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.