Corning: Is Gorilla Glass Cracked?

Dec. 8.11 | About: Corning Inc. (GLW)

There has been a lot of chatter about Corning (NYSE:GLW) and its cutting edge LCD product "Gorilla Glass." So much chatter that Motley Fool believes that GLW is the stock to own forever, according to one of its publications that comes " free" with a subscription to their premium service.

There are plenty of caveats in the publication of course, but when I read it I had to chuckle to myself that Corning of all companies would be the ONE stock to own now, and forever!

After all, GLW does not have that many bullets in its rifle, and maybe, just maybe, they have been hit by a torpedo on its blind side, and will have a tough time recovering, let alone leading.

The Basics

Corning: Price: $14.00/share, 2.20% dividend yield, ESS Rating of bullish

Corning Inc. (<a href='http://seekingalpha.com/symbol/GLW' title='Corning Inc.'>GLW</a>)
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A Korean company of flat panel TV's has backed out of a "contract" to buy LCD glass from Corning resulting in an unprecedented announcement by the company that they are reducing earning guidance by THIRTY (30) PERCENT, and cutting glass production to reflect further declines, including those of its prized product, "Gorilla Glass." Read this report

The Korean company to back out was not mentioned in their press release, but in a blog on Barron's (Read here) Tech Trader Daily, it was noted that LG Display Co. (NYSE:LPL) was the firm that canceled the balance of its orders with Samsung Corning. If this is true, and I can find no report from Corning to dispute this information, it is a huge blow to the immediate future of Corning's LCD business overall. I believe LG is one of Corning's largest customers.

It is of no surprise that flat panel TV sales have dropped significantly, and for this additional loss of business Corning already had "in the bag" is simply a disaster for the stock. LG was a huge customer of Corning, and they chose a less expensive glass to remain competitive. Something that Corning might realize but could not match.

That being said, what else does Corning have to keep its 10 billion dollar "promise"?

Well, they have Gorilla Glass. A fine product, perhaps the best in the industry, but it does have competition, and since Corning is cutting back on the production of this product as well, then they will have to re-tool, re-invest, and leap frog this technology to begin to regain its footing in my opinion.

My Opinion

Corning has been a fine company for a very long time. It has cash reserves, reputation, reliability, and has survived and thrived through good times and bad. I have even mentioned it in an article I wrote as a possible buy for a long term investor, and it might still be the case.

The facts remain, however, that Corning has taken a body blow, and it could take quite some time for it to catch its breath.

Even though the PPS has recovered since the initial news, I have decided to change my opinion of Corning, until such time that they can show me that they have a plan to recoup what they have lost. Revenue and earnings.

I believe analysts will follow this train of thought, and I am selling my position at a decent exit point.

* Please remember that this is my opinion, and not a recommendation for anyone to either buy or sell any stock mentioned here, or in any article. Do your own research and choose what investments are right for you to hold, buy, or sell using your own knowledge.

Disclosure: I am long GLW. I will be selling my position at an acceptable exit price soon. I will not short this stock.