Corning Earnings Call Insights: Share Stability and Demand-Driven Declines

Corning Inc (NYSE:GLW) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Share Stability

Mark Sue – RBC Capital Markets: Jim, we understand you’re focused on share stability for Display Glass to better forecast catastrophe and so far so good. What could be significant indicators on pricing changed (for tell) about the market share intentions from your competitors. I asked since every action has a reaction and I’m wondering if rationality may prevail in the industry or do you feel that competitors are still considering what they should do at this point and do external factors such as currency actually imply some share shift in the forthcoming quarters?

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James B. Flaws – Vice Chairman and CFO: Mark, I’ll have to let you speak directly to our competition about their intentions. We believe what we’ve seen in quarter one both in terms of how the contracts are working on our share and on more moderate price declines indicates that we believe the industry is moving to more moderate price declines for LCD Glass, so that’s the only initial indicator I can give you. I believe our competition is announcing the results today and next week. So, we look forward to hearing what they have to say about guidance, but that’s our strong belief that we can see moderation and price declines in the LCD business.

Mark Sue – RBC Capital Markets: Then may be if I touched on Gorilla Glass where you’re focusing on moving up more capacity there, Gorilla Glass, which is still highly differentiated. Are we at a point where prices for Gorilla Glass can actually start stabilizing or not decline since it is a premier product that’s going through a lot of premier end markets, such as smartphones and tablets. What should we kind of assume for pricing for Gorilla glass segment for the balance of the year?

James B. Flaws – Vice Chairman and CFO: We expect prices to decline in Gorilla. This remains a new product. It’s in the consumer electronics industry. However, we think we can keep up with any price declines. The price declines in Gorilla tend to happen in the first quarter of the year so you should expect some price declines this year, but we’re very confident we can keep up with that in terms of our cost reduction and experience the great growth that we expect from this market going forward and we continue to do very well with all customers and our recent announcement of our Gorilla 3 went over very well at the Consumer Electronics Show and we’re expecting a strong conversion rate of new customers to this improved image resistant glass.

Demand-Driven Declines

Rod Hall – JPMorgan: Jim I want to clarify one thing you said which is I think I heard you say that Specialty Materials is expected to be down 30% sequentially, just want to make sure that we heard that right? Then if that is correct, just get you to give us a little more color on that if that is demand driven declines that are little bit more decline than we would have anticipated or is there something else going on there’s other threshold changes in the use of Gorilla glass and some unknown factors coming up for the same, it would be good to get some color on that? Then the other thing maybe more on the positive side I wanted to ask you about the panel industry just maybe if you could comment in 2013 about the supply capacity of the panel industry whether you think supply gets short as we move through 2013 or just kind of what you think the situation there is and how that might come back and impact glass pricing?

James B. Flaws – Vice Chairman and CFO: Sure Rod. So on Gorilla, I did say 13% and we think it’s probably slightly higher than what the normal seasonality that we experienced in Gorilla to be, probably because there was a little inventory build through Q4, but we now are 6-year Gorilla and what we’ve determined is Q1 is always the quarter where we see the weaker demand. So it is demand driven, but demand may be partially affected by inventory. We’ve seen no change in market share for Gorilla and in fact, now we think Gorilla 3 will actually improve our position, it’s a much better product. So we are not worried about the slight down in Q1, and actually are anticipating very strong growth in the remainder of the year. In the back half of the year, we think touch will begin emerging on notebooks, and as you know notebooks are about twice as big as a tablet and many times bigger than a smartphone, so we think that will be good for us. So we are not worried about the slight down in Q1. Relative to panel industry, it’s a little hard for us to judge. Clearly the panel capacity has been moderated in terms of the growth over the past year and the new panel capacity in China by LG and Samsung is not coming on fast. So, as we continue to see the LCD market grow, and I’d emphasize again the large scale televisions and I mentioned the growth in 50 inches this past year and the average size going up, and I don’t know if you had a chance to go to the Consumer Electronics Show, but clearly very large size and increasing focus on higher definition for those. I think we’ll use our panel capacity, whether it actually gets to a shortest position or not, it’s hard for me to judge from my position, but I would say there is good signs in the panel industry as well as on our LCD glass business.

Rod Hall – JPMorgan: Jim, just a follow-up in first part of that question, thank you for that. But I wanted to just see, could you make a more general comment on your views of consumer demand situation right now. Do you feel that demand you are starting off the year ago weaker than you would have anticipated, or just generally any color you can give us on what you’re thinking on consumer demand will be interesting.

James B. Flaws – Vice Chairman and CFO: You’re asking for Gorilla demand at retail?

Rod Hall – JPMorgan: No, just more general consumer demand because you had made the commentary on LCD demand, that being a little bit weaker, do you feel like consumer demand in general, the parts of consumer demand you anticipate to is a little bit weaker than normal seasonality as you are heading into Q1, or — I’m curious what you think is going on with the consumer.

James B. Flaws – Vice Chairman and CFO: I would say, I have to break it down by geographies, but in the U.S. I think television demand is fine, heading into the Super Bowl. People forget that people buy televisions after Christmas. In China, we’ve had good contact with our customers who buy the glass there and Chinese television sellers remember the Chinese brands are about 70% there. Their expectations are for a good Chinese New Year, and demand I think it remains mediocre in Europe, that really no surprise. In our car business, which is the other consumer phenomenon that we experienced the card demand I think in the United States remains strong, very weak in Europe. I think card demand in China looks fine. We do not feel like we’ve seen this big downdraft from the United States from the payroll tax rolling back on. Obviously the fiscal cliff negotiations have helped a lot of American’s except the very wealthy. So, we’re not seeing a big downdraft in consumer demand.

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