Marconi PLC Securities Litigation

The Consolidated Amended Class Action Complaint dated December 21, 2001 filed in the Action (the "Complaint") generally alleges, among other things, that Defendants issued materially false and misleading press releases and other statements regarding Marconi's financial condition during the Class Period in a scheme to artificially inflate the value of Marconi's securities. The Court dismissed the claims of foreign investors who purchased ordinary shares in foreign markets.

In the Complaint, Lead Plaintiff alleges that throughout the Class Period, Marconi plc ("Marconi") was a global communications and information technology company that supplied advanced communications solutions and key technologies and services for the Internet, specializing in developing and supplying data networking equipment and solutions to telecommunications operators and Internet service providers. Marconi's other operations included electronic and information system solutions, and capital businesses that provided funding for various investments. By early 2001, the economic slowdown, particularly with respect to information technology spending in the telecommunications sector, was well known to the market. The severity of the slowdown led many of Marconi's major competitors, including Nortel Networks, Cisco, and Alcatel, to issue earnings warnings and reduced earnings estimates. On April 10, 2001, the first day of the Class Period, in a Form 6-K filed with the SEC announcing certain changes to its board of directors and plans for a reorganization of the company's activities into three customeroriented divisions, Marconi also announced that it expected to report profits for the year ended March 2001 that were within the range of analysts forecasts.

On May 10, 2001, Marconi announced that it had launched a "general syndication for a Euro 3 billion multi-currency revolving credit facility." The signing of this Euro 3 billion multi-currency revolving credit facility was announced on May 31, 2001. Given the currency exchange rate at that time, the credit facility was valued at $2.5 billion. On May 17, 2001, Marconi filed a Form 6-K with the SEC reporting results for the year ended March 31, 2001. On June 19, 2001, Marconi's CEO, George Simpson, in an interview with the Financial Times (London) stated that "we have no reason to change our view of what we said a month ago." On July 4, 2001, all trading in Marconi ordinary shares on the London Stock Exchange was suspended at Marconi's request while its board met. U.S. markets were already closed for the Independence Day holiday.

After the close of the European markets, Marconi issued a profit warning, disclosing that, because of an unforeseen "significant falloff" in European orders, sales for the year would be fifteen percent (15%) lower than the previous year and that its operating profit before exceptional items would be down approximately fifty percent (50%) in the year ending March 31, 2002. When trading resumed on July 5, 2001, the price of Marconi ordinary shares, which during the Class Period had traded as high as £4.24 per ordinary share on May 2, 2001, dropped by over fifty percent from its closing price of £2.45 per ordinary share on July 3, 2001 to £1.12 per ordinary share at the close of trading on July 5, 2001. Similarly, Marconi ADRs dropped, on extraordinarily heavy trading volume, from a closing price of $7.03 per ADR on July 3, 2001 to a closing price of $5.35 per ADR on July 5, 2001.

Lead Plaintiff alleged that Defendants' scheme involved the material misstatement during the Class Period of Marconi's financial condition and performance, particularly concerning Marconi's prospects for growth, customer base, falloffs and cancellations in European orders, decline in sales and orders for Marconi's products and services, and under-pricing of Marconi's contracts. It was alleged that accurately reporting such financial information would have, among other things, harmed Marconi's ability to meet securities analysts' consensus revenue and earnings expectations, Marconi's common stock price (including the potential price received on the exercise of options held by the Individual Defendants, which the Individual Defendants sought to re-price because the options had exercise prices well above the market price and were therefore "out-of-the-money"), and Marconi's ability to secure strong support from the market for the syndication of a Euro 3 billion multi-currency revolving credit facility.

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