 9,000, including the locally based U.S. unit that employs about 500 full-time staffers and contractors at its Marshall campus and accounts for about a fifth of Marconi's $2.1 billion in annual sales.
Ericsson declined to be more specific about the operations in Marshall. "The U.S. operations are important, but we have no details at this moment," said Kathy Egan, an Ericsson spokeswoman.
Analysts and industry insiders, however, believe the local unit, which was once the promising computer networking firm Fore Systems, could be hit hard.
The division -- the region's high-tech star only a decade ago, complete with an architecturally inventive campus -- has steadily shrunk since it was scooped up by Marconi for $4.5 billion in 1999 at the height of the tech boom.
Plagued by culture problems, a tanked telecom industry and a product -- high-speed networking switches -- that never seemed to take off, Marconi Data Networks failed to gain a solid footing under its British owners. After the buyout and the nearly simultaneous telecom industry busts, the company and the local operations went through a difficult 20-month restructuring period that steadily cut local jobs, which once stood as high as 1,800.
As rumors swirled in the past month of bids by Ericsson, Huawei Technologies Inc. of China and Paris-based Alcaltel, industry insiders were betting that any Marconi buyout by an international firm would exclude the Data Networks unit, which also includes offices in Boston and Vienna, Va., a Washington, D.C., suburb.
The division's largest customer is the federal government, which relies on Marconi to provide security-sensitive infrastructure for its computer networks. Analysts estimate that the government has installed about $1.5 billion worth of Marconi network equipment over the years and wondered if the government would allow a foreign concern to own a company that provides such critical technology.
Many anticipated that Data Networks would be spun off and sold on its own after its London parent hung out a for sale sign earlier this year. But when the Ericsson buyout rumors were confirmed yesterday, Data Networks remained on the list of assets to be bought.
It's unlikely any answers on the fate of the U.S. division, which has the fattest profit margins of Marconi's businesses, will emerge tomorrow when Ericsson Chief Executive Officer Carl-Henric Svanberg joins Marconi CEO Mike Parton on a visit to the Marshall campus.
What is expected, analysts say, is that Ericsson, the world's largest wireless provider, will use the Marconi buyout to further its footprint in an increasingly complicated telecom arena, in which wireless and landline telephone technologies are converging.
Ericsson's strength is supplying wireless infrastructure, while Marconi's strength is supplying traditional landline networks and equipment to European behemoths such as British Telecom.
By picking up Marconi's products and services, Ericsson hopes to further its position in Europe by being able sell itself as a comprehensive telecom supplier, helping companies provide voice, video and data services over both wireless and land-based networks, analysts said.
"The economic reality of this deal was that Marconi was available for a fairly low price," said Mark Bieberich, director of communications infrastructure at the Boston-based research firm, The Yankee Group. "For a company like Ericsson, that's looking to expand its product portfolio, this made economic sense."
Ericsson's interest in the United States, where the blending of cellular and landline technologies is not as far along, is less clear.
About the only plum that Data Networks brings with it is its federal government business, which accounts for the bulk of the division's roughly $250 million in annual revenue.
But the future of that business, Mr. Bieberich said, depends on the unit's ability to help the government migrate from computer networking technology developed by the former Fore researchers to newer, more efficient Internet technology that the local unit is still fine-tuning.
The local operation, analysts and insiders say, is the victim of bad timing and lost bets.
When Marconi bought Fore Systems at the height of the high-flying, high-priced tech boom, the technology and talent the London firm craved promised to revolutionize the way that telephone companies delivered service.
Fore was built around new online networking technology, known as ATM, for asynchronous transfer mode, that was faster and better than the existing technology at the time, sending voice, video and data simultaneously.
But the ATM technology never took off, in part because much larger competitors such as Juniper Networks and Cisco Systems bet early and more heavily on the newer Internet networking technology that rapidly became the standard for the private sector.
Ultimately, Marconi was stuck with a very expensive piece of equipment and no one to sell it to. "Data Networks was left holding the bag," said one former employee who declined to be named. "They just lost momentum, it was nobody's fault, it just happened that way."