Corning shares take a wild ride after flat-panel glass warning

Shares of Corning Inc. rallied Wednesday despite a warning that prices for its lucrative, liquid-crystal-display glass used in flat-panel monitors will fall more sharply in the first quarter than in the past.

The glass, fiber optics and materials company posted fourth-quarter results after the markets closed Tuesday. While its shares tumbled nearly 6 percent after the opening bell, they jumped $1.14 cents, or 4.7 percent, to close at $25.39 Wednesday on the New York Stock Exchange _ near their 52-week high of $25.76.

Corning's chief financial officer, Jim Flaws, said in a conference call with analysts Wednesday that he expects gross margins in the company's display technologies business to remain steady in the first quarter as costs drop and larger-size video monitors become more popular.

"We are anticipating sequential LCD glass pricing to be down more significantly in the first quarter than in recent quarters," Flaws said. "However, as a result of our ongoing cost-reduction programs, the benefit of additional volume of large-sized glass ... we believe we could maintain our display gross margins during the quarter."

After the first quarter, he added, Corning expects price declines "to be more in line with the longer-run historical levels for the remainder of the year. ... The key for us remains our ability to lower cost as pricing comes down."

Corning said it expects first-quarter earnings of 21 cents to 23 cents a share before one-time items on sales of $1.2 billion to $1.25 billion. Analysts were expecting quarterly profits of 23 cents per share on sales of $1.224 billion.

The company lost $32 million, or 2 cents, in the October-to-December quarter because of one-time tax charges but still matched Wall Street's expectations. Sales jumped 16 percent to $1.2 billion from $1.03 billion a year ago, but fell just shy of Wall Street's prediction of $1.21 billion.

Excluding tax-expense charges of $371 million, or 24 cents a share, and an $84 million after-tax gain related to a foreign subsidiary, Corning earned $339 million, or 22 cents a share, which was in line with the mean forecast among analysts surveyed by Thomson Financial.

The drop in the share price was Wall Street's reaction "to them posting a loss" as well as signs that "competition is heating up and the prices for LCD TVs would be declining," said analyst David Naranjo of market research firm DisplaySearch in Austin, Texas.

Helped by a surge in demand for its super-thin, unvaryingly flat LCD glass, sales in Corning's display technologies division jumped 67 percent to $518 million from $311 million a year ago. But profits for that segment fell nearly 10 percent to $328 million from $363 million in the third quarter because of a slightly lower gross margin percent and higher tax rates and operating expenses.

As many as 38 million LCD TVs will be shipped worldwide this year, up from 20 million in 2005, Naranjo predicted. Of those, some 9.5 million units will be sold in North America.

LCD glass accounts for about 38 percent of Corning's annual revenue, which totaled $4.58 billion in 2005. The company, based in western New York, commands an estimated 55 percent of the worldwide LCD glass market.

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