Corning Strengthens Role in Filter Market
Daniel S. Burgess
CORNING, N.Y. -- When potential competitors, suppliers and customers are one and the same, preparation for contingency is the key to success. In the synergistic world of telecommunications typified by last year's merger of JDS Fitel Inc. of Nepean, Ontario, Canada, and Uniphase Corp. of San Jose, Calif., (and the subsequent multibillion-dollar acquisitions by the resulting JDS Uniphase Corp.) it is not enough to buy for market consolidation and distribution channels.
Accordingly, Corning Inc. announced a $2 billion agreement to purchase Sturbridge, Mass.-based NetOptix Corp., a manufacturer of thin-film filters. In addition, within the span of three weeks, Corning announced plans to expand its ability to manufacture thin-film filters for its dense wavelength division multiplexing (DWDM) components at its facility in Marlborough, Mass.; to form a joint venture with its partner Samsung Electronics of Seoul, Korea, to package the filters; and to acquire British Telecom's Photonics Technology Research Center in Suffolk, UK, to develop next-generation DWDM components. Effectively, Corning has positioned itself to become an end-to-end supplier of these products for the long term.
Paul A. Rogoski, Corning's manager of corporate information, pointed to the explosion in demand that led to more than $400 million in sales of components for the company in 1999. "We needed to expand capacity," he said. The NetOptix purchase does that and ensures it a stable supply of parts by establishing captive production.
Yet what is good for JDS Uniphase and Corning is not the norm for other photonics companies. "Vertical integration is an advantage; I wouldn't say that it is a trend," Rogoski said. "It's beneficial for cost, manufacturing, supply and responding to changes in the market." Indeed, while companies such as Nortel Networks of Brampton, Ontario, Canada; Murray Hill, N.J.'s Lucent Technologies; and Cisco Systems Inc. of San Jose, Calif., have acquired captive suppliers, they still rely on outsourcing and so are subject to changes in the relationships between companies.
"Corning's strategy is to be the leading supplier," Rogoski said. "Anytime you have more control, it's advantageous to you."
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