The New York-based glass and ceramics maker has established itself as a major player within a niche of the communications industry since the 1970s. At that time, the company invented optical fiber, the fishing line-like wires comprising most modern networks. This invention facilitated an unprecedented boom in recent years in network reconstruction.
Corning, which sold its cookware business in 1998, has become the world's largest supplier of fiber-optic wires and the cabling that sheaths them, analysts say.
Now the company is reportedly considering a purchase of a Nortel Networks fiber-optic components unit in a move that would expand Corning's business and allow it to keep pace with the likes of JDS Uniphase, an optical parts maker that is acquiring SDL. Corning representatives declined to comment on the talks.
The immense demand for communications network capacity has led to an explosion in the number of companies building fiber-optic networks. That new construction helped spawn dozens of start-up optical equipment providers, including Sycamore Networks, Ciena and Corvis, among others, many of which have gone public and sported lofty stock valuations.
"In terms of the market (for fiber-optic wires), it is not as big as the equipment market, and its growth is slower," said Patrick Fay, an analyst at KMI, a fiber-optic market research firm. "But you still need to have fiber and cable for the network operators who are building all these new networks."
The market has grown substantially in recent years as carriers such as Qwest Communications International, Level 3 Communications and Aerie Networks, among others, continue to expand their networks. Last year, the worldwide installation of fiber-optic cable rose 39 percent, according to a new study by KMI.
That growth has helped Corning's bottom line.
The company posted strong second-quarter earnings earlier this month based, in part, on higher-than-expected sales of fiber-optic wires.
Corning reported pro forma net income of $271.1 million, or 94 cents a share, compared with net income of $136.5 million, or 52 cents a share, for the same quarter a year ago.
Wall Street expected the company to post a profit of 80 cents per share, according to First Call/Thomson Financial, a company that tracks consensus estimates.
Quarterly revenue increased to nearly $1.8 billion, up from more than $1.1 billion a year ago.
Financial analysts reacted positively to the results, in some cases raising estimates and price targets for Corning.
Christopher Crespi, an equity analyst at Banc of America Securities, reiterated a "strong buy" rating on the stock and set a new stock price target of $325.
"We were positively surprised by Corning's...earnings announcement and believe it firmly indicates the continued strength we see in the optical-networking space," Crespi said in a recent research report. "Corning has made significant effort in expanding the company's telecommunications portfolio, and as a result it is evolving into a premier optical networking company."
International fiber-optics presence
As the company is a leading fiber-optic cable producer, its hair-like glass strands are being installed across the globe as dozens of new communications carriers scramble to build new networks. KMI projects Corning as the leading optical-fiber manufacturer, ahead of No. 2 Lucent Technologies and No. 3 Alcatel.
"They're a strong player. They have at least 30 percent of the worldwide market," KMI's Fay said.
The company, which generates roughly 70 percent of revenue from its telecommunications products, sold its cookware and medical research units and increased its research and development budget.
"We were a very different company five or 10 years ago," said Corning spokeswoman Monica Ott. "Corning in 1996 decided to focus on high-growth, high-tech products, which was the catalyst for selling its biomedical and cookware businesses."
But some analysts believe Corning will simply follow the industry into the market for fiber designed for metropolitan area networks and corporate campuses. Many communications carriers already are testing installations of fiber-to-the-curb, in which fiber-optics, rather than other technologies, are installed as close as possible to customers.
"There's still going to be a tremendous demand for fiber in the coming years," Fay said.
Corning makes both single-mode fiber, used in long-haul networks, and multimode strands, more suitable for metro and campus situations.
In addition, the company makes the sophisticated photonics technology that powers fiber-optic networks including network amplifiers and pump lasers. Company executives believe that making both the optical fiber and the photonics gives Corning a unique advantage over other companies that do not work as closely with both of the necessary pieces of a modern network.
The company, which is approaching its 150th anniversary, also manufactures specialized glass for flat-panel computer monitors, high-end TV tubes and ceramics for the automotive industry.