Wednesday, January 28, 2009

Corning cuts 3,500 jobs as 4Q profit slumps

ROCHESTER, N.Y. (AP) -- Corning Inc. said Tuesday it is cutting 3,500 jobs, or 13 percent of its payroll, as demand slumps for glass used in flat-screen televisions and computers.

The specialty glass and ceramics company, the world's largest maker of liquid-crystal-display glass, announced the cutbacks as its fourth-quarter profit plunged 65 percent to $249 million, or 16 cents a share, from $717 million, or 45 cents a share, a year earlier.

Excluding one-time items, its profit of 13 cents a share came in well below Wall Street's forecast of 20 cents a share.

Sales slumped 31 percent to $1.08 billion from $1.58 billion, below $1.16 billion in sales forecast by analysts polled by Thomson Reuters.

The company also cautioned that per-share profits before one-time items will likely be canceled out in the first quarter. Sales will fall below fourth-quarter levels as projected LCD glass volumes slump 20 percent to 25 percent, it said.

Shares of Corning fell 7 cents to $9.88 in morning trading - near the low mark of its 52-week range of $7.36 to $28.07.

In December, the company withdrew all guidance for the October-December period because of volatility in the LCD market. An earlier projection called for profit of 20 cents to 28 cents a share on sales of $1.1 billion to $1.2 billion.

"We're not in denial about the recession and started taking quick action in quarter four and are continuing to do so in quarter one to get our cost structure in line with the sales level," Chief Financial Officer James Flaws said in a conference call with analysts.

The cutbacks at Corning, which employs 27,000 people, will result in first-quarter restructuring charges of $115 million to $165 million before taxes as well as fourth-quarter charges of $22 million. The move will bring annualized savings of $150 million to $200 million, it said.

About 1,500 of the 3,500 jobs being eliminated are salaried employees. The company also is cutting more than 1,400 temporary jobs. The restructuring program will include a selective early retirement program and consolidation of manufacturing plants.

The 157-year-old company is based in the city of Corning in rural western New York. About 640 of its 5,000 employees in the Corning region will be laid off, it said.

Sales in its display technologies segment fell 50 percent to $390 million from $774 million a year ago. Aside from a drop in retail sales, panel makers have slowed their purchase orders to try to reduce a buildup in inventories as prices fall, the company said.

Market research firm iSuppli Corp., based in El Segundo, Calif., estimates about 102 million LCD-TVs were shipped worldwide in 2008, up from 78.5 million in 2007. In North America, shipments were expected to grow to 29.5 million in 2008 and edge up to 30.1 million this year.

"There's always this oversupply-undersupply cycle in the LCD business, and this time the down cycle just happened to coincide with the recession," said analyst Paul Gagnon. "It's driven a lot of pessimism, but long-term we still see this as a product with growth potential, even in mature markets" such as the United States.

The abrupt slowdown in LCD-TV sales, its biggest business by far, serves as a nagging reminder for Corning that relying on one colossal cash cow product leaves it vulnerable to severe cyclical swings. The dot-com bust in 2001 came close to sinking a company with lopsided investments in fiber optics.

Corning is striving to expand beyond a heavy focus on display glass. Among its high-wager hopefuls are mercury filters for coal plants, green lasers to equip cell phones with projectors and silicon bonded to glass to extend battery life for handheld electronics.

Sales in Corning's telecommunications unit fell 6 percent to $405 million from $430 million on weakened optical fiber sales for private networks. Environmental technologies sales fell 32 percent to $128 million from $189 million, hurt by weaker auto-pollution filter sales.

For all of 2008, Corning earned $5.26 billion, or $3.32 a share, up from $2.15 billion, or $1.34 a share, in 2007. Sales edged up to $5.95 billion from $5.86 billion the previous year.
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