Updated from 2:39 p.m. EDT
Extensive cost-cutting helped
predict a narrower-than-expected first-quarter loss, but with revenue continuing to evaporate the company was forced to lay out plans for another round of belt-tightening in an attempt to slow its still blistering rate of cash burn.
The fiber-optic cable maker also offered a confusing outlook, saying its business bottomed in the first quarter but also observed that its customers in the telecommunications industry haven't stopped cutting their spending.
Corning was lately up 4 cents, or 0.6%, to $6.89, but down from a 52-week high of $27.49.
"Although sales were slightly below our guidance for the quarter, we are encouraged that the sequential rate of decline for the quarter slowed substantially versus the declines experienced in the second half of 2001," said Corning's chief financial officer, James Flaws, in a statement.
The Elusive Bottom
"We believe the first quarter is a bottom," said Dan Collins, a Corning spokesman. "We don't have an indication things will get worse. But we're not in a position to say when we'll see signs of improvement."
Corning said it would post a net loss of about 10 cents a share, better than estimates for a 17-cent loss, due to improved results in its information display and advanced-materials businesses. Sales, however, will be about $900 million, compared with expectations of $941 million. In the year-ago period, the company had earnings of 29 cents a share and sales of $1.9 billion.
Corning would not comment on volume growth in the quarter before it releases earnings on April 22.
"They're adjusting faster than expected to an environment where you're seeing some positive signs, such as the sequential decrease in spending declines," said Mark Langley, an analyst at Needham.
Still, the company, which built infrastructure in anticipation of a robust telecom market, has work to do. It will take restructuring and impairment charges of $600 million, spread over the next two quarters, to align its operations to "its near-term market outlook and the reality of being a smaller company."
"It is unclear how much of the $600 million charges will be cash," said Sam Kingston, an analyst at Dresdner Kleinwort Wasserstein. "I am waiting for detail on how it is going to be digested."
Corning expensed nearly a billion dollars in charges in 2001 and currently has $1.8 billion cash and short-term investments on its balance sheet, about $400 million less than at the end of 2001.
In February, Corning said it would be free cash flow positive in 2002, but it did not reiterate that forecast on Monday. The company has a $2 billion revolving credit facility, which expires in 2005.
Based Kingston's calculations, Corning has until 2003 before its balance sheet sees stretch marks. "They don't have their backs up against the wall yet, but they've put themselves in a precarious situation," he said. "If the end-markets don't improve in the next two years, they will have a big problem."
Spokesman Collins said the additional job cuts could total up to 4,000. In 2001, Corning eliminated 12,000 jobs, idled manufacturing plants and reduced capital spending.
And Corning said its chief executive, John Loose, would retire on April 25. The company will appoint James Houghton, its current chairman, to the additional position of CEO. Houghton has been nonexecutive chairman since June 2001, and was Corning's chairman and CEO from 1983 to 1986.