UPDATE: Corning Sees Acquisition Opportunities In Downturn
06 Fevereiro 2009 - 3:52PM
Dow Jones News
Corning Inc. (GLW) executives painted a sobering picture for the
year but expressed optimism about the company's ability to take
advantage of the opportunities that have emerged from the economic
downturn.
"It's really bad out there," Chairman and Chief Executive
Wendell Weeks said during an investor conference on Friday. "We've
been hit hard by slowing global economies."
The Corning, N.Y., company is feeling the squeeze as demand
falters in all of its businesses. Its liquid crystal-display
division, once its strongest business, performed the worst in the
fourth quarter, with a 50% year-over-year sales decline. Its other
large business, making fiber-optic cables for telecommunications
companies, fell 6% from a year earlier. As a result, the company
said it will cut 3,500 jobs, or 13% of its work force.
"Concerns remain in our view as the global economy is still
challenged and consumers rein in their spending," said Mark Sue, an
analyst for RBC Capital Markets. "Nonetheless, Corning is being
more prudent this year than last year and adjusting its cost
structure for difficult times ahead."
Like many other companies that find themselves hard hit by the
economy, Corning has made a number of moves to cut costs. While the
company is on the defensive, Weeks said acquisition opportunities
remain. During these distressed times, valuations are down, he
said. The company sits on $2.8 billion in cash and short-term
investments.
For the display business, Weeks said he expects the current
supply contraction of LCD glass displays used in TVs to end in the
second quarter. Corning is taking a hit as its customers, the TV
manufacturers, are cutting back on inventory to match the reduced
demand for flat-screen TVs. It's unclear how the TV market will
fare as consumers hold back on buying big-ticket discretionary
items.
Corning expects decline in sales of both LCD TV and computer
monitors. It's the first significant decline in TV sales since the
energy crisis of 1975, said Jim Clappin, who runs the company's
display business.
The LCD business is particularly important for Corning because
the division has a disproportionately large impact on its stock
performance.
Corning's telecom business has been shrinking for years. One
bright spot has been Verizon Communications Inc.'s (VZ) investment
in fiber-optic lines, which it has been using to offer faster
Internet and video services. But Verizon, like most other telecoms,
is reining in its spending this year, which is a blow to
Corning.
Corning projects a 10% to 15% decline in the telecom market from
a year ago.
"We're prepared to take additional action in the second half to
protect the financial health if things don't get better," Peter
Volanakis, president and chief operating officer of Corning, said.
"We're gearing ourselves for a deep recession."
Still, the executive wasn't completely downbeat in his
presentation. Given Corning's pipeline of new products, the company
hopes to win new customers and gain market share against rivals in
this downturn, he added.
In addition to the job cuts, Corning shut down factories toward
the end of last year, with some still partly or fully down. The
company also suspended merit increases on salaries and has some
employees working short weeks.
The cuts and other restructuring moves will result in annualized
savings of $150 million to $200 million, Volanakis said. Capital
expenditure is expected to fall 42% this year.
"We're going to use the recession as an opportunity to improve
costs and fix things that aren't working well," he said.
Chief Financial Officer James Flaws said the company's goal is
to keep paying its dividend, but noted that it hasn't been active
in buying back shares under its current stock repurchase program.
He added Corning would consider cutting its quarterly dividend,
currently at 5 cents a share, if things get worse.
Corning stock was recently up 5.5% at $11.58.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020;
roger.cheng@dowjones.com