Corning: Coming back?: once at the top of the fiber optic game, Corning suffered in the telecom meltdown. But CEO Jamie Houghton might be turning things around - Profile - Interview

Chief Executive, The, June, 2003 by William J. Holstein

James R. Houghton was chief executive of Corning from 1983 to 1996. After retiring, he served on the company's board during the late 1990s, when Corning experienced surging demand for its fiber optic cables and related equipment, which accounted at one point for 70 percent of the company's sales.

Then the bottom fell out. Thanks to the telecommunications meltdown, Corning sales fell 50 percent. Its stock price plummeted from a high perch of $113 into the $5 range by the time CEO John Loose stepped down after 40 years with the company.

That's when several members of the board knocked on Houghton's door. "They asked me, very strongly, whether I would go back in," recalls Houghton, a scion of Corning's founding family. "It was an easy decision. I love the company desperately, so I said, 'Sure.'" It helped, in a crisis, that Houghton had a short learning curve. "It wasn't as though I'd flown in from Mars," he quips. "I had a lot of catching up to do and all that, but basically it's gone very well."

The company has had to cut itself down almost by half, shuttering factories and laying off nearly 18,000 of its 40,000 workers. But thanks to cost-cuffing and to its continued investment in its Corning Technologies arm, Corning appears to be rebounding. Its first-quarter numbers, excluding special charges, beat analysts' expectations by 3 cents. And its stock has risen by more than 60 percent this year; in May, shares were back up to $5.73 from a low of $1.10 in October.

Corning executives think the company will see profitability again as early as next quarter. Houghton believes the worst of telecom's nuclear winter is over, and that demand for high-speed communications will recover around the world. Here are excerpts of his conversation with Chief Executive.

How did you know you had to cut as dramatically as you did?

It actually started before I got there to a certain degree) but got much more intense in the last year. This was an unbelievable situation. I went back and looked at history because everybody said, "You know, Jamie, you've been through 1975, you've been through 1982, you've been through all these different difficult times."

But nothing is like this. Even during the Great Depression, our sales didn't go down by 50 percent. I think that was largely because we were making light bulbs then. Light bulbs wear out and you've got to keep going.

This was "the perfect storm" story. It was just amazing. I can't find any credible evidence anywhere that there was a group of people who saw it coming. So in my view this was a devastating event that nobody predicted, not the financial analysts, not our consultants, not inside, not outside, not anywhere. It just hit.

I very quickly decided that I wasn't going to spend a lot of time going over the past. It just wasn't worth it. I pulled my team together, all of whom were there when [former CEO] John Loose was there. It's a very good management team. And I said, we're going to move forward, period. That's what we've done, and so far it's been pretty successful.

Do you worry that you damaged the fundamental strength of your company by cutting your employment in half?

No, I don't think so. When I came back, I figured that my role was probably going to be most important in the context sense, not in the content sense. I've always been a real believer in values--the values of the company and quality and things like that. So I said to my team, "I'm going to preach the context in which we are going to operate, which is our seven values." Because content can follow context, but it doesn't matter what the content is if you've got the wrong context. If you're cheating around the edges or you're doing bad stuff, content doesn't make any difference. I said, "You guys know a lot more about content than I do. I'm going to participate in deciding our strategy, but strategy follows the right context. So my first goal is going to be setting that context."

What was the guiding principle of that context? Did you fall back on Corning's seven principles?

Values, absolutely--values starting with quality and the last value, which is the most important, which is valuing the individual. And I thought, especially at times like this, that it was really important because we were losing a lot of people and we had to treat them well, but we also had to keep the cadre we wanted to keep. So valuing those people was very, very important and it still is. We are working hard at that, because in a sense we reached the bottom and we can see some light, but this is the time people are going to question if Corning is the place they want to work. We want to make sure they stay.

After the collapse of the fiber business, you reached a 50 -50 split between that and Corning Technologies. What's the latest mix?

It's still about 50-50. I have always resisted the notion that we were just a [fiber optics] company or telecom company. The financial community was begging us to get out of these other activities because they like pure plays. They wanted us to get out of everything else except telecom. Thank God we didn't.