Dropping out of light speed

In the face of the now infamous market slowdown and the resulting dearth in capital spending on the part of service providers and carriers, Corning last week reduced its earnings guidance for 2001 after receiving fewer orders than expected. In addition, the vendor revealed additional component manufacturing cutbacks were possible.

Corning projects 2001 revenues will range from $8.2 billion to $8.5 billion, which is still an increase compared with the $7.1 billion posted for 2000.

“There's no question that we're currently experiencing some softness in the North American long-haul market, which grew at substantially faster-than-normal rates in 2000,” said Gerald Fine, executive vice president and general manager of photonic technologies for Corning. “[The market] may be absorbing some of that growth right now.”

Corning projects 25% revenue growth for photonic technologies in 2001 — half its original forecast of 50% revenue growth. According to the company, the worldwide demand for optical fiber should grow about 20% this year, and the photonic component market will grow between 10% and 30%. Where the photonic market falls between the 10% and 30% depends on when service providers resume their normal capital spending, Fine said.

Corning expects growth in the submarine market to be less than the terrestrial long-haul market. According to Fine, the company charts a 40% growth rate over the next four years to $3.7 billion.

While Corning has seen a slowdown in long-haul activity lately, future demand for photonics will be strong, Fine said. For the time being, however, the company will shift its focus toward metro and international markets, which have not yet seen a similar slowdown, he said (see figure).

“Within any long-term trend, obviously there's an inevitable short-term fluctuation, and right now we're in one,” Fine said.

Despite maintaining a positive outlook for the photonic market during the next four years, Fine indicated a bit of uncertainty by acknowledging that Corning is in “weekly contact” with its customers — Cisco Systems, Ciena, Marconi and others — so it can respond immediately if circumstances change.

In addition, while the company originally expected growth to accelerate in the second half of this year, “we're less optimistic that we were even a month ago,” Fine said. “Right now, we're seeing that it's pretty slow.”

And further layoffs are not being ruled out in terms of additional cost-cutting measures, he added. The company already laid off 825 workers on March 1.

As Corning's stock price continues to tumble to levels that President and CEO John Loose called “nuts” in published reports last week, rumors still circulate about Corning being the prime candidate to purchase Lucent's fiber business.

Corning would not comment on a possible acquisition, according to a spokeswoman.

However bad it may look, demand for components is still there, said Elizabeth Bruce, research analyst, optical component for Aberdeen Group. “There will be growth. It will just be a little slower now,” she said.