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Optical components

Corning's Plant Restarts: A False Spring?

Corning Inc. (NYSE: GLW) has said it is reopening two of its five optical fiber plants that were idled in October, and it plans to call back some of the 2,500 people who once worked in those Concord and Wilmington, N.C., facilities.

What's more telling, however, is what the company isn't doing.

It isn't declaring that the carrier fiber glut is over. And it isn't backing down from the grim guidance it gave in October, when it said it was looking forward to seeing about $1 billion in fourth-quarter revenues, down from $2.1 billion it reported during the year-ago period (see Corning Slams on the Brakes and Corning Meets Low Expectations).

Corning's fiber plants in Neustadt, Germany, and Noble Park in Victoria province, Australia, will likely resume production in the next month or two, but the company also intends to shut down a 200-person plant in Deeside, North Wales, according to an Associated Press report.

In 2001, Corning took several cost-cutting measures in the face of slowing demand for optical fiber, including cutting 12,000 jobs.

When Corning originally idled the North Carolina plants in October, the plan was to keep them shut down until the company had worked through some excess inventory that had built up in the preceding months. "It's not that they're reopening plants. They're partially reopening plants that won't be running at anywhere near capacity," says Gabriel Lowy, an analyst with Credit Lyonnais Securities.

"Faced with excess global fiber capacity and the transition of optical network deployments from the long-haul to the metro and access markets, we continue to believe [Corning's] revenue and earnings have begun to slow to lower rates of growth over the next several years," Lowy writes in a Jan. 7 note to clients.

"We anticipated that we'd need to get back to manufacturing [for current customers] in the first quarter," says Paul Rogoski, a spokesman for Corning. "We don't want anyone to read anything into this other than that we're doing what we said we were going to do."

There's no word yet on how many Corning employees will be put back to work at the plants, and the company hasn't ruled out idling the plants again if market conditions worsen.

— Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com
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