Corning to Acquire Pirelli's Optical Components and Devices Business For $3.6 Billion.

Business & Technology Editors

CORNING, N.Y.--(BUSINESS WIRE)--Sept. 27, 2000

Corning Incorporated (NYSE:GLW) and Pirelli S.p.A., announced today that Corning has agreed to acquire Pirelli's interest in its optical components and devices business for approximately $3.6 billion in cash. Pirelli's optical components and devices business, based in Milan, Italy, is a leading manufacturer of lithium niobate modulators, pump lasers, certain specialty fibers and fiber gratings used in optical networks.

Under the terms of the acquisition, which has been approved by the Boards of Directors of both companies, Corning will pay approximately US$3.6 billion to acquire all of Pirelli S.p.A's 90% interest in its optical components and devices business. The remaining 10% of the company is owned by Cisco Systems, Inc. Corning will make an initial payment of approximately US$3.4 billion, and may make a contingent payment of US$180 million upon the achievement of certain business milestones.

Corning expects to finance the purchase with proceeds received from the issuance of a combination of equity and convertible debt securities. While the specific mix has not yet been determined, Corning will raise funds in proportions that maintain its strong financial position. The financing will be lead managed by Goldman, Sachs & Co.

The investment is expected to be less than 5% dilutive to Corning's 2001 Pro Forma earnings per share (EPS) and accretive thereafter. Pro Forma earnings exclude amortization of purchased intangibles and goodwill, purchased in-process research and development, one-time acquisition costs, discontinued operations and other non-recurring items. The acquisition, which is subject to customary regulatory approvals, is expected to close by the end of the fourth quarter of 2000.

The transaction will be accounted for as a purchase. Corning will likely record a charge for acquired in-process research and development when the transaction is completed. The goodwill associated with this transaction is expected to be amortized over a 5-10 year period.

In announcing the acquisition, Corning's Chairman and Chief Executive Officer, Roger G. Ackerman stated, "The acquisition of Pirelli's active component technologies and products significantly adds to our capabilities in the transmission segment of the optical layer. The combination of Pirelli's business with our leading position in optical fiber and photonic technologies enables us to continue to provide our customers with an enhanced value proposition for high-speed next generation systems."

Marco Tronchetti Provera, chairman and CEO of the Pirelli Group stated, "Through this transaction Pirelli will strengthen its long-standing relationship with Corning and will reinvest the proceeds to further enforce its strategic role in its core businesses: telecommunications, energy transmission and tires, capturing opportunities to create additional value."

The addition of lithium niobate technology will broaden Corning's portfolio as the company continues to position itself as a leading supplier of photonic products to optical layer companies. The capabilities of Pirelli's optical components business in 980 nm pump lasers for submarine use directly complements and supplements Corning Lasertron's terrestrial 980 nm pump capabilities.

Lithium niobate modulators are ideally suited for use in high-speed, long haul optical communications networks. The technology has been chosen by a majority of long-haul equipment suppliers because it has the best combination of optical, electronic, and reliability performance.

Corning will host a conference call to discuss the details of the acquisition on Wednesday, September 27, 2000 from 8:30 a.m. to 9:00 a.m. EDT. To access the call dial (888)-282-0369 or [phone], password is: Corning IR. A replay of the call will begin approximately 1/2 hour after the call is completed and will run through 5:00 p.m. EDT on Friday, September 29. To access the replay dial [phone], no passcode will be required.

Established in 1851, Corning Incorporated (www.corning.com) creates leading-edge technologies for the fastest-growing markets of the world's economy. Corning manufactures optical fiber, cable and photonic products for the telecommunications industry; and high-performance displays and components for television and other communications-related industries. The company also uses advanced materials to manufacture products for scientific, semiconductor and environmental markets. Corning's revenues in 1999 were $4.7 billion.