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News > Technology
Corning takes $5.1B charge
July 9, 2001: 4:47 p.m. ET

Company also sets 1,000 layoffs as part of restructuring effort
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NEW YORK (CNNfn) - Faced with a protracted downturn in the market for high-speed telecommunications equipment, Corning Inc. on Monday said it will record more than $5 billion in charges against its second quarter earnings, shutter three manufacturing plants and lay off 1,000 more employees.

The company, which now expects profits to be lower than forecast in the second half of the year, said the second-quarter charges reflect the impairment of goodwill and other intangible assets related to recent photonic technologies acquisitions and the write-off of excess and obsolete inventory.

The cost-cutting plan includes the closing of three manufacturing facilities and will result in an unspecified charge against its third-quarter earnings, Corning said.

Including those just announced, Corning has cut 3,500 jobs from its photonics division since the beginning of the year, bringing its total 2001 job cuts to 5,900 positions or about 15 percent of its workforce, the company said.

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Shares of Corning (GLW: Research, Estimates) a leading supplier of fiber-optic cable and photonic components used in high-speed telecommunications networks, fell 7 cents to $15.06 on the New York Stock Exchange ahead of the news, which was released after the close of trading. The shares fell another 55 cents to $14.51 in after-hours trade.

Photonic components, which are used to transmit light waves across fiber-optic networks, have proven to be a sore spot for many telecom equipment makers amid a sharp slowdown in capital spending by service providers in recent months.

Executives at Corning said they anticipate the downturn could last another 12 to 18 months, which is what prompted the job cuts and plant closures.

"Our photonic technologies business grew 75 percent to 100 percent per year for the past three years, and we originally anticipated similar growth again this year," John Loose, Corning's president and chief executive, said in a statement,

"As a result, we added significant capacity and fixed costs to meet expected market demand that has not materialized. We now expect sales this year in the range of $600 million to $700 million for this business, with significantly lower sales of optical amplifiers and other photonic components."

The second-quarter charges are comprised of a $300 million inventory write-down and a $4.8 billion non-cash, non-tax deductible charge for impaired goodwill and acquired intangibles related to last year's Pirelli optical components business and NetOptix acquisitions.

The company said the charge reflects a combination of lower market multiples for the valuation of these businesses as well as weakened industry conditions.

Corning will announce its second-quarter results after the market closes on July 25. The company said it expects to report earnings, excluding the extraordinary charges, slightly exceeding the Street's current consensus estimate of 18 cents per share. At the same time, Corning said its earnings for the remainder of the year will fall below analysts expectations because of the reduced forecast for its photonic technologies unit and the low level of visibility across the telecommunications industry.

Separately, Corning announced it would discontinue dividends on its common stock on an ongoing basis. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.