8-KOther Events

CORNING INC /NY 8-K Report (May 13, 2003)

Filed May 13, 2003For Securities:GLW

Summary

Corning Incorporated (GLW) announced on May 12, 2003, an agreement to sell a significant portion of its photonic technologies business to Avanex Corporation. This strategic divestiture is structured as an exchange for Avanex common stock, valued at approximately $25 million at the time of the announcement. In conjunction with this deal, Avanex also announced its intention to acquire Alcatel Optronics, aiming to create a more robust and consolidated photonics player. Corning expects to hold a 17% stake in the combined Avanex entity post-transaction. This transaction is a critical step for Corning as it navigates the prolonged downturn in the telecommunications industry. The company aims to preserve jobs within the divested business and refocus on its core telecommunications segments, including optical fiber, cable, and related hardware. Corning anticipates a pretax charge of $50 million to $70 million in the second quarter related to these actions, with an approximate cash impact of $40 million to $50 million, which includes restructuring charges and a $20 million contribution to Avanex. The company reiterates its commitment to returning to profitability in 2003.

Key Highlights

  • 1Corning to sell a significant portion of its photonic technologies business to Avanex Corporation.
  • 2Transaction valued at approximately $25 million in Avanex common stock.
  • 3Corning to retain a 17% ownership stake in Avanex post-transaction.
  • 4Avanex will also acquire Alcatel Optronics, consolidating the photonics market.
  • 5Expected to close in the third quarter of 2003, subject to regulatory and shareholder approvals.
  • 6Corning anticipates a second-quarter pretax charge of $50 million to $70 million.
  • 7Company reaffirms focus on core optical fiber, cable, and hardware businesses, aiming for 2003 profitability.

Frequently Asked Questions

Corning is divesting this business segment due to the prolonged downturn in the telecommunications industry, which has led to reduced demand for photonic technologies. This sale is part of a strategy to streamline operations, preserve jobs, and refocus on core, market-leading businesses like optical fiber and cable, with the goal of returning to profitability in 2003.

Corning expects a second-quarter pretax charge of approximately $50 million to $70 million. The total cash impact, including restructuring costs and a $20 million contribution to Avanex, is estimated to be between $40 million and $50 million. The exact charge will be influenced by the fair value of Avanex stock at closing.

Corning will become a significant shareholder in Avanex, retaining approximately 17% of Avanex's common stock after both the Corning and Alcatel Optronics transactions are completed. This ownership stake reflects Corning's continuing interest in the consolidated photonics entity.

The sale includes assets related to Corning's optical amplifier facility in Erwin, New York, and its optical components plant in Milan, Italy. Approximately 400 employees are expected to transfer to Avanex as part of this transaction. Corning's Lasertron facility in Bedford, Mass., manufacturing photonic components, will close by year-end, affecting about 150 positions.