Acres of newsprint were devoted to Marconi's woes last week. The
saga dominating the Square Mile - with a profits warning and the
departure of the deputy CEO - had seen the GEC successor firm squander
shareholder value astonishingly fast.
As PRWeek went to press, Marconi's board was preparing to face
shareholders at its AGM. With a depressed share price and job lossess
dominating news about the company, some corporate PROs are asking where
Marconi's PR machine was when it was needed.
The drama began to unfold before a mortified City last Wednesday when
Marconi suspended its shares for an entire day before ending speculation
by issuing a profits warning and announcing 4,000 redundancies.
Once trading resumed, the price had slumped by more than half to 112p -
a far cry from last year's 1250p. The company is worth around one-tenth
of its value nine months ago. Caught out by the sale of its medical
equipment business to Philips, just as it became apparent that profits
were likely to be below expectations, Marconi found itself cornered.
Philips was legally obliged to announce its acquisition, but by then
Marconi realised it would need to issue a profits warning. The filip for
its shares if the Philips statement went ahead would turn to shareholder
outrage once the warning was released the next day.
A board meeting beckoned, but to the astonishment of analysts and the
City media none was convened until late in the day. Instead Marconi took
the almost unprecedented decision to suspend trading in shares the next
day before issuing the profit warning at 6.30pm when the board meeting
was finally wrapped. Investors were hardly mollified.
According to The Daily Telegraph telecoms reporter Dan Sabbagh the
timing of the announcement was typical of Marconi's 'erratic'
communications in recent months. While other telecoms firms had begun to
warn of a downturn, Marconi continued to make soothing noises - despite
analysts' suspicions it would be affected with its rivals.
When announcements finally came to be made, the timing didn't help: the
6.30pm profit warning was followed several days later by the 9.30pm
announcement that deputy chief executive John Mayo had fallen on his
In its new incarnation as a telecoms rather than defence group, Marconi
had fallen foul of a wider downturn. Chris McLaughlin, communications
V-P at telecoms firm Callahan Associates, says the strategy of moving
into telecoms (by selling the then GEC Marconi's defence interests to
British Aerospace) was 'not clearly enunciated to the City. The sector's
deterioration was not factored into briefings, with shock when
expectations were not met'.
'The comical timing added to the drama,' Sabbagh says. 'Obviously,
statements are put out when they're ready, but a well-prepared firm
would surely issue them earlier.'
But Sabbagh insists that while the affair was an undoubted PR disaster,
blame should not necessarily be heaped on Marconi's press office - which
he considers 'under-resourced' - nor on its retained PR agencies:
Brunswick for UK financial PR and Hill & Knowlton on a global corporate
'If you have a good relationship with your PR people you should keep
them informed so they can prepare the market. We don't know how much
they were told by senior management,' he says.
That line is backed by CEO Lord Simpson's claim that he was unaware of
the seriousness of the firm's financial position until just before the
profit warning was issued. If the CEO didn't know, the argument goes,
how could in-house and external PR teams be aware of the impending
Rumours Marconi management had ignored Brunswick's pleas for it to
release more information in the months leading up to the crisis fuel
speculation that there had been conflict between client and agency.
Unable to criticise its own employers, Marconi PROs were in a difficult
position defending themselves. Mel Foster, V-P of media relations, was
circumspect: 'In the light of events over recent weeks, the company is
considering the way forward in communicating with the market.'
Foster says that critics of the profit warning timing fail to take into
account that company policy was to release trading statements twice a
year: 'People are saying Marconi should have made a trading statement
earlier than it did. The answer is that a statement was made at the
earliest possible opportunity when it was understood a statement was
'With regards to the timing that day - the statement was released when
it was ready - there was no procedural issue with in-house or external
media relations that affected its timing,' he adds.
Foster says claims of an under-resourced press office are unfounded.
Both agencies are contracted to boost manpower in PR when call volumes
Brunswick was reluctant to upset a major client, referring questions
asked of its account team to Marconi's press office, where Foster
dismissed claims of a rift as 'speculation'.
Marconi's problem with bad publicity may just be starting. While deputy
CEO John Mayo paid the price for investor wrath, attention is now
focusing on Simpson's role, and he may yet be unseated. Simpson has at
least dug deep in a bid to repair some of the PR damage - spending
£173,000 of his own money on shares in the later stages of last
Analysts may not consider it a good buy, but it was a sign of faith at a
time when it was much needed.