3 Min Read
By Neha Alawadhi
Jan 28 (Reuters) - Specialty glass maker Corning Inc warned that prices of LCD glass would decline further in the current quarter, raising concerns about growth in its display business.
Corning shares fell as much as 9 percent on Tuesday.
"The one major concern investors walked away from the outlook was the pricing pressure in first quarter. Instead of being down 2-3 percent in the quarter versus the prior quarter, it's probably going to be down twice that amount," said analyst Steven Fox of Cross Research.
Core sales in Corning's display technologies business, which makes LCD panels for Sony Corp and Lenovo Group , fell 5 percent to $665 million in the fourth quarter.
The display business accounts for more than a third of the company's revenue.
Corning, best known for its Gorilla glass used in smartphones, said prices of LCD glass are expected to decline further this quarter as some contracts signed in 2012 require the company to match prices offered by rivals.
"We anticipate our price declines will return to more moderate levels after first quarter ...," Chief Financial Officer Jim Flaws said in an earnings call after the company reported better-than-expected quarter ended Dec. 31.
"If prices were to continue to decline like they are in first quarter, our competition would soon be incurring losses," he said.
Corning said it would still be profitable at even lowered prices as its costs are already lower than its competitors by a substantial percentage.
"The concern today may be related to pricing for display glass which took an unexpected dip at the end of the quarter," RBC Capital Markets analyst Mark Sue told Reuters in an e-mail.
Corning bought out Samsung Display from a 1995 LCD glass joint venture in October, a deal that was expected to add about $2 billion to Corning's annual sales.
The company, whose Gorilla glass is used in smartphones made by Apple Inc and Samsung Electronics Co Ltd , said net income rose to $421 million, or 30 cents per share, in the fourth quarter from $155 million, or 10 cents per share, a year earlier.
Net sales fell 9 percent to $1.96 billion.
Corning's core earnings were 29 cents per share.
Analysts on average had expected a profit of 27 cents per share on revenue of $1.93 billion, according to Thomson Reuters I/B/E/S.
A decline in sales of Gorilla glass hurt core gross margin, which fell by 2 percentage points to 40 percent.
Corning shares were down 6 percent at $17.12 on the New York Stock Exchange.