Corning (GLW) surged 8% early Wednesday after the company pledged to hold the line on glass pricing despite an expected first-quarter sales slowdown.Flexing its muscle as one of the dominant suppliers of liquid crystal display glass to the computer monitor and flat screen TV industries, Corning says it is planning to avoid a repeat of last year's price erosion and inventory glut. "We decided we are going to hold our prices in the seasonally softer part of the year because we believe the demand will be strong in the back half of the year," vice president of finance Kate Asbeck said in an interview Wednesday. The move could cost Corning some market share as other glassmakers cut prices. Corning also anticipates that its LCD production may slow, giving it a chance to make repairs. But clearly, Corning is trying to avoid the kind of inventory pileup that fueled steep price declines last year. LCD prices fell 9% in 2006. Corning says it expects to hold price declines to about 1% to 2% in the seasonally slow first quarter. Price drops should remain "moderate for the remainder of the year," the company says. "We are hoping for tighter LCD supply in the second half," CFO Jim Flaws told analysts on a conference call Wednesday. Due to the stiffer pricing policy, Corning expects first quarter LCD volume to be down 10% to 15% sequentially -- a reverse of the 15% volume increase the company saw in the first quarter of 2006 over the fourth-quarter 2005 levels.
Overall, Corning sees 2007 industry LCD volume expanding in the 35% range. Corning says it will likely grow slightly faster than that pace. The projection is a slower rate than the more than 50% growth rate last year. But as Asbeck points out, the volume increase comes off a larger base -- meaning a smaller proportional impact. The bullish pricing comments helped Corning investors overlook a mixed earnings report issued earlier Wednesday. Corning
reported earlier Wednesday that fourth-quarter adjusted earnings were 31 cents a share on sales of $1.37 billion. Analysts were looking for a 31-cent profit on sales of $1.3 billion. But the company said first-quarter numbers will fall slightly below targets, in large part because of the pricing decision. Corning shares rose $1.54 to $20.38 early Wednesday.