GLW ($14.30-$16 ) second-quarter earnings fall
By Ben Klayman
CHICAGO, July 25 (Reuters) - Corning Inc. (NYSE:GLW - news), the world's largest fiber-optic cable maker, said on Wednesday its second-quarter earnings fell due to the slowdown in the telecommunications industry.
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The Corning, New York-based company posted a net loss of $4.8 billion, or $5.13 a share, including a pretax charge of $4.8 billion for the impairment of goodwill and other intangible assets and an $8 million pretax restructuring charge.
That compared with a net profit of $149 million, or 17 cents a share, in the same period last year.
Second-quarter sales rose 5 percent, to $1.9 billion from $1.8 billion a year earlier.
The company reported pro forma earnings, excluding the $4.8 billion pretax charge, of $80 million, or 9 cents a share. This compared with $271 million, or 31 cents a diluted share, in the same period a year ago.
The second-quarter results included a pretax charge of $271 million ($184 million after tax), or 20 cents a share, to write off obsolete inventory in the photonic technologies unit. Adding that back in, the company's operating earnings were 29 cents a share, beating analysts' estimates.
Analysts had expected Corning to earn 18 cents a share, with a range of 17 cents to 20 cents, according to market research firm Thomson Financial/First Call.
TURBULENT OUTLOOK
``The telecommunications market outlook remains turbulent,'' Corning President and Chief Executive John Loose said.
``We continue to see a very significant decrease in the long-haul market in North America. The impact of this market decline has been most severe on our sales of LEAF fiber to new carriers and on our photonics business,'' he added, referring to Corning's most profitable fiber product.
He added that increased sales in China have helped offset the declines, but the photonics business will continue to be weak the rest of the year.
Corning has moved to reduce costs with capital spending cuts, plant closings and job cuts, Loose said. Its market shares in key businesses have either remained stable or grown.
In Instinet after-hours trading, Corning's shares rose to $14.20 from a Wednesday close of $13.77 on the New York Stock Exchange. They closed regular trading up 26 cents, or almost 2 percent, before the results were announced.
Over the past year, they have underperformed the S&P 500 and S&P Communications Equipment indexes by about 81 percent and 19 percent, respectively.
Sales in the second quarter for Corning's photonics unit were $158 million, a decline of about 33 percent from last year. Loose called the unit's results disappointing, but told Reuters the company's overall results were better than expected thanks to strong results in the fiber and cable business.
However, optical fiber volume grew 25 percent versus the second quarter last year due to strong international and single-mode fiber demand, especially in China. Pricing of optical fiber also remained stable in the quarter, he said in a telephone interview after the results were announced.
PRICES ARE HOLDING
``Our prices are holding,'' Loose said. ``They were very stable in the quarter and have been throughout the first half of the year.''
Volume of Corning's flat-panel display glass business grew 45 percent, but those gains were largely offset by modest price declines and the impact of the weak yen.
While Corning has shown strength in China, a strong flat-panel business and stable prices, one portfolio manager worries nonetheless.
``Long-haul fiber and photonics seem to be weak for the foreseeable future and those two areas combined unfortunately are about 60 percent of their business,'' said Justin McNichols, with asset manager Osborne Partners Capital Management.
He lauded the company's efforts to cut inventories, but said accounts receivable were flat versus the previous quarter and Corning is falling behind the curve on cost cutting.
A TOUGH SECTOR
The slowdown in customer spending has hurt a lot of former high-tech firms, including Nortel Networks Corp. (NYSE:NT - news)(Toronto:NT.TO - news), Cisco Systems Inc. (NasdaqNM:CSCO - news) and JDS Uniphase Corp. (Toronto:JDU.TO - news) (NasdaqNM:JDSU - news), all of which have cut financial forecasts and jobs.
Earlier this month, Corning said it would cut another 1,000 jobs, close three plants, and take the $5.1 billion in charges. The company also said the slowdown could last another 12 to 18 months. It said then the second-quarter results, excluding the one-time items, would beat estimates but added the second half of the year would lag expectations.
The company also killed its dividend, something it had paid every year since it first became a publicly held firm in 1945.
On Tuesday, Corning linked up with Japan's Furukawa Electric Co. Ltd. in a deal to buy Lucent Technologies Inc.'s (NYSE:LU - news) fiber-optic cable unit for $275 billion.
Furukawa will take most of the business, but Corning for $225 million in cash will get Lucent's interests in two Chinese joint ventures. |
