Corning Inc.: Technology Strategy in 2003

Corning Inc.: Technology strategy in 2003

Group no. 7

Laveena Saxena (PGP32252), Prerna Chauhan (PGP32258), Muktesh Jain (PGP32264), Manu Gupta (PGP32289), Priyanshi Jain (PGP32299)

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Founded as a glass manufacturer in 1851, the company quickly established itself as a maker of specialty glass products. Over the next 100 years, Corning diversified into light bulbs, television, cookware, silicones, medical products, and, finally, optical fiber. As the telecommunications industry boomed in the late 1990s, the optical fiber business boomed with it, and Corning's stock hit record highs.

The firm made more than $9 billion worth of acquisitions in fiber and photonics (acquiring more than $6 billion worth of goodwill in the process) before the crash hit. Corning's stock collapsed, and in 2002 the company faced serious operating challenges.

The problem area in the case lies with the lack of diversification in the company’s portfolio with their major focus on the telecommunications segment, despite their main agenda being of diversification.

Due to telecommunications bringing 70% sales to the company, it also caused the maximum spend on the R&D that was equal to 68% of the R&D budget. This was beneficial till the market was doing exceptionally well in this segment.

However, as the telecommunication industry dipped, it caused direct impact on the company with the sales falling and having a direct repercussion on the stock prices of Corning Inc.

There are two reasons that can be attributed to the negative value of net income. They are:

1. One of the major changes to be noticed is a major restructuring charge of US$ 5725 million that is incurred in 2001 that has also led to net loss in income and this charge would not be reflected in the income statements henceforth.
2. The dipping of the telecommunication sector leading to a decrease of sales from US$ 5186 to US$ 4458 million

Recommendation to Joe Miller on how to spend the R&D budget

We need to now weigh the possible opportunities available with Corning Inc. as to where can it spend on its R&D to regain or improve its position in the market.

• Telecommunication- Photonics: Although the telecommunication market as a whole is expected to go down, this segment is showing an upward expected trend (Exhibit Table G) and also is the most mapped with the technological competencies of the company
• Information Display: With a promising future expected as visible from Table C with a 76.3% growth expected especially in advanced display products and also with LCDs being such a promising option for the future, this option is also viable for diversification. Also, when we map the technological competencies of the company with this segment, it shows that they are well related.
• Advanced Materials: With the intent of diversification of the portfolio and positive growth that is observable in the environmental products division this sector also has to be allocated with some R&D expenditure.

Also, with the 7 acquisitions made in the similar fields, it provides the company opportunities to leverage these competencies and open further possibilities for the company.