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Corning's Holiday Glow

Sales of thin TVs could fatten fourth-quarter profits.

Corning's (GLW) - Get Corning Inc Report display-glass business could take on a new shine as a TV industry record teeters.

Flat-panel TV prices are falling to new depths, and the holiday spending splurge is sending sales soaring to all time heights. The fastest-growing segment of this slim TV revolution is liquid-crystal displays. That's good news for Corning, of course, as one of the top suppliers of glass to the LCD panel and TV makers.

In fact, in the next couple of months, industry prognosticators expect LCDs to overtake the venerable cathode-ray tube, or CRT, model as the dominant TV in the U.S. market.

"LCDs could eclipse CRTs this quarter or next," says Paul Gagnon, an analyst with market researchers DisplaySearch. The view is pretty much the same at iSuppli, another TV market watcher. "In the first quarter, we will possibly see the shift," says Riddhi Patel, iSuppli TV analyst.

Worldwide, CRTs are still by far the most popular segment of the market, given the substantially lower prices the deep-box TVs fetch.

But price has been working in LCD's favor lately, as TV titans


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slash away at price tags in a fight for market share.

For example, prices last year on some 32-inch TVS -- the most popular LCD size -- fell below $1,000. A year later, 32-inch TVs are being advertised for under $500. Higher inventories and cutthroat competition have helped drive down prices dramatically, say industry observers.

"It's been a roller coaster the last two quarters," says DisplaySearch's Gagnon. "I may have to change my mind and buy an LCD this year instead of waiting."

According to DisplaySearch's latest projection, about 15 million LCD TVs will be sold globally in the fourth quarter, taking the year-end total to about 43 million units.

But Gagnon has a hunch that this might be the year of the LCD.

Fourth-quarter LCD sales "will probably exceed our expectations. Lots of inventory and lots of price drops will probably drive LCD volume to a higher point than we expect," says Gagnon.

Patel from iSuppli predicts January will continue to be strong for LCD sales, as people who delayed their decision finally pull the trigger. January is also a big time for football fans to upgrade, what with college bowl season and the huge NFL playoffs. And finally, says Patel, people may be looking to apply all their holiday gift cards toward a big purchase.

The nasty price declines that are feeding all this LCD popularity seem to be taking the biggest toll on the TV makers and their panel suppliers, says Patel.

"The glass suppliers and retailers have their own markups," Patel says.

Corning watchers will be pleased to hear that. Earlier this month, Corning said LCD prices were still falling, but volume remained strong, allowing executives to predict that gross margins will remain in the 45% range.

The stock closed up 52 cents at $21.52, as investors enjoyed a little preholiday glow.