Faced with an "abrupt" economic slowdown, Corning Inc plans to close three manufacturing plants and cut another 1,000 jobs from its photonic technologies division.
The maker of optical fiber and cable used in telecommunications networks on Monday also warned it would miss its second half earnings projections as the result of a US$5.1 billion charge primarily related to the recent acquisitions of Pirelli and NetOptix. The company also will write-off US$300 million in excess and obsolete inventory.
Corning shares closed trading Monday down US$0.03 at US$15.10 on the New York Stock Exchange. The shares fell another $0.95, or more than 6 percent, in after-hours trading.
Including Monday's announcement, 3,500 photonic technologies positions will have been eliminated since the beginning of the year, bringing total 2001 reductions to 5,900 positions, about 15 percent of Corning's total global work force of approximately 40,000.
"With the dramatic reduction of infrastructure spending across the telecommunications industry and our expectation that this market downturn could last 12 to 18 months, we are taking decisive action to lower costs and improve the future profitability of our Photonic Technologies business," John Loose, president and chief executive officer, said in a prepared statement.
The photonics division makes components designed to boost or redirect transmission of massive data traveling long distances along fiber-optic lines at hyper-speed.
The business had revenues of US$1 billion in 2000 and had been growing at 75 to 100 percent a year over the past three years, Loose said. Company officials originally expected growth to double this year, then cut that projection to a flat growth. But, after a brief uptick in the first quarter, the second quarter results show a fall of 30 to 35 percent in growth.
Loose said sales in 2001 were expected to be in the range of US$600 million to US$700 million.
"The abruptness of this industry downturn is unprecedented," Loose said.
Corning officials said they continue to look at more personnel reductions and other restructuring actions elsewhere in the company. Costs related to the cuts and closures should mean a third quarter pre-tax charge of US$300 million to US$400 million, they said in a conference call late Monday.
Also Monday, the company announced it will no longer pay dividends on its common stock. The last quarterly dividend payment of US$0.06 per share was paid June 29.
Analysts surveyed by Thomson Financial/First Call had predicted earnings of US$0.18 per share in the second quarter, US$0.19 in the third, US$0.20 in the fourth and US$0.85 for the year. The company will announce its second quarter results after the market closes on July 25.
Corning said without the US$5.1 billion in charges, it was operating slightly ahead of analyst expectations for the quarter. It did not release earnings guidance but said it would provide an update in its second quarter report.
Corning manufactures optical fiber, cable and photonic products for the telecommunications industry; and high-performance displays and components for television, information technology and other communications-related industries.
The company also uses advanced materials to manufacture products for scientific, semiconductor and environmental markets. Corning revenues for 2000 were US$7.1 billion.
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