Marconi: The beginning of the end?

Mike Parton, the boss of Marconi, is an eternal optimist. He sees silver linings where others see only clouds. But his admission last Friday that Marconi had abandoned debt refinancing plans because the market had nosedived again must have sucked out every last drop of faith.

When he was bundled into the chief executive's office last September, after his predecessor John Mayo had to fall on his sword, he thought things could get no worse. At the time he predicted that 2002 would be the turning point. "Suddenly we will be able to lift our heads and things will seem OK," he told this paper.

The sad thing is that 2002 may now be the beginning of the end. Marconi shares, worth £12.50 some 18 months ago, now stand at 9.5p.

The root of the problem is that its former go-go executives lavished cash on overpriced businesses and focused Marconi on what is now the rapidly vanishing telecoms hardware market.

Mr Parton has been trying to pick up the pieces. Marconi is heavily indebted. It had hoped to restructure its loans with its banks, but the likes of HSBC are understood to have got the jitters and revised the terms, forcing Marconi to back out of the original talks.

Even Mr Parton would now admit that his available moves are limited.

Option one is a rights issue. Under consideration in December when a Marconi share was worth 45p, today it would be easier to execute than persuading Mr Mayo to admit his role in Marconi's downfall.

Option two would be to ask creditors to swap their debt for equity. It is understood Mr Parton has already proposed this, but the banks will take a lot of persuading. Number three would be a sale to a rival. Even at its pathetically low market value of £265m, few companies could afford Marconi.

Number four, though, might just work: a fire-sale of all the toys Mr Mayo bought, such as Fore Systems, would leave Marconi focused on SDH, a technology that smooths the flow of data through phone networks. Then, and only then, might Marconi be cheap enough for one of its struggling rivals to muster a bid.

That must be the only silver lining in this sorry tale.