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MARKET COMMENT
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Cable & Wireless (LSE: CW.)(NYSE: CWP) should be renamed Unable & Hopeless. Today's interim results confirmed C&W's extravagant Global network has turned into a financial disaster. Sliding sales, widening losses, hefty write-offs and a strategic U-turn -- no wonder the shares slumped 40.25p (31%) to 90p this morning. The figures were yet another triumph for bookkeeping opacity. On a continuing basis, turnover fell 6% to £2,245m and operating losses increased from £78m to £213m. While C&W's traditional telecom businesses largely held their own, the Global operation saw its EBITDA performance plummet into loss. Throw in Global write-offs totalling £3,562m, a few discontinued businesses and various other funnies, and the final post-tax loss came to £4,535m. The only undisputed figures were the cash pile and the dividend. At the end of September, net cash stood at £2,216m. The half-year payout was raised from 1.5p to 1.6p per share. Any lingering visions of C&W becoming the telecom operator of choice for the world's corporate multinationals have finally vanished. Today's statement proves the 'last man standing' argument -- of C&W being left to clean up following the bankruptcies at WorldCom and Global Crossing etc. -- is null and void. Rather than capitalise on the difficulties of others, C&W has in fact announced a retreat of its own. A restructure of the Global business is set to restrict US and European operations to large corporate clients only. Capex will be cut and about 3,500 jobs (28% of the Global workforce) will be axed in a £800m shake-up. Astonishingly given its recent acquisitions, C&W also admitted that a total exit of US and Continental Europe had been under discussion, too. Unsurprisingly, there's no sign of any near-term improvement for C&W. "Difficult market conditions" and "downward pricing pressures" have created an "unusual degree of uncertainty in sector demand forecasts". While keeping the faith with Global becoming free cash flow positive by March 2004, C&W has relied upon an embarrassing (and costly) withdrawal to maintain the promise. In short, today's disastrous results offer no reassurance on management's ongoing pledges. Going on the latest performance, there's only one potential way to profit from C&W shares: invest at a hefty discount to the 93p per share cash pile and hope somebody quickly puts Global out of its misery.