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New Corning Charges Could Reach $825 Million

The maker of fiber-optic cable doesn't expect much growth in telecom for another two years.
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Corning

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said Thursday it plans to take $800 million to $825 million in charges in the fourth quarter, and doesn't expect much growth in the telecommunications industry for another two years.

The New York-based maker of fiber-optic cable said the pretax charges would include about $400 million for goodwill impairment in its telecom segment, and $400 million to $425 million to account for the impairment of assets in its television glass and photonics businesses. The charge related to its conventional glass business reflects the impact of a decline in the North American television tube industry. As for its photonics business, the charge reflects a prolonged slump in the optical components market.

The move comes as a result of the company's annual assessment of goodwill as required by the Financial Accounting Standards Board.

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Around midday, the company's shares were down 26 cents, or 6.2%, to $3.97 on the

New York Stock Exchange. Corning's stock was once a highflier in the technology sector, posting an all-time high of $113.33 back in September 2000.

"Our outlook does not anticipate any significant growth in the telecommunications segment until late 2004," said the company's vice chairman and chief executive, James B. Flaws, in a press release.

The beleaguered company has been struggling to turn a profit for the last year-and-a-half, posting six consecutive quarterly losses as sales dwindled amid a massive industry-wide slowdown. Most recently, it warned that it wouldn't meet its fourth-quarter financial targets and would cut 2,200 jobs. The company expects to have its workforce reduced by 23,500 when the restructuring is complete.

The latest charges are in addition to a $550 million to $650 million charge it announced at the end of October. The initial charge was designed to cover layoffs and the closing of its optical fiber plants in Australia and Germany, as well as the closing of its facility in Concord, N.C.

"This has been a very difficult year, the long and deep depression in telecommunications industry capital spending has challenged us," Flaws said. The company reiterated that its restructuring will bring it back to profitability sometime in 2003. "We are prepared to do more if necessary," Flaws added.