Barron’s: Corning announced its Q4’08 outlook and it is disappointing but not surprising. Corning expects Q4’08 revenues of US$1.2 billion to $1.3 billion with profits of 20-28 cents per share. Wall Street was expecting revenues of US$1.54 billion and profits of 42 cents per share. Quite a disparity! Corning also expects glass volume to be down 10%-20% Q/Q with its wholly owned businesses down 20%-30% Q/Q. Samsung Corning Precision (SCP) is expected to decline by 5%-15% Q/Q. And on a Y/Y basis, glass volume is expected to 2%-13%. What is interesting is that Corning has been telling everyone that they have not seen any decline in LCD TV demand.
Corning is only partially at fault for the company had a single source for US LCD TV retail sales and that source was signaling that everything was humming along as usual. Up until now. The “everything is OK” response from Corning was unusual as many LCD manufacturers as well as major LCD TV brands like Sony have been adjusting LCD TV supply for at least a couple of months.
CEO Wendell Weeks stated that Corning will be reducing captial spending, scaling back some manufacturing operations and reduce the rate of growth in research, deverlopment, engineering expenses and overhead. CFO Jim Flaws commented that the company’s gross margins would tank by 20%-30% for its wholly owned display businesses due to lower sales and capacity reductions in Q4’08. 5% is due to one-time costs for shutting down glass tanks while the rest is due to lower utilization. Previously Corning expected overall LCD glass volume to grow 15%-25% Y/Y; now the company is looking at 5%-15% Y/Y growth. The reason? Slowing in consumer demand for LCD TV.