Corning executives now believe the telecom industry won't revive for another year to year and a half. Optical networking has been hit harder than most technology sectors, as communications providers hold off on network expansions and upgrades and struggle with financial problems. The one part of Corning's business that was stronger than expected in the second quarter--optical fiber--grew largely on the strength of cheaper products, rather than that of the company's more advanced LEAF fiber.
Even more worrisome to Wall Street is Corning's decision to stop providing financial projections. "The lack of visibility from our customers, combined with market volatility, gives us less confidence in our forecast reliability," said Jim Flaws, Corning's chief financial officer.
And when the company drops any pretense at gauging the future, investors get especially nervous.
"Corning's sharp lowering of photonics estimates, inability to provide guidance and discontinuation of dividend will cause concern among investors," Goldman Sachs analyst Natarajan Subrahmanyan wrote Tuesday. "We continue to believe there will not be a significant uptick until there is more visibility into the timing of a fundamental rebound in business."
At least one Corning executive said months ago that his customers' expectations might be unrealistic, because telecom companies are chasing the same clients and assuming the same contract wins. Many now believe there is a glut of bandwidth in North America, at least for carrying data across large distances. And this week, Loose said so-called long haul transport remains the biggest concern.
The latest confirmation came Tuesday--not from Corning or another fiber maker, but from the other end of the spectrum.
As the largest online ad delivery agency, DoubleClick consumes more network capacity than most organizations. And during a Tuesday conference call with analysts, DoubleClick executives indicated that bandwidth is plentiful, with prices still falling from already cheap levels.
That's the last thing Corning and its peers need to hear.