By Mardi Balgochian Scalise, Lightwave Web Editor
Corning Incorporated (NYSE:GLW) announced plans to reduce its worldwide optical fiber workforce by approximately 1,000 employees by the end of 2001 in response to the continuing downturn in the telecommunications sector. These reductions will include hourly and salaried employees primarily at manufacturing locations. Corning will begin to notify those employees impacted by the announcement over the next few weeks. The company has already communicated plans to employees for short-term Labor Day holiday shutdowns at its Wilmington and Concord, North Carolina manufacturing facilities.
The action is being taken to match overall operations with the weakening demand for optical fiber and cable, primarily in North America and Europe. James B. Flaws, Corning's chief financial officer, said the company has seen a sudden slowing in orders across all fiber product lines, and now expects overall market growth for optical fiber in 2001 to be significantly less than the previous 15 percent outlook.
Corning said its unit shipments of optical fiber and cable in the second half of the year will be less than the same period in 2000. Corning continues to see a downward trend in demand for its LEAF and MetroCor fiber products, however the company still expects its premium fiber products, as a percentage of total fiber volume, to be at 20 percent or less for the year. "While year over year fiber pricing has remained stable through August, we expect that average pricing for the year could be down by the previously disclosed zero to five percent range," Flaws said.
Flaws added, "We are continuing to deal with the poor short-term visibility across the telecommunications market, and we need to react quickly to changing market conditions."
The announcement brings Corning's 2001 reductions to approximately 8,000 positions or about 20 percent of its total global workforce of 41,000 at the beginning of the year. Corning anticipates that the costs of these reductions will be included in the previously announced $300 million to $400 million restructuring charge which will be recorded in the second half of this year.
This announcement comes only days after Corning Incorporated announced its acquisition of a minority stake in Transvok Fiber Optic Cable Plant, , a manufacturer of optical fiber cable in Russia. In this transaction, Corning Incorporated's wholly owned subsidiary, Corning International Corporation, entered into an agreement to acquire slightly more than 25 percent of TRANSVOK. Corning Cable Systems in Hickory, N.C. is slated to manage the equity venture.
Other recent announcements included Corning Incorporated's offering of common stock, the net proceeds from which are expected to be used to finance the acquisition of Lucent Technologies' controlling equity interests in Lucent Technologies Shanghai Fiber Optic Co., Ltd. and Lucent Technologies Beijing Fiber Optic Cable Co., Ltd. This stock announcement came the same day as Corning and Russian cabler Saranskkabel Optika announced a three-year supply agreement for Corning optical fiber, including Corning SMF-28 fiber and Corning 50/125 and 62.5/125 multimode fibers. Saranskkabel Optika has been a Corning optical fiber customer since 1998 and the agreement provides Saranskkabel Optika with at least 70 percent of their total fiber supply.
The company also recently announced an agreement between Corning Cable Systems and Agilent Technologies Inc. (NYSE:A), designed to provide the communications industry with a high-volume supply of new parallel-optics solutions.
About Corning Incorporated
Established in 1851, Corning Incorporated manufactures optical fiber, cable and photonic products for the telecommunications industry; and high-performance displays and components for television and other communications-related industries. For more information, visit www.corning.com.