Marconi has been struggling against its larger rivals

Marconi is believed to be in talks with Huawei Technologies, a group it already has a business partnership with.

A Marconi spokesman declined to comment on the reports which suggested the firm could be bought up in a �600m deal.

The news comes days after Marconi said losses had widened to �36m ($64m) from �11m a year ago in the first three months of the financial year.

The Coventry-based group added that revenues in the three months to June had fallen by �4m to �285m as sales fell and margins tightened.

Shake-up

It was the latest set of bad news for the firm which missed out on a key BT contract in May.

The group warned it would lose out on �50m when BT decided not to select it as one of eight companies to work on a �10bn upgrade of its network.

Since then the firm has been carrying out a strategic review of its options amid concerns it is too small to compete with industry heavyweights such as Ericsson and Siemens.

The review has seen it cut costs which have included axing 800 jobs and closing the group's Edge Lane plant in Liverpool where the company began life in 1903.