Report of Possible Bid Boosts Marconi Shares

Shares of British telecom equipment maker Marconi rose as much as 6.7% on Monday in London after the Sunday Business newspaper said Cisco Systems may make a $17-billion bid for the firm.

But analysts expressed skepticism about a takeover amid the ongoing spending slump in the telecom sector, which has spread to Europe. Also, Cisco Chief Executive John Chambers in April said the company prefers to buy start-ups because “very large acquisitions--even a 10th of our size--are difficult to digest.”

Last month, Marconi posted a second-fiscal-half loss as it spent more to develop new products even while clients are cutting spending on telecom networks. It also said the first half would be difficult and that it plans to cut 3,000 jobs.

Cisco last week said it expects spending by clients to be crimped “for the foreseeable future.”

Marconi spokeswoman Michaela Hopkins and Cisco spokeswoman Abby Smith declined to comment on the Sunday Business report.

“Having suffered the sharp U.S. slowdown, it would appear unwise for Cisco to follow the deceleration as it spans the globe,” said Stephan Michel, a credit analyst at Barclays Capital. “Why would Cisco want that exposure now?”

Cisco shares (ticker symbol: CSCO) rose 88 cents to $19.73 on Monday while Marconi’s U.S.-traded shares (MONI) rose 35 cents to $10.35, both on Nasdaq.