Corning's Still Building Big

Corning Inc. (NYSE: GLW) announced today that it will spend $150 million on a new plant near Milan, Italy (see Corning Expanding in Italy). The move is the latest in a year-long spending spree that's brought Corning's total capital expenditures on components manufacturing facilities to nearly $1 billion since April 2000.

Table 1: Corning's Spending Spree

Date	Plant location/type of investment	Components	Amount of investment
2/8/2001	San Donato, Italy (new plant)	lithium niobate modulators, pump lasers, specialty fibers and fiber gratings	$150 million
1/23/2001	Fountain Valley, Calif. (new plant)	wavelength management modules	$20 million
9/7/2000	Nashua, N.H. (new plant)	pump and transmission lasers	$225 million
8/17/2000	Henrietta, N.Y. (new plant)	fiber-based passive components	$80 million
7/13/2000	Bedford, Mass. (expansion)	pump and transmission lasers and receivers	$225 million
6/28/2000	Erwin, N.Y. (expansion)	EDFAs	$50 million
4/3/2000	Benton Park, Pa. (new plant)	EDFAs, dispersion compensation modules	$200 million
		TOTAL	$950 million

The move shows that Corning's still planning aggressively for long-term production of optical components, despite talk of a slowdown in demand among its customers (see Corning Caveats Rain on Earnings Parade). It also indicates Corning may have gotten less than it bargained for in its purchase from Cisco of Pirelli SpA's component assets earlier this year (see Corning Buys Cisco's Pirelli Share). The new plant, Corning says, will replace the one that Pirelli had in Bicocca, Italy. A few hundred employees will move to the new plant, and more will be added to double the headcount to about 1,000 by year's end 2001. According to a Corning spokesperson, the new facilities will be "state of the art." The old ones were not.

Today's announcement also shows that Corning is undeterred in its plans for expansion, despite worries about the economic climate and despite rumors that Corning was among the companies that lost out to Nortel Networks Corp. (NYSE/Toronto: NT) in a bid for the much-coveted plant sold by JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) last week (see Nortel Buys JDSU Plant for $2.5B).

All told, Corning says it spent roughly $2 billion in 2000 on capital outlays for new plants in 2000, and it plans to spend another $2.5 billion this year. Roughly half of that will go directly to expanding components manufacturing, particularly amplifiers and pump lasers.

Analysts say it's vital for Corning to keep expanding this way. According to a report by Hasan Imam of Thomas Weisel Partners, Corning hasn't been able to meet demand in photonics components. Partly as a result of this, he downgraded Corning stock from Strong Buy to Buy late in January (see Nortel Buys JDSU Plant for $2.5B). Solving these capacity constraints is key to Corning's ongoing success, he says.

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