Corning: No More Conventional TV Glass

Date: 16 April 2003
Source: Yahoo
Corning Inc., the largest maker of fiber optic cable, on Tuesday said it would stop making glass for conventional television screens in North America because of competition from lower-cost imports and weak demand.

The decision will result in about 1,000 job cuts at its manufacturing plant in State College, Pennsylvania, and pre-tax charges of $140 million to $170 million in the first half of 2003. The job cuts represent slightly more than 4 percent of the company's work force.

"This business has been facing a declining customer base and significantly increased imports for several years and it is now losing money," Corning Chairman and Chief Executive James Houghton said in a statement. "In our relentless drive to restore profitability to Corning, we can not carry money losing mature businesses."

Its shares were up 15 cents, or 2.6 percent, at $5.95 in trading on the New York Stock Exchange (news - web sites).

Corning, hurt by the slowdown in the telecommunications sector -- which accounts for half its sales -- has slashed jobs and eliminated money-losing or noncore businesses in an effort to return to profit. It last reported a net profit in the first quarter of 2001 and has said it does not see a telecom recovery until late 2004.

Analysts said the decision was not surprising.

"It's something we were anticipating at some point would be shut down, sold or something like that," said UBS Warburg analyst Nikos Theodosopoulos, who has a "buy" rating on the stock. He does not own Corning stock and UBS has done banking work for the company.

In February, Corning said it would discontinue two product lines, including optical switches, and close two plants.

Corning got into the cathode ray tube business before TV's popularity took off, making radar screens during World War II. Sales began dropping off in the mid-1990s due to cheaper competition and growing demand for liquid crystal display (LCD) technology used in computer and now TV screens.

The Corning, New York-based company also said its first- quarter results would match or exceed its previous estimates for revenue of $700 million to $730 million and a net loss of $10 million to $50 million, or 1 cent to 4 cents per share. That excludes one-time items such as the cost of an asbestos litigation settlement.

Corning's conventional glass (also called cathode ray tube) business is a partnership between Corning and Asahi Glass America, a unit of Japan's Asahi Glass Co. Ltd. (5201.T) . The companies will stop making glass by the end of the current quarter.

Corning Chief Financial Officer James Flaws said in a statement the television glass market is a mature business and results had been declining. He said the business deteriorated in the first quarter and it sees no sustainable recovery.

Flaws added that Corning remains on track to return to profit, excluding items, by the third quarter. It reports first-quarter results on April 23.

Corning said it will book $62 million of the total pre-tax charge, or $20 million after taxes, in the first quarter.

In addition to the charge related to the latest decision, Corning's first-quarter results also will include a previously announced $20 million charge related to the exit of the optical switching business and a previously announced pretax charge of $300 million related to asbestos litigation.

Corning said it used $189 million in cash and six million shares of stock to retire a total of $273 million in debt, resulting in a net pretax gain of about $5 million to be reported in its first-quarter results.

600450 Corning: No More Conventional TV Glass
Date: 16 April 2003
Source: Yahoo

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