Corning pumps up the competition with business agreements

Scrambling to keep up with the dynamic and acquisition-frenzied optical components market, Corning Inc. (Corning, NY) made several major announcements this week. The fiber maker has agreed to buy NetOptix Corp. (Sturbridge, MA), a manufacturer of thin-film filters, for approximately $2 billion in stock. Corning also has formed an equity venture and agreed to purchase a photonics research facility.

Scrambling to keep up with the dynamic and acquisition-frenzied optical components market, Corning Inc. (Corning, NY) made several major announcements this week. The fiber maker has agreed to buy NetOptix Corp. (Sturbridge, MA), a manufacturer of thin-film filters, for approximately $2 billion in stock. Corning also has formed an equity venture, Samsung Corning Micro-Optics, to package thin-film filters for dense wavelength-division multiplexing (DWDM) components, and has agreed to purchase a photonics research facility.

According to Corning's Chairman and Chief Executive Officer, Roger G. Ackerman, the announcements indicate that the company intends to continue to strengthen its position in the industry. "Market demand for optical networking products is expanding at an incredible rate," Ackerman said. "The market for DWDM components, in particular, will double this year. The acquisition of NetOptix will help Corning capitalize on this growing market opportunity."

The purchase also points to the trend toward consolidation in the fiber-optic component arena and Corning's need to keep up with that trend, notes Fayad Abbasi, analyst for StreetAdvisor.com. "After JDS Uniphase purchased several companies and Lucent purchased Ortel, Corning could not afford to be left behind. The current market makeup for independent fiber-optic component manufacturers shows JDS Uniphase in the top spot, with Corning at number two," Abbasi says. "We expect increasing activity in acquisitions as these two leaders, along with Lucent, continue to compete fiercely," he predicts.

Under the terms of the acquisition, Corning will exchange 0.90 shares of Corning common stock for each share of NetOptix common stock. Based on the closing price for Corning last Friday, the transaction would be valued at approximately $2 billion. Corning said it expects the deal to lower its earnings slightly this year but increase them beginning in 2001.

After the deal closes, Corning said NetOptix will supply the thin-film filters it makes-as well as filters produced at Corning's operation in Marlborough, MA--to the Samsung Corning Micro-Electronics venture. The new company will manufacture DWDM packaged components using robotics and other automation developed by Samsung in several manufacturing steps that are currently done manually. As a result, the company expects enormous benefits in capacity, reproducibility, unit cost, and reduced cycle time.

Samsung Corning Micro-Optics will be located in an existing Samsung facility near Seoul in Suwon, South Korea. Volume manufacturing is expected by mid-2000.

On the research and development side, Corning announced that it will buy the Photonics Technology Research Center in Martlesham, UK, from British Telecommunications Plc for about $66 million. The integration of the center's research into Corning's technology is expected to lead to new product commercialization and strengthen research on photonic components and network devices.

Says Corning's chief technology officer and executive vice president for science and technology, Charles W. Deneka, "The research and development of planar integrated optics, semiconductor optical amplifiers, electro-absorption modulators, and optical networking devices underway at the center offer excellent opportunities for us to deliver new products to our current businesses, and at the same time augment our other internal product development efforts."

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