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Soft switching

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Marconi, the telecoms giant, has plans to begin re-investing in research and development after finally clearing its debt, reports The Scotman.

The group said toughening market conditions would force a £10m-a-year cash injection, despite an earlier pledge to keep operating costs to a minimum.

The cash will be used to boost sales and marketing, with a focus on customer trials of its next-generation product. Marconi’s key business is now in upgrading telecoms networks and installing broadband.

Competition in the sector has lead to a squeezing of the group’s already slim margins, but chief executive Mike Parton said the firm would continue to lift pre-tax profits – which jumped in the second-quarter from £5m to £47m.

Marconi’s biggest customer is BT, which contributes 32% of total sales. This is mainly due to the former monopoly’s aggressive plan to upgrade all its networks by 2008.

The upgrades – known as 'soft-switching' – involve a move from hardware to software systems. For the consumer, this allows phone and internet services to become more portable – a fusion of the home and the office.

Marconi is still recovering after its near collapse in 2001, when the telecoms crash sent it close to oblivion. It reinvented itself last year, although a complex debt-for-equity swap left shareholders almost penniless.

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