BERLIN (Dow Jones)--Marconi Corp. (MRCIY) said it sealed a preliminary sales agreement with Huawei Technologies Co. (HWI.YY) and aims to jointly develop products with the Chinese company, sparking a surge in its shares Monday.
The deal potentially marries Marconi's long-standing relationships with European telecommunications carriers with cheap, Chinese-built equipment from Huawei.
The U.K. telecoms equipment maker said the companies have discussed a distribution deal that would allow each company to sell certain products from the other's range to their respective clients. The two have also discussed how Marconi could use its services network to support Huawei's pursuit of orders in the European market.
The companies have signed a memorandum of understanding and have formed working groups to sign a more definitive deal before Marconi's fiscal year ends in March.
"This is mutually beneficial," said one London-based analyst who declined to be named. "This offers Huawei access to the European market and gives Marconi shareholders an indication of where the company is heading beyond its initial recovery."
This is the latest step in Marconi's recovery, after an ill-fated expansion drive in the technology boom years swelled debt and threatened the company's survival. Under Chief Executive Mike Parton, Marconi renegotiated a debt-for-equity swap in 2003 and cut debt through disposals.
By 0906 GMT, shares in Marconi were 30.5 pence or 6.1% higher at 631.88 pence, outperforming the broader market.
There's speculation that Marconi could eventually be taken over by Huawei, said another analyst, who declined to be named. He noted that a joint deal on product development would help Marconi trim costs.
"Basically the agreement hints that there could be a bid for Marconi in future ... the market had been expecting Marconi to find a bigger partners to do some kind of deal in the medium term," the analyst said.
Huawei is trying to get more of a foothold in Europe - a region dominated by the likes of Sweden's Telefon AB LM Ericsson (ERICY), Nokia Corp. (NOK), Siemens AG (SI) and Alcatel SA (ALA). The Chinese company last month won a third-generation mobile equipment order from Dutch operator Telfort, its first major 3G win in Europe.
Under the terms of the agreement, Marconi would distribute certain data products to key customers, while Huawei would sell next-generation radio access products.
"This is an important first step in what we believe will be a long and mutually beneficial working partnership," CEO Parton said in a statement.
The companies are continuing talks on a joint product development agreement that would see them share research and development resources and technologies.
"The next stage of our relationship will be to develop jointly new products that would then be sold through our mutual distribution channels," Parton said.
Company Web site: http://www.marconi.com
-By Taska Manzaroli; Dow Jones Newswires; +49 30 2888 410; taska.manzaroli@dowjones.com (Nicole Lee in London contributed to this item.)
(END) Dow Jones Newswires "
Posted to the site on 31st January 2005
Posted to: www.cellular-news.com/story/11858.php