Corning (GLW) beat fourth-quarter targets as consumers' love of flat panel TVs drove a 46% rise in LCD glass volume.

But the Corning, N.Y., maker of glass for flat panel screens guided lower for the first quarter, saying it expects glass volumes to drop sequentially as a result of what it calls normal seasonality.

For the quarter ended Dec. 31, Corning said it made $646 million, or 41 cents a share, reversing the year-ago loss of $33 million, or 2 cents a share. Sales rose to $1.37 billion from $1.2 billion a year earlier. Excluding a one-time gain, latest-quater earnings were 31 cents a share.

Analysts were looking for a 31-cent profit on sales of $1.3 billion.

Corning said total LCD glass volume, including both Corning's wholly owned business and the Samsung Corning joint venture, increased 46% year over year and 20% sequentially. Net income for the Display Technologies segment, which includes results of Corning's wholly owned business and equity earnings from SCP, increased 25% to $461 million in the fourth quarter compared with $368 million in the fourth quarter of 2005, and 17% compared with the third quarter.

The company guided to first-quarter earnings of 24 cents to 27 cents a share on revenue of $1.26 billion to $1.31 billion. Analysts were looking for a 28-cent profit on sales of $1.34 billion.

Corning said that first-quarter sequential glass volume for both its wholly owned business and Samsung Corning Precision will be down 10% to 15% compared with the fourth quarter.

"This sequential volume decline reflects the seasonality of the LCD TV market as television becomes a larger part of the LCD industry," finance chief James Flaws said. "Historically, the color television end market has seen 55% of total sales occur in the second half of the year. Retail sales of LCD televisions are more weighted in the second half due to the rapid increase in penetration.

"We anticipate that this seasonality decline may fall more heavily on Corning in quarter one due to our overall market share and our new pricing strategy. We expect to see our total glass volume increase significantly as the market expands in the second half of this year. Additionally, we are encouraged that the LCD industry appears to be operating at lower levels during the first quarter in order to avoid a repeat of last year's panel inventory buildup which caused significant disruption in the LCD supply chain."

Price declines of 1% to 2% are expected in the first quarter for Corning's wholly owned business. At SCP, first-quarter price declines are anticipated to be higher, and any subsequent declines are expected to be moderate for the remainder of the year.

Corning also said it wants to keep more cash on hand to invest in emerging technologies:

"Our board of directors has established a goal to maintain a cash balance in excess of debt as a protection against volatility in our markets," Flaws said. "The board has also approved priorities for the use of any cash beyond this level. First, we will repay debt maturities within the upcoming three years. Second, we will earmark funds needed for potential major new developments coming out of our laboratories. After these priorities are achieved, the board will consider share repurchases or the reinstatement of dividend payments."

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