Corning, Hit by Nortel Warning, Cuts Outlook for Photonics Unit
A WSJ.COM News Roundup February 16, 2001
CORNING, N.Y. -- Corning Inc. cut its growth outlook for its photonics business Friday
on the heels of an earnings warning from key customer Nortel Networks. Nortel's warning,
released late Thursday, sent its stock into a tailspin and shudders through the fiber-optic
component sector.
At 4 p.m. Friday on the Nasdaq , shares of Corning were down $9.01, or 21%, to $33,
and rival JDS Uniphase tumbled $9.31, or 21%, to $35.81, Nortel dropped $9.75, or 33%,
to $20 on the NYSE.
Corning is the world's biggest producer of optical fiber and cable used in telecommunications
networks and one of the leading makers of optical components that enable the transmission
of massive data volume at hyper-speed.
Corning and JDS are major suppliers to Nortel, said Wachovia Securities communications
equipment analyst George Hunt. In the last quarter, Nortel accounted for more than 10% of
JDS Uniphase's business, he added.
Weakening business at Nortel means slower orders for the suppliers of components to Nortel,
including photonics, such as lenses, filters and other parts. Nortel puts those components into
products it sells to telecommunications carriers for their fiber-optic networks.
Corning now expects its annual revenue-growth rate in the photonic-technologies business to
be 50%, down from the 75% to 90% growth rate it had predicted earlier in the week. Corning said
that the slower growth means the company will now accelerate its cost-control measures and will
consider further job cuts.
Corning, however, stood behind its previous earnings guidance of 28 cents to 31 cents a share
for the first quarter and $1.40 to $1.43 a share for fiscal 2001, excluding amortization of goodwill,
nonrecurring items, discontinued operations and other items.
In the year-earlier first quarter, Corning reported income before items of $178.1 million, or 64 cents
a share, on revenue of about $1.38 billion. For fiscal 2000, the company reported income of about
$1.09 billion, or $1.23 a diluted share, on revenue of $7.27 billion.
Nashua, N.H., Still Luring High-Tech Heavy Hitters February 14, 2001
By FRANK BYRT/ DOW JONES NEWSWIRES
BOSTON -- While many communities fret about high-tech industry layoffs, the area around
Nashua, N.H., is gearing up for as many as 10,000 new high-tech jobs within the next five
years as New Economy employers continue to flock to the former mill town.
Teradyne , Cisco & Corning's Lasertron division, as well as money-management giant Fidelity
Investments, have all recently announced major new facilities, while a host of other high-tech
companies are growing in the area as well.
"It's an underrated high-tech mecca at this point," says Tom Newman, VP for corporate
relations for Teradyne, Boston. "There are a lot of Silicon Valley 'wannabes,' but Nashua has
a hell of a pro-business attitude, as does New Hampshire in general, and a great labor force.
So that's why we're there and that's why others are there as well."
Great Schools, Close Airports, Low Taxes
Southern New Hampshire, and the Nashua area in particular, benefits from the
proximity of hundreds of universities and technical schools, and the spin-offs of
high-tech growth companies from Greater Boston, 40 miles away. It also benefits from
relatively easy access to airports, low taxes - including no sales or income taxes - and
great rankings on the quality of life scale due in part to abundant recreation opportunities
and a low crime rate.
Most recently, in September, it was Corning Lasertron that announced it was
coming town. The Corning, N.Y., company said it is investing $225 million to
build a new photonic components manufacturing facility on a 56-acre site that
will employ about 850 people by 2002.
That expansion came on the heels of Lasertron's announcement that it was
doubling the manufacturing capacity of its communications network components
plant in Bedford, Mass., about 18 miles south of Nashua, and adding about 300
jobs there.
A common thread for several of the fast-growing newcomers is the former
mini-computer maker Digital Equipment Corp., which was the major employer in
New Hampshire and one of the top employers in Massachusetts a decade ago.
Digital got lost in the dust when it failed to adapt to the personal computer boom.
It was a shadow of its former self when it was sold to Compaq Computer in 1998,
leaving behind thousands of former employees and dozens of modern computer
manufacturing facilities.
Merrill, Salomon Downgrade Corning On 1Q Outlook
Dow Jones Newswires -- January 25, 2001
By ELLEN SHENG/DOW JONES NEWSWIRES
NEW YORK -- Even though Corning Inc. (GLW) roundly beat fourth-quarter earnings estimates by 6
cents a share, the optical fiber maker's warning that the first quarter may show some signs of slowing
caused analysts from Merrill Lynch and Salomon Smith Barney to promptly slash ratings and lower views.
"Some cautionary comments about the company's two most profitable businesses leads us to believe that
upside to earnings per share could be more limited during 2001 than we previously expected," wrote Merrill
Lynch analyst Steven Fox, in a note Thursday.
Fox lowered his intermediate-term rating to accumulate from buy.
Corning warned that its optical fiber and flat panel display glass businesses, which combined carry gross
margins of at least 50%, are currently experiencing a more uneven order rate than previously expected, the
analyst said.
As a result, Fox trimmed his first 2001 earnings estimate to $1.37-$1.47 a share, down from $1.40-$1.50 a
share.
In another note Thursday, Salomon Smith Barney analyst Timothy Anderson, who cut his rating to
outperform from buy, said that weak macroeconomic conditions, combined with uneven orders for the
aforementioned businesses, hampered his enthusiasm for the stock.
According to Anderson, Corning said the weak conditions are likely to cause a retail inventory adjustment
in finished LCD monitors in the first quarter, affecting demand rates for flat panel glass. First-quarter
revenue guidance was lowered by $100 million-$200 million, he said.
"Despite the fact that management strong reiterated confidence in its earnings guidance for the year," the
analyst wrote, "we are concerned the inventory corrections at Nortel and Lucent may cause a dip in optical
component demand."
Anderson cut his price target by $5 per share to $90, but did not change earnings estimates, which are 28
cents per share for the first quarter 2001 and $1.40 per share for the full year 2001.
Both Merrill Lynch and Salomon also slashed ratings Thursday on JDS Uniphase Corp. (JDSU), another
maker of fiber optics.
- Ellen Sheng; Dow Jones Newswires; 201-938-4176; ellen.sheng@dowjones.com |
