Corning Polishes Forecast for Glass - TheStreet

Eager glass buyers have convinced Corning (GLW) - Get Report that it has a clear view of growth in its display business, but investors still want to see the goods.

The fiber cable and glass panel maker reaffirmed its outlook Wednesday for a first-quarter profit of about 12 cents a share on sales in the range of $1 billion. Those numbers haven't changed since the

company's update last month and are in line with analysts' expectations, according to Thomson First Call.

Corning also stuck with its prediction that first-quarter liquid crystal glass, or LCD, shipments will grow between 5% and 10% over the previous quarter. The company said that glass panel buyer

AU Optronics

(AUO)

of Taiwan has agreed to prepay for future LCD shipments.

The comments eased some worries on Wall Street about Corning's outlook, particularly on the LCD front, where some fans had feared a slowdown. Even so, "people are still skeptical" about Corning's confident LCD stance, says American Technology Research analyst Chris Dzurinko. "We need to see two quarters of execution above expectations for Corning to convince the skeptics."

The Corning, N.Y., tech shop is the leading supplier of thin glass sheets used by LCD panel makers for flat-panel TVs and computer monitors. Corning plans to spend $1 billion on the expansion of its glass production capacity this year.

To help ensure that demand for larger glass sheets is strong, Corning has been accepting prepaid arrangements from panel makers. AU Optronics is at least the third LCD panel maker to commit payments ahead of orders in an attempt to hold its position in line for future glass supplies. Two other panel makers, Chi Mei and ChunghWa Picture Tubes, have similar arrangements.

Analysts say that ideally these arrangements work for both the supplier and the buyer by strengthening ties between the two sides. "The panel makers are worried about supply," says Dzurinko. A couple years ago, supply was tight and they weren't getting what they needed, says Dzurinko, who rates Corning a buy. "I think they are looking ahead at the next cycle and figuring out how they can be prepared."

But some observers point out that these prepaid deals merely establish a credit with Corning and are not guarantees or purchase commitments. In other words, unlike take-or-pay agreements common in the chip industry that require payment even if supplies weren't shipped, Corning's prepaid deals aren't as ironclad.

And while many industry experts predict big sales growth for flat-panel TVs and computer monitors, the consistency of supply and demand remain questionable.

In November, for example, after several assurances that LCD growth was holding strong, Corning ran into a

shortfall when a couple of big Taiwanese customers canceled orders.

Dzurinko says inventories are still an issue today. "We are not in a situation yet where there's tight supply," he says.

Corning shares rose 13 cents to $11.44 Wednesday.