A dip in
fiber optic cable sales dims an otherwise bright outlook on TV sales next year.
Shares of the technology glassmaker sank 7% Wednesday after the company
reported mixed third-quarter results. The Corning, N.Y., company warned that telecom fiber sales would probably fall 20% or more sequentially, thanks mostly to the splurge and purge buying cycle of
But while Corning executives had nothing but glowing things to say about their big telco customer on a conference call with analysts Wednesday, they saved their biggest enthusiasm for TVs.
Corning makes the thin liquid crystal display glass that goes in flat panel monitors and televisions. And given the price declines and the strong consumer demand for new generation TVs, Corning now predicts that one out of three TVs sold next year will be LCDs.
Though the company doesn't plan to share its 2007 predictions until its annual analyst day in February, CFO Jim Flaws could hardly restrain himself.
"No question about it," Flaws said on the earnings call. "We'll see 33% penetration of LCD next year." Based on preliminary estimates, Corning guesses that LCD represents about 21% of color TV sales worldwide this year.
Flaws described how big-screen LCD TV prices in recent store fliers were coming down enough for his boss CEO Wendell Weeks to consider a purchase.
Overall, Flaws said the LCD business was heading in the right direction.
"We are seeing stronger TV demand, and the average size of the television is creeping up," Flaws said.
Bulls worry that TV prices may be falling too fast for Corning to get a good profit out of the deal. But the company's third quarter gross margin of 44% was wider than anticipated and executives are calling for the margin to stay in the 44% to 45% range this quarter.
For the third quarter, Corning's adjusted profit was 28 cents a share, beating analysts' estimates by 3 cents. But total sales of $1.28 billion were shy of the $1.3 billion target held by the Street. Sales guidance for the fourth quarter was also lower than expected, with Corning calling for a top range of $1.33 billion -- below the $1.36 billion consensus estimate, according to Reuters Research.
Shares fell $1.73 to $21.42 in midday trading Wednesday.