Corning expands its horizons with Siemens acquisition

Corning Inc. (Corning, NY) was busy last week, signing agreements to acquire Siemens AG's optical cable and hardware business as well as Optovac, a manufacturer of calcium fluoride optics. The deals follow a period of steady earnings and several other acquisitions that will help the company to expand its product line and maintain its presence in the fiber-optic cable market.

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Stock prices for Corning have been on a steady uptrend since October, when the company reported better than expected third quarter earnings. The investment required for this week's acquisitions is expected to dilute earnings in the coming year, and analysts predicted a fall in stock price to follow the Siemens announcement. The financial community seemed to see Corning's aggressive strategy as a positive sign, however. Price per share dipped only slightly and rebounded to an all-time high of 119 7/8 on Friday.

Corning expects that the acquisition will cause dilution of less than 5% in 2000 earnings per share, and to generate revenue thereafter. Speaking last week before the announcements, Roger G. Ackerman, Corning's chairman and chief executive officer, told Wall Street analysts that he expects the company's 1999 earnings per share to be in line with analyst consensus of $1.86, representing a 24% increase over 1998's $1.50 per share. He projects that next year's earnings will grow 20% to 25%, to $2.25 to 2.35 per share.

The acquisition of Optovac, based in North Brookfield, MA, will complement Corning's current product line of advanced materials for the semiconductor industry and strengthens its position in the optical lithography marketplace. Optovac will be purchased from its parent company, EM Industries Inc., which is an associate of E Merck KGaA of Darmstadt, Germany, according to terms that are not yet disclosed. Optovac's products are currently used by laser manufacturers and laser system suppliers, and for imaging and analytical instrument applications, including space telescopes and medical testing.

Ackerman's earnings outlook for 2000 does reflect recent investments--including the agreement to acquire Oak Industries and its Lasertron division--which Corning expects to grow rapidly and help position the company in world markets. Says Ackerman, "We have a very upbeat situation right now. We have increased our R & D spending and have major capital expansion plans underway. And certainly, the acquisition of the active device company, Lasertron, part of Oak, has helped us fill out our quiver of arrows to go after that market. So we feel pretty good about what we are doing." In the United Kingdom, Corning purchased the 50% interest of its partner, BICC, in Optical Fibres Ltd., and has agreed to buy their European cable business. The company also acquired the remaining 50% interest in Optical Waveguides of Australia from BICC, which Corning hopes will provide it with greater access to Asian markets.

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