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The glass giant looks to weather the network expansion doldrums

Fri, 11/30/2001 - 7:00pm
Duffy Hayes

Google Factor: 18,300

Misery certainly loves company, and nowhere is it more evident than in the beaten and battered fiber optic cable market. For Corning Inc., the world's leading supplier of the glass cables that carry optical signals, the past year has seen its orders drop like a rock as the world stops stringing fiber optic cable here, there and everywhere. But, if history's any indication, Corning will ride out these latest doldrums and survive to lead production of optical fiber and components when the market makes its inevitable rebound.

Much of the problem today in the fiber optic sector can be traced to a real slump in the expansion of long-haul data networks. That market isn't expected to recover until at least 2002. Its other area of focus, incumbent and competitive local exchange carriers, have stopped their network expansions as well, as competitive LECs find themselves on the fast track to oblivion. For the incumbents, a lack of competition means there is no incentive to upgrade their networks to evolve into the data business, where lower profit margins are more than likely in the near term.

Right now, Corning is in the middle of restructuring to stay afloat in this hardened climate. The restructuring the company announced will result in charges of up to $1 billion in 2001. It's also pink-slipping close to 12,000 employees by the end of the year, and has temporarily idled the majority of its worldwide optical fiber manufacturing plants. Drastic times, after all, call for drastic measures.

But even with the major changes, Corning still operates from a relative position of strength; it is the number-one maker of optical fiber, with a 40 percent share of the world market. It also has a strong component business making the lasers and amplifiers that drive fiber optic network performance.

In a nutshell, the company should be strong long term because an overall increase in bandwidth demand will likely continue to fuel overall growth for the fiber business around the world.

Another promising trend in optics is the migration from traditional backbone networks to metropolitan networks. Corning offers an innovative product, MetroCor Fiber, which increases the efficiency of metro networks by allowing optical signal to travel farther before needing amplification. Potentially, it could shave half the cost of building an urban optical network. Corning researchers also are working toward a promising all-optical switch, which could transform the switching business long term.

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