NEWS ANALYSIS: Marconi debacle sends warning to corporate PR - Last week's troubles for the erstwhile industrial giant contains valuable lessons for the corporate PR community, says Andy Allen

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

sword.



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

brief.



'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

crisis?



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

appropriate.'



'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

rise.



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

week's debacle.



Analysts may not consider it a good buy, but it was a sign of faith at a

time when it was much needed.



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