updated 10/7/2004 4:38:44 PM ET 2004-10-07T20:38:44

Shares of Corning Inc. fell more than 7 percent Thursday after the company said it will take non-cash charges of as much as $2.9 billion against third-quarter results as its telecommunications unit continues to struggle with industry sluggishness.

In a release late Wednesday, chief financial officer James Flaws said that while 2003 and 2004 telecommunications segment results have been on track with projections, "we no longer see signs of the broad uplift in industry conditions previously projected for 2005 and beyond."

Industry consolidation did not occur as Corning had anticipated, oversupplies are keeping prices too low, and a rebound in prices is not foreseen in 2005 and beyond, the company said.

"What we had assumed a year ago is that we would see competitors behaving more economically," Flaws told analysts in a conference call Thursday.

"We've had people pricing actually below their cash cost," he said. "And after a couple of years of people doing that, you start to think they're not going to change their behavior."

The announcement Wednesday listed charges of $1.4 billion to impair goodwill related to the telecommunications segment; $420 million from the expansion of its Concord, N.C., optical fiber facility that was mothballed in October 2002; and up to $1 billion for an allowance against certain deferred tax assets.

Also Wednesday, Corning said its board approved a $326 million expansion of the new liquid crystal display glass substrate factory under construction in Taichung, Taiwan. Manufacturing of substrates for desktop and television monitors from the second factory phase is expected to start late next year.

The materials company, which specializes in fiber-optic and glass products, recorded a $108 million profit for the last quarter that beat Wall Street forecasts, propelled by a surge in sales of glass used in flat-screen computer monitors and televisions.

The telecommunications industry's slump in 2001 forced Corning to shed noncore and money-losing businesses. Under James Houghton, who returned as chief executive in April 2002, the company has shut more than a dozen plants and nearly halved its work force to 22,500.

More than half of its optical fiber business, which remains the world's largest, has been mothballed. Corning's main fiber-producing rivals are Furukawa, Fujikura and Sumitomo in Japan and Alcatel and Pirelli in Europe.

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