London-based telecom equipment maker Marconi (MONI) warned that fiscal year 2002 operating profit will be 50% below year ago levels on a 15% sales decline. Goldman Sachs downgraded the stock to market underperform from market perform. Other telecom equipment stocks, such as Alcatel (ALA) and Cisco Systems (CSCO), fell on the news.
Goldman analyst Eiji Aono says that the news is stunning for two reasons: First, the size of the warning; Second, the extraordinary way in which the warning was (mis)handled. He notes that MONI's shares were suspended all day yesterday (7/4) in London, awaiting a press release, while the shares in the rest of the UK and European tech sector took a hit instead. He cut his FY 02 EPS estimate by 64% and his FY03 estimate by 57%.