Verizon last April signed a $1.1 billion, three-year fiber and hardware purchase agreement with Corning, enhancing capacity to support a next-generation fiber platform that will support all the telco’s growing wireline and wireless network initiatives.
Wendell Weeks, CEO and president of Corning, told investors during its fourth-quarter earnings call that the expansion of its manufacturing facilities is being driven by its agreements with Verizon and Saudi Telecom.
“We’re not providing guidance on how much capacity we’re adding for competitive reasons,” Weeks said. “We launched this latest round of capacity expansion, which is anchored by the Verizon announcement and their commitment to spend $1.1 billion.”
Weeks added that initially the build out of these plants will affect profitability.
“You can expect the expansion of capacity to have a drag on our profitability in the back half of 2017 and the first half of 2018,” Weeks said. “You’re going to see those plants ramp up and increasing utilization in the back half of 2018.”
Earlier this week, Corning opened a new cable plant facility in Newton, North Carolina, as part of Corning’s previously announced plan to invest more than $250 million in its optical fiber, cable, and solutions manufacturing facilities.
Corning is also expanding other facilities in the state, including its fiber manufacturing facility near Concord and its cable facilities in Winston-Salem and Hickory.
Optical communications continues to be a key driver of growth for Corning as the company reported full-year 2017 sales of $3.5 billion, up 18%, and core earnings up 33%.
Corning attributed optical growth to gains in enterprise and carrier businesses, as well as contributions from acquisitions. Fourth-quarter optical sales increased 13% year over year.
In December, Corning struck a deal to acquire 3M’s Communications Markets Division assets for about $900 million to enhance the fiber maker’s global reach and high-bandwidth product portfolio. Corning expects to complete the 3M acquisition later this year.
Weeks said that the 3M acquisition “rapidly expands our offerings in the rapidly growing fiber to the home and optical solutions markets.”
The fiber vendor reported fourth-quarter core sales of $2.7 billion, up 7% year over year, and core earnings per share of 49 cents. Likewise, 2017 core sales were $10.5 billion, up 8%. Corning said that full-year and fourth-quarter 2017 core results have been adjusted to exclude $1.8 billion in non-cash items related to tax reform.
Looking towards 2018, Corning expects full-year Optical Communications sales to increase by about 10%, excluding any contribution from the pending acquisition of 3M’s Communications Markets Division.
By acquiring 3M’s communications assets, Corning will be one step closer to achieving its broader revenue goals. The vendor has set a course to accelerate optical sales to $5 billion by 2020.
“We expect to continue growing more than twice as fast as the communications infrastructure market,” Weeks said. “Rapid adoption of optical solutions in more market segments combined with the strength and relevance of our technology and innovation approach support superior growth.”