Cable Tech

Corning and Lucent May Reach Deal

Speculation is growing that Corning Inc. (NYSE: GLW) will soon make a bid to buy the Optical Fiber Solutions Group of Lucent Technologies Inc. (NYSE: LU).

"It's certainly a strong possibility at this point," says a director at a Wall Street investment bank, who requested anonymity. "I think we'll hear about this very soon."

Despite a lack of confirmation from both companies, sources say the only holdup is the concern by the U.S. Department of Justice about the potential size of Corning's market share should the deal go through.

"Corning would like to buy [Lucent's cable business], but the issue is: Will they be allowed to?" says John Dexheimer, president of Lightwave Advisor (no Website), an independent investing and consulting firm in Connecticut.

According to market research firm KMI Corp., Corning and Lucent share nearly half of the worldwide fiber optic cable market, which reached about $2.7 billion in 2000 and is set to grow 30 percent this year.

"[It's going to be] very, very tough for GLW [Corning] to pass this through DOJ," writes Jim Jungjohann, analyst with CIBC World Markets in an email note to Light Reading. He adds that Lucent's not likely to want to wait for a long, extended sales process, such as the one that marked the acquisition of SDL Inc. (Nasdaq: SDLI) by JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU).

Some analysts think it may be significant that Corning and Lucent are both U.S. companies. "It may help their case that the alternative to Corning buying Lucent's cable business is that otherwise it would go to a company outside the U.S.," Dexheimer says.

The other top players in the fiber optic cable market, who also seem to be in a financial position to be potential buyers of Lucent's Optical Fiber Unit, include Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Fujikura, Furukawa Electric Co. Ltd., Hitachi Ltd. (NYSE: HIT; Paris: PHA), Pirelli Cables and Systems, Sumitomo Corp., and a variety of Korean manufacturers -- according to KMI's research.

Another issue is price. According to an article in last week's Wall Street Journal, revenues from Lucent's Optical Fiber Unit totaled about $2 billion, and the paper quoted analysts -- including CIBC's Jungjohann -- as speculating the company might fetch as much as four times that amount in a sale.

But others aren't so sure. "Price? I don't have a good sense for it here," Dexheimer says. "Lucent's not in a great negotiating position, though."

He also questions the possible impact a sale of its Optical Fiber Unit might have on Lucent. According to its SEC filings, the unit was the only one in the company to post sales growth last quarter.

"If the sale goes through, it would clearly represent the last item of value Lucent has to offer," Dexheimer says. "I don't expect Lucent to last as a single business entity for longer than another two years."

Other analysts wonder how much the potential sale would benefit Corning. "To just buy more of the same -- I'm not sure that's good for Corning," said one analyst anonymously. "I'd like to see them try harder to expand out horizontally instead of just buying more fiber."

For their part, the companies involved aren't talking, even though the industry seems to take the possible sale as a given. "I'll reiterate what Jim Flaws [Corning's CEO] said last week: It's all rumor and speculation. I will neither confirm nor deny it," says a Corning spokesperson.

Lucent spokespeople are towing the same line, and add that the idea that its cable business is up for sale is in itself a rumor that Lucent never has confirmed.

-- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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morewestland 12/4/2012 | 8:50:31 PM
re: Corning and Lucent May Reach Deal
The blind buying the blind? Can you hear the pressure hull popping?

Peter Heywood 12/4/2012 | 8:50:22 PM
re: Corning and Lucent May Reach Deal You could turn the conclusions of this "study" around and say that folk that often get negative coverage in Light Reading tend not to advertise.

Surprise, surprise.

Mary Jander 12/4/2012 | 8:50:18 PM
re: Corning and Lucent May Reach Deal It also would be interesting to see what is perceived to be "negative" and "positive" coverage. Often, that's extremely skewed and depends on the specific interests of the person reading the particular article.
manoflalambda 12/4/2012 | 8:50:17 PM
re: Corning and Lucent May Reach Deal Heywood says --

"You could turn the conclusions of this "study" around and say thafolk that often get negative coverage in Light Reading tend not to advertise.
Surprise, surprise."

