Corning prepared for prolonged recession, but expects LCD demand recovery starting in 2Q09
Press release, February 9; Rodney Chan, DIGITIMES [Monday 9 February 2009]
Hard hit by slowing global economies, Corning is prepared for a prolonged recession, "but well positioned in key growth markets to take advantage of opportunities when the economy turns," Wendell P Weeks, chairman and CEO, will tell more than 200 analysts and investors attending the company's annual investors conference at The Times Center in New York on Monday (Feb 9).
"We are prepared for lower sales and earnings this year, with a conservative capital structure, ample liquidity, and a goal of generating positive free cash flow for the year," Weeks will say. At the same time, he will explain that the company is continuing to invest in a portfolio of products such as 10G LCD glass.
"After all," he will say, "we are in the midst of a recession, not an industry collapse. We believe we are on the right side of the technology substitution curve and the technology leader in all of our core markets. LCD is the winning TV technology, optical fiber is the only choice for the expansion of high-speed telecommunications networks and there is no turning back in the demand for clean air."
Peter F Volanakis, president and COO, will remind investors that last month the company announced restructuring plans to bring about US$150-US$200 million in annual cost savings. In late January, Corning announced it would reduce its workforce by 3,500 full-time positions, suspend salaried merit increases, and begin consolidating some manufacturing operations.
Corning expects that the contraction in the global LCD supply chain will ease by the end of the first quarter and overall demand will increase in the second quarter, leading to a stronger second half of the year. "We expect volume in the first quarter to decline 20% to 25% sequentially as the supply chain contraction continues," James P Clappin, president of Display Technologies Asia will say. He will also note that Corning has reduced its own glass production by more than 50% and its equity venture, Samsung Corning Precision Glass has idled more than 25% of its capacity.
"We believe that the 2009 LCD glass market will be about two billion square feet, flat with last year," he will note. Corning expects that there will be an overall decline this year in LCD monitor sales driven by the lower economy and notebook computers gaining market share.
He will explain that LCD televisions will continue to gain share in the global TV market as CRT popularity and availability decline. Overall, LCD televisions will exceed 50% of annual TV sales in 2009, the company believes.
Clappin will point out that the worldwide installed base of televisions is about two billion sets and less than 15% are LCD. "So there remains a very large substitution base and future opportunity. A 1% increase in global market penetration for LCD televisions represents more than 200 million square feet in additional glass demand," he will add.
James B Flaws, vice chairman and CFO, will tell investors that the company has designed its financial plan on a sales cycle that would result in about US$5 billion of sales in 2009. "Our first-quarter run rate will be less than US$1 billion as we continue to grapple with the realities of the recession," he will say. "As we explained, we are expecting significant improvement in LCD glass demand in the second quarter, leading to stronger demand in the second half of this year. If this improvement doesn't occur, we are prepared to take additional restructuring actions to ensure the financial health of the company."
The key words in Week's speach is "We are expecting significant improvements" IF it doesn't then we are prepared to take additional restructuring" Boy thats like sitting on a fence. Its like saying "if I win the lottery I will..." and if not then life goes on. In other words individuals are looking at the statemnet as being positive. But we all know what the economy is like. GLW is looking for a big FALL for there is no improvement in site. Look at Sony, Panisonic, LG, Samsung, Sharp etc. They are all predicting LOWER sales and profits. That being the case where /who is GLW going to sell to? maybe in exchage for food stamps?