John Mayo the chief executive-elect of Marconi bowed to intense shareholder pressure and quit

John Mayo, the chief executive-elect of Marconi, bowed to intense shareholder pressure and quit last night following the telecom equipment manufacturer’s disastrous profits warning earlier this week. John Mayo, the chief executive-elect of Marconi, bowed to intense shareholder pressure and quit last night following the telecom equipment manufacturer’s disastrous profits warning earlier this week.
Lord Simpson of Dunkeld, who had been due to step up to the position of chairman in 12 days, will now remain as chief executive, while Sir Roger Hurn has agreed to stay on as chairman.Mr Mayo was seen as the architect of Marconi’s decision to move into telecoms ­ a strategy that backfired spectacularly this week when the company announced 4,000 job losses and warned that profits this year would halve.He was due to step into the chief executive’s job at Marconi’s annual general meeting on 18 July but in the last two days has lost the support of the company’s leading institutional shareholders.Mr Mayo, who came to Marconi from the pharmaceuticals company Zeneca in 1997, is likely to receive a pay-off running into hundreds of thousands of pounds. However, his share options are worthless after the calamitous fall in Marconi’s shares, which yesterday fell another 7 per cent at 104.5p.Marconi directors saw their woes mount yesterday after it emerged that they had bought shares in the company on Thursday ­ only immediately to lose thousands of pounds when the group’s shares plummeted again yesterday. The shares have fallen from £12.50 in 12 months.The company announced that four executive directors, including Mr Mayo, bought a total of 375,000 shares on Thursday, at prices ranging from 111p to 124p a share.

But Lord Simpson was not among the share-buying executives.City pressure for a top-level executive to fall on his sword was on the increase yesterday before the resignation of Mayo, as investors feared that more bad news on write-downs and trading was ahead. Lord Simpson had been up for re-election as a director at the 18 July meeting, but institutions questioned whether this would happen even before word was issued about Mr Mayo’s resignation.Alex Scott, who manages a fund at Barclays Stockbrokers that sold all of its Marconi shares on Thursday and yesterday, said both Mr Mayo and Lord Simpson were under pressure to resign: “Only seven weeks ago they gave us a positive update on trading and an upbeat assessment of the future…. There is a feeling of shock at what’s happened.”Mr Scott said the recent scheme announced to reprice Marconi share options now looked “particularly odd”, ahead of an earnings alert that has sent the repriced options even further underwater. Earlier yesterday, a fund manager at one of Marconi’s top five shareholders said: “I want people to take responsibility for their actions I look forward to seeing Mayo and Simpson. I’ll ask them face to face which executive is going to take responsibility for this.” Tim Rees, director of Clerical Medical, which has a 1 per cent holding in the company, said: “Mistakes have clearly been made, but I will leave it to the non-executive directors to judge who is best positioned to take the company forward.” But Mr Rees called for the scheme to reprice options to be withdrawn or he would vote against it at the AGM..

Will this wretched bear market ever end? If history means anything, then eventually it will, but there’s certainly not much light to discern at the end of the tunnel yet. Will this wretched bear market ever end? If history means anything, then eventually it will, but there’s certainly not much light to discern at the end of the tunnel yet. The news yesterday was that the industrial economy is now deep in recession, in the sense that it is contracting fast, with year on year production in May falling at its fastest rate since the early 1990s.Unsurprisingly, the biggest collapse came in previously fast growing high tech industries – computers, semiconductors, mobile phones and the like – but the rest of manufacturing seems to be under severe pressure too. The spendthrift British consumer hasn’t yet woken up to the fact that things are looking decidedly rocky out there, but the stock market most certainly has.Just recently, the extreme bear market afflicting technology, media and telecommunications stocks has begun to take root in the wider stock market too. Look at our graphic on the opposite page and you will see that after a long period in which Old Economy companies have compensated for the collapse in TMT stocks, they too are now in the round heading south.The only real question is quite how badly they are going to get clobbered. Many of them have got healthy profits and reasonably secure dividends, so it’s not going to be as bad as the TMT’s, a great number of which have as little substance as candy floss.Even so, the mood out there is turning profoundly bearish across the board and its hard to see where the good news is going to come from to reverse that sentiment.

As long as consumer demand remains robust, the Bank of England won’t be cutting interest rates any further. In the US, there is as yet little sign of the economy responding to the therapy of Alan Greenspan’s repeated rate cuts. And as for Europe, the less said about that the better.Sluggish or declining growth means lower corporate profits and that in turn means lower valuations. So much for the short to medium term, but there are perhaps some longer term reasons to worry about the stock market too. Recent experience of bear markets has been very limited for the obvious reason that there hasn’t really been one since the early 1990s and even that was more of a hiatus than a fully fledged market collapse.True, there have been periods of severe turbulence – the 1987 crash and the Emerging markets crisis of the late 1990s – but these have been more in the nature of short, sharp shocks than prolonged bear markets.

In short, most of us have grown up with the idea that the natural state of equities is to be in a bull market. Corrections thus become nothing more than buying opportunities. Buy on the dips has been a reliable rule of thumb, and those who have followed it for the past twenty years would have done pretty well.But the truth of the matter is that historically bear markets have been almost as common as bull markets, and after the New Economy excesses of the late 1990s, the bear may now be reasserting itself. We must hope that this is not the case, but those soaraway returns that until recently seem almost to have grown on trees are becoming harder and harder to find.Orange progress It’s hard to find anything positive to say about the mobile phones industry these days, but second quarter subscriber figures from Orange, published yesterday, seem to offer at least a glimmer of hope to battered investors. The rate of growth has slowed but not by as much as many would think and it was still probably big enough to ensure that Orange will overtake BT Cellnet, which issues its own figures next week, to become the second biggest UK service provider.As Orange was keen to trumpet, this will be the first time in any market in the world that the last operator into the market has overtaken one of the two original incumbents. That may say more about Cellnet’s failure than it does Orange’s success, but it is still quite an achievement all the same.