Goldman Sachs Downgrades Marconi on Earnings Warning
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%.