Well, D'uh. Does that mean they HAVE to buy
advertising to get positive Light?

lightreading=national inquirer 12/4/2012 | 8:50:16 PM
re: Corning and Lucent May Reach Deal i am responding to the post below. you and your boss need to wake up and smell the coffee. it's not only advertisers that receive preferential treatment on lightreading. as deep throat said in "all the president's men": you need to follow the real money. I would be very interested in seeing the coverage results of lightspeed-backed companies vs all the rest. as a lightspeed-backed company, lightreading has no business reporting on the optical networking space.

One of the three internship projects I am working on right now is focused on advertising in the telecom market. My boss told me to look at Light Reading and other on-line reports.

He was interested in the correlation between advertising and reviews in Light Reading, and told me to post my preliminary results. I rated companies from +5 (frequently positive, or very positive coverage in Light Reading) to 0 (very negative.) I still need to add alot of companies. I plan to do regression analysis for my final paper.

The results: advertisers averaged 3.5 and non-advertisers averaged 1.5!!!

Ciena 4
Mayan 1
Lightlogic 4
Sycamore 5
Coriolis 4
Trellis 4
Optisphere 4
Alidian 3
Avanex 3
Kestrel 4
Redback 5
Telabs 3
Riverstones 4
Village Networks 4
Morconi 3
Digital Optics 4
Telium 4
Fujitsu 1

Cisco 1
Corvis 0
Avice 1
Astral Point 3
Foundry 1
Extreme 1
Ironbridge 0
Lucent 0
Nortel 1
Zafire 0
Juniper 4
Broacade 3
Bookham 3
Sorrento 0

I really hope this is helpful for people considering advertising! I would really, really appreciate suggestions and comments! For example, should we have a daily ranking? What other areas factors can I measure?

liereading 12/4/2012 | 8:50:15 PM
re: Corning and Lucent May Reach Deal Lightreading model: Pay to play guys...I love this John guy's stdy - fork over the bucks or you're dead meat. The editors can defend themselves through any e-mail alias they want, but there's ultimately nobody outside of
Lightreading who can vouch for this model, not even the advertisers themselves. It's like advertising in Hustler - not exactly a source of

Cisco - new product announcements? strategic moves? DID YOU PAY? No? then we will rip into you with lies!

Nortel - most powerful entity in optical networking? 17 new customers last week? DID YOU PAY? No? then we will rip into you with lies!

Pay to play...

Pay to play
Rugger 12/4/2012 | 8:50:15 PM
re: Corning and Lucent May Reach Deal The companies on the "negative" side of this debate don't need LR to be successful. They need to execute. LR claims to only report what's happening in the optical realm. They don't claim to be market movers. Hell George Gilder doesn't seem to be much of a market mover anymore. The only market movers out there are the companies themselves. They either execute and flourish, or fail to execute and die.

However, LR obviously does play favorites among those who spend some of their advetising dollars here.
Richard228 12/4/2012 | 8:50:14 PM
re: Corning and Lucent May Reach Deal John - where do you work? Have you gotten some good feedback on other types of analysis you can pursue?

My company just got scorched by the LightReading flamethrower. I don't know what motivates these guys. They have alot of hate in their hearts. That
hatred is now destroying my families financial picture.
optinuts 12/4/2012 | 8:50:14 PM
re: Corning and Lucent May Reach Deal easy to pick on lucent, but:

why give sycamore a 5 and corvis a 0?

can LR defenders justify that?
DuckDuckGoose! 12/4/2012 | 8:50:13 PM
re: Corning and Lucent May Reach Deal Need to get this straight - who is bankrolling this periodical? They should
be running for cover. A fine company like Cisco also has a fine legal team.
Showing your middle finger to too many large companies for too long is
dangerous to one's health.
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