THE GEC MARCONI CASE REVIEW
GEC is one of the largest diversified conglomerate in U.K. to shift in to a telecommunication and information technology organization that created a controversy because of the shareholders position about GEC, this occurrence has been of one of the greatest fall in business history and disaster in stocks of all times when the shareholders believed that they can get a bigger share because of corporate sell off and acquisition but the result was GEC/Marconi has lowered their share value because of several mistakes including disposal and indebtedness.
It was 1996 when Simpson has become the Chief Executive Officer and he decided to sell-off large parts of their businesses, these are 150 companies that they are going to dispose and he thinks will become positive in their position to change the business GEC to Marconi and so GEC shifted to Marconi global communication and information technology. They have served more than 100 countries all over the world, this is popularly known as the Simpson era, and this time they have focused as US based company rather than UK.
The transition of GEC to Marconi has created a negative effect of monitored result but become a high risk because of series of acquisition they have lost their effect and control of finance, recording and distribution. Their engagement in acquisition also led them to disposal and confusion of direction and strategies that their business heavily affected their potentials.
From 1996 to 2002 there have been abnormal financial position and setback but during the announcement date when the shareholders believe that there is an enhanced shareholders value thinking that they have reinvested their money through acquisition in another company the shareholders was shocked to realized the opposite that their average returns has almost turn to zero but the explanation coming from the Marconi and the stocks company was difficult to understand. Many have made the study how it came out and how their shares have been affected; the following hypothesis has arisen;
1, the value of their shareholders increases after the corporate sell-off and the progress will be used for other investments 2. The shareholders value decreases because of acquisition 3. Shareholders value will increase again after the after the sell off but the proceeds will be used for pull of the company. The following hypothesis concluded their remarks but has not but to be true and relevant and needs further study, that there should be statistic and document representation of the explanation to further understand it’s worth and to really determine the Marconi capacity of sell-off and acquisition but it doesn’t came.
The GEC or Marconi accounting system does not prove its worth but rather shows another constraint and shareholder began to wonder if they have invested their money on GEC or in Marconi in which case they felt that they have been deceived. The company was about to blow up but it was under the shareholders doubt so Lord Simpson introduces the value management system that will continue in effect their stock market performance for the benefit of the shareholders and this has been a more risk more return or a do or die strategy on their part, this has become an emergency escape goat of the company and new investment policy has been adopted and implemented.
There had been innovation of the system, cost performance, new methodology and new accounting chain of supply. In due respect their performance in financial aspect has been well rounded but later in has been intensified and profound business practice and intuition of the shareholders measures are the same because of the most unsettled issues. The company still has not given their shareholders the chance to view its forecast and that their stability indication is still not accurate, there were time that the announcement of its shares and financial reporting was suspended. The catastrophe that leads them to this mess is basically the mismanagement practices of their CEO Lord George Simpson. The fall of the Marconi Company has created a crisis in the life of their employees and shareholders.
However during the re-launching of their aerospace in 1999 parts of their business has been sold to British aerospace they have established its position under this company, the telecommunication business was engaged in the internet boom that becomes a major hit and the business all went well, some of the shareholders went broke but those who supported and remain their shares in the company struck it right quickly to start a better position.
Marconi has been getting most contracts because internet has become worldwide through personal, household and business functions. The year of 2001 have paved its way the remarkable changes in their company, but as of today they have been affected by 3G or 4G internet battle that they may need to re-stabilize and increase the speed of their internet services so that they will not be left behind to cope up with the competition of cutting edge technology.