Racal Electronics said it would float its telecomms business ending months of speculation surrounding the future of its nine-year old subsidiary.
It has also put up for sale its struggling data communications unit.
The news came as the UK electronics giant saw its pre-tax profits slump to #9.2 million in its second quarter results, compared with #21.2 million a year ago.
However, sales by Racal Telecom increased by #3.3 million to #140 million, while operating profits before reorganisation charges fell to #16.5 million from #20.8 million. The unit?s figures were hit by a #2.4 million reorganisation charge for the integration of Racal Network Services and Racal British Rail Telecommunications to form Racal Telecom.
The company said it would float its successful telecomms business ?at the right time?.
Racal bosses expect to hive off its data communications subsidiary within six months and said it has already received several offers. Sales by the unit during Racal?s first fiscal six months plummeted by #24.2 million to #124.9 million, while operating losses increased from #12.5 million to #21.9 million.
A company spokesperson attributed the decision to sell Racal Data Communications to the high costs involved in engineering and marketing new products. He said: ?This decision was taken in the light of the continuing delays in the development and introduction of new products, the disappointing first half results and the rapidly escalating costs of competing in this sector.?
The business comprises two different business areas: network integration and services plus products, and offers technologies such as ISDN, frame relay and ATM. It is the products division that has been blamed for the losses. The sale of the group will affect 2,500 staff.
Investors welcomed the news to float the company?s telecomms division, an option which analysts believe was attractive to Racal bosses because of the success of the recent flotation by rival Energis.
Racal Telecom is the UK?s second largest managed data network services operator and will be attractive to prospective investors. It recently announced it is to pump #26 million into modernising its network which will include the introduction of intelligent networks.,p> The investment would give it a headstart of several years over the capability of its competitors? systems, claimed the company. Racal also strengthened its overseas capabilities by recently forming a joint venture with a US supplier of fibre optic networks. The deal with Metromedia Fiber Network (MFN) will enable Racal to offer fully managed transatlantic services.
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