GREENSBORO, N.C. — Recent reports that struggling British telecom firm Marconi Plc. is seeking to sell its U.S. petroleum equipment and technology unit, Marconi Commerce Systems, have been exaggerated, company officials say.
In an interview Friday, Marconi Commerce Systems President David Kaehler said Marconi Plc.’s recent restructuring—which placed the Commerce Systems unit among a group of so-called “noncore” business units to be “managed for value,” according to statements released by the parent company this week—does not necessarily mean the company is being positioned for sale.
Marconi Plc., the British telecommunications firm, caused a stir among financial analysts when, projecting to break even in the second quarter of this year, instead issued a profits warning and disclosed mounting debts and an operating loss of $329 million for the first quarter ending June 30. Following the resignations of its CFO earlier this year, and its Chairman and CEO this week, the company announced plans to move forward with a plan that would group those business units in which it plans to focus its strategic investment, and place its remaining business units in its Capital Group, where they would be “managed for value in order to enhance the group’s earnings and cash flow and to reduce debt,” according to company statements.
Marconi Commerce—formerly Gilbarco Inc.—is among the business units Marconi Plc. considers to be outside of its core interests and has been placed in the Capital Group. While such a move might be interpreted as its being positioned for sale, according to Kaehler, a sale of Marconi Commerce—or any of the business units within the Capital Group—is not a foregone conclusion.
“It is unfortunate that the statements made give that impression,” Kaehler said. “It is clear from the announcement yesterday that we are less strategic to Marconi going forward. They are going to have a very clear focus on telecommunications infrastructure moving forward. Are we for sale? Any of the companies in the Capital Group, if the right offer came along, would be for sale, because the parent needs cash and they would like to reduce their debt. But they do not feel they need to sell all or any of the companies in the Capital Group as long as they are generating profits and sustaining themselves.”
According to Kaehler, Marconi Commerce Systems, and other units in the Capital Group, are profitable, cash-generating businesses. As such, it is feasible Marconi Plc. would choose not to seek a buyer but, rather, maintain some or all of them as a revenue stream. As non-core businesses, however, there would likely be limitations on their ability to grow through a major acquisition. Marconi Commerce recently broadened its back-office software offering with the acquisition of two backoffice solutions providers, The Software Works! and Bizware.
“’Management for value,’ in terms of the impact on Commerce Systems, means that would not be in a position to make a large strategic acquisition because we are not in [Marconi Plc.’s] core,” Kaehler said. “But, frankly, I don’t have any near-term aspirations to make a large acquisition and smaller ones, we’ve funded out of our own profitability. We’ve made significant R&D investment and we have been told there will be no reduction or restriction on our R&D investment.”
As for the likelihood of a sale, Kaehler said that while the financial woes of Marconi Commerce’s parent company might provide an opportunity for a buyer who understands the business, he warned the cyclical nature of the petroleum industry is not for the feint of heart.
“If there is a strategic player out there who had and interest in broadening their portfolio in the petroleum and c-store segment, I think this would be a good time to look,” he said. “I think if you’re a financial buyer, you’d have to understand the cyclical nature of this business and how much it is impacted by the price of oil, the mergers of the major oil companies and the like. It depends on who might be looking, if anyone. And if not, we’re happy to continue on and continuing to grow our share. Our prospects of doing that are pretty good.
Kaehler added the new parent company structure offers some benefits to his operation, such as the ability to function as a more independent business unit.
“Some will view this as a positive. They think companies like the old Gilbarco were distracted by larger Marconi corporate initiatives. Trying to take such a diverse group of companies and make them all appear as one integrated Marconi is a huge challenge. Those were significant tasks that we had on our plate in addition to serving customers. In the Capital organization, we are given the freedom to use our own in-house systems and operate as independent business units and serve customers better. From my standpoint, that’s great news.”
