Kingston Communications may be forced to pay one of its former executives hundreds of thousands of pounds, and has denied rumours that it may be broken up into separate units.
According to reports, Steve Maine, the firm's outgoing chief executive, is due a year's salary, totalling £380,000, in compensation for loss of office.
The company's new chief executive, Malcolm Fallen, has already started a cost-cutting drive, aiming to slash £10m from annual costs.
But Clive Longbottom, services director at analyst Quocirca, said a break-up would not surprise him.
"Kingston has struggled over the past few years. It has gone from being a telecoms darling to just another player in a deregulated market," he said.
"It should have bought up other companies to get itself out of Hull, just like Colt did to get out of London."
According to its interim 2003 report, Kingston posted a turnover of just under £162.9m for the six months to 30 September 2003, compared with a little over £169m for the same period in 2002.
The firm's losses increased from £6.7m in the six months to 30 September 2002 to £8.7m in the same period of 2003.
However, Richard Ashley, marketing director at Kingston's business services division, said the company's Nortel business increased by 40 per cent last year.
He added that the vendor had given the telecoms provider its EMEA partner of the year award.
"A company such as Nortel would not give us such a prestigious award without making sure we were around for the long term," said Ashley.
"We have an excellent installed base of Meridian, and we are starting to deliver more IP telephony solutions with Nortel."
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