Corning to Buy Siemens Units to Expand Telecom

Corning Inc., the No. 1 maker of the glass used in fiber-optic telecommunications networks, agreed to buy the fiber-optic cable and parts businesses of Germany’s Siemens for $1.4 billion to expand in Europe and Asia.

Corning is building its capacity for making fiber-optic cable, a market that is growing at 15% a year, J.P. Morgan Securities analyst Charles Willhoit said. That growth is expected to accelerate to 25% in the next two to three years as telecommunications companies race to build advanced networks to handle surging data traffic.

“The opportunities in fiber optics are tremendous,” said Robert Tango, an analyst at SunTrust Equitable Securities in Boston. “Corning is sending a clear message to investors that it’s focusing on telecom, its fastest-growing business.”

Corning will pay for the businesses, including the rest of its two joint ventures with Siemens, by issuing stock and debt. It also will assume $120 million in debt. The Siemens units have about 3,300 workers and $780 million in annual sales.

The acquisition, which is expected to close early next year, will reduce earnings by less than 5% next year but add to earnings after that, Corning said. In 1998, Corning had profit of $394 million on revenue of $3.48 billion.

Corning said earlier this week that earnings per share will rise about 25% next year on higher sales of phone-equipment parts.

Telecommunications business will make up 60% to 70% of revenue in 2000, up from an expected 50% in 1999, spokesman Paul Rogoski said.

Corning also makes fiber-optic components for telecommunications networks, which are used in the equipment that transmits signals on fiber-optic networks. The component market is forecast to rise 50% a year for two to three years, Willhoit said.

Siemens, a maker of products ranging from light bulbs to power plants, has been selling some businesses to focus on more profitable operations. Corning shares rose $2 to close at $107.25 on the New York Stock Exchange. Siemens’ American depositary receipts rose 75 cents to $115.75.