The firm said it expected sales in the first three months of its financial year, from April to June, to fall below �400m ($654m) from �426m in the January to March quarter.

It also said it was cutting 500 more jobs, to add to the 1,500 it was currently shedding.

The cuts will bring its total workforce down to 13,000 worldwide. Marconi employs 5,000 people in the UK, with its main plants in Coventry, Liverpool, Beeston in Nottinghamshire and Chelmsford in Essex.

Progress

Marconi's pre-tax loss in the year to March 2003, before one-off items and goodwill, fell to �599m from �674m last year.

Market conditions remain very tough and the group expects a further contraction in market volumes and group sales Marconi

After one-off items were accounted for the pre-tax loss was �1.3bn, down from �5.9bn in 2002.

Core sales fell 32% to �1.8bn, but Marconi said its cost-cutting programme meant its break-even sales target of the coming year had been reduced to �1.5bn from �1.7bn.

"This is a tangible demonstration that the actions we are taking to return the business to operational health are working," said chief executive Mike Parton.

"Our markets remain very tough and we will continue to take the actions necessary to build on this improved operational performance."

City analysts say Marconi is gradually improving its balance sheet, and may return to profit during 2004.

But in order to so, it will probably need to lay off yet more staff in the UK, Germany and Italy, Dresdner Kleinwort Wasserstein telecoms analyst Per Lindberg told BBC Radio.

Re-born

The newly-restructured Marconi made its debut on the London Stock Exchange earlier this month.

Shares in the old Marconi were delisted after a complex restructuring of its �4bn debt pile was approved.

Under the terms of the deal, owners of the old Marconi plc shares received just 0.5% of the new stock, with the remainder going to the company's creditors.

Shares in Marconi Corporation fell initially but later rallied to end up 2.5 pence at 65.5p.

"Market conditions remain very tough and the group expects a further contraction in market volumes and group sales during the current financial year as telecom operators continue to maintain tight controls over capital expenditure," Marconi said.

It said sales had held up in Germany and Italy and also in Australia and Malaysia, but had fallen in the US, Middle East and China.

It added that the UK market remained "challenging".