Updated from 9:37 a.m. EST

Blindsided by the economic downturn,

Corning

(GLW) - Get Report

announced Tuesday it has slashed first-quarter guidance and will cut 3,500 workers, or 13% of its staff.

The recession and sluggish production of new flat-panel liquid crystal display TVs shattered Corning's fourth-quarter performance and first-quarter outlook.

"The disappointing economy has had a big impact on several of our businesses with display being the most pronounced," says Kate Asbeck, vice president of finance for Corning.

The tech glassmaking company

posted earnings

, excluding one-time items of 13 cents a share, 70% below the 40 cent pro forma profit in the year-ago quarter and well off the 19-cent analysts' target.

Sales for the quarter were $1.1 billion, below the $1.58 billion for the same period last year and nearly in line with analysts' estimates of $1.15 billion.

"The level of contraction in the supply chain was much more than expected," says Asbeck. There was no indication of the severity of how low inventory would go, Asbeck said in an interview Tuesday.

Corning cut LCD glass production capacity by 50% starting in November and December to adjust to the sudden drop off in orders, says Asbeck. While flat-screen TVs continued to be one of the few thriving segments in the consumer electronics market, constrained credit and spending hampered sales of jumbo-sized TVs, say industry researchers. And while intense competition helped lower prices and spur sales, TV makers tried to pinch costs to avoid high inventory.

The slump in orders will only get worse in the first quarter, said the company's CFO Jim Flaws in a press release.

Corning expects sales, gross margin and net income to slide below fourth-quarter levels and adjusted profit to just squeak by at break-even, said Flaws.

Corning joined the growing list of big tech shops like

Texas Instruments

(TXN) - Get Report

and

Sprint

(S) - Get Report

this week

swinging the ax

. Corning says the elimination of 3,500 employees will bring the company's costs in line with a $5 billion annual sales level.

With Corning's quarterly revenue level at or below $1 billion, which is $4 billion annualized, the $5 billion projection seems high.

But Asbeck says the company expects orders to pick up in the second quarter in advance of computer monitor and TV production targeted to the holiday buying season at year end.

Corning shares fell 65 cents, or 6%, to $9.30 in pre-market trading but were recently up 0.6% to $10.01.