Ericsson has bought Marconi for £1.2 billion.
Under the deal, Ericsson will takeover the majority of the former giant including its optical networking equipment, broadband access products and soft-switch products as well as research and development operations. It also gets Marconi's radio access business and the company brand. These arms account for 75 percent of Marconi's income.
Ericsson expects that the acquisition will add £1 billion in sales but won't improve Ericsson's bottom line until 2007. As wireless networks continue to boost data throughput rates, the back-end supporting wired networks must continue to grow, said Ericsson CEO Carl-Henric Svanberg. Ericsson will now be able to supply the equipment that can help operators increase capacity on their wired networks.
Marconi's remaining services business will be renamed Tenet and will operate independently of Ericsson. They include network support and installation to operators and large enterprises, mainly government and transportation entities.
Ericsson said it expects to cut 15 percent to 20 percent of the workforce it acquires due to product overlap.
Marconi has struggled recently, especially when it lost a contract to upgrade BT's entire network earlier this year.