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Light Reading Index Takes a Hit

Light Reading
News Analysis
Light Reading
1/25/2001

The Light Reading Index got hit on the head today as Corning Inc. (NYSE: GLW) issued some cautious growth projections during its quarterly conference call. The Index closed down 63.00 (7.73%) to 752.37.

Corning, the number one supplier of fiber-optic cable, announced solid results, but company executives cast a cloud over future growth by widening the range of future revenue and profit guidance (see Corning Caveats Rain on Earnings Parade). Analysts from Goldman Sachs & Co. (NYSE: GS), Merrill Lynch & Co. Inc. (NYSE: MER) and First Union all demoted Corning one notch, citing a work-down in inventories at Nortel Networks Corp. (NYSE/Toronto: NT) and Lucent Technologies Inc. (NYSE: LU). Lucent and Nortel are major clients for Corning's photonics components.

Corning posted fourth quarter sales of $2.1 billion, an increase of 52 percent compared with 1999 fourth quarter sales of $1.4 billion. Pro forma net income was $314.6 million, more than double the $142.2 million reported for the same period last year. This translates into 34 cents per share, up 89 percent from results of 18 cents in the fourth quarter of last year.

Corning closed down 13.87 (19.79%) to 56.25. The stock had a ripple effect on the market, taking most of the optical components stocks with it.

JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU) was downgraded by Salomon Smith Barney to an Outperform from a Buy citing planned inventory reductions at Nortel and Lucent. Nortel and Lucent account for roughly 25 percent percent of JDSU’s total sales. JDSU announced its earnings after market close today. JDSU closed down 7.87 (12.49%) to 55.19.

JDSU’s proposed merger with SDL Inc. (Nasdaq: SDLI) was postponed for another week (see JDSU and SDLI Delay Merger, Again). The company press release said that the Department of Justice needed more time to consider a proposal submitted by JDSU to avoid anti-trust concerns. Most analysts feel the deal will go through and as a result the price of the two stocks move in unison.

SDLI also posted solid earnings after market close yesterday (see SDL Triples Revenue in Q4). The company reported sales of $175.6 million up 200 percent from $58.7 million in the same period last year. Pro forma net income was $48.2 million, or 53 cents per share, versus $12.8 million, or 17 cents per share for the same period last year.

SDLI closed down 32.94 (14.19%) to 199.19.

-- Matt Malina, research associate, Light Reading http://www.lightreading.com

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