LCD Glass Glut Costs Corning

Catching the company flatfooted, two of Corning's Taiwan customers cut orders for flat-panel liquid crystal display screens.

The glut-inspired move forced the tech glass maker to trim fourth-quarter LCD sales projections Thursday.

Display glass surpassed fiber-optic cable this year as Corning's largest source of revenue, and investors didn't appreciate the bad news, sending the shares down 8% Thursday.

Corning now projects fourth-quarter LCD sales will be flat to up 3% vs. the previous quarter's levels. Just over two weeks ago, the company had expected growth somewhere between 3% and 10%.

The fact that Corning is a poor predictor of its own business isn't really a surprise. For a good portion of the boom years, the company maintained that it had more fiber-optic cable orders than it could fill. Corning executives were still talking about big fiber demand even after it was clear that phone companies had shelved their ambitious network expansion plans.

Corning has since de-emphasized its optical-fiber efforts, taking a big writedown last quarter to adjust the fallen value of that business. But if big telco demands proved hard for Corning to anticipate, imagine how challenging the consumer electronics industry must be.

Vowing not to be fooled again, CFO Jim Flaws pledged last year that sudden changes in demand for display glass wouldn't catch the company by surprise the way the fiber cable collapse did. Corning says it learned its lesson from the disappointing days when customers discovered they had a surplus of so-called dark fiber, or unused cables, in the ground.

Addressing analysts on a July 2003 conference call, Flaws said "there actually are no dark displays." He went on to add that "unlike the fiber market," the LCD market is tracked by a variety of market researchers.

"We believe we have a very good line of sight where the end products are going and the pace and demand from these reputable industry sources," Flaws said.

That view apparently still isn't clear enough right under Corning's nose, in Taiwan, where a couple customers are buried in glass.

600450 LCD Glass Glut Costs Corning
Date: 3 December 2004

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