Mainstream media outlets weren't particularly enthused by Corning's (NYSE: GLW ) third-quarter results. And with Corning shares now trading just a nickel above their pre-earnings price, it appears investors agree. Gains in revenue and profit margin that The Wall Street Journal called "solid" helped boost Q3 profits 22% in comparison with last year. But with management warning that major LCD television players like AU Optronics (NYSE: AUO ) and Sony (NYSE: SNE ) will buy less of its glass this quarter than they did last quarter -- and pay less for it, to boot -- most investors are tempering their enthusiasm over Q3's strong performance and worrying more about the lower profits promised for Q4.
And that's not the worst of it. While sales, period, grew in Q3, sales in the all-important display business (i.e., glass used to build LCD TV sets) declined 5% in Q3. Which means we're not just worrying about a sequential decline in glass sales that might happen next quarter; we also have the established fact of a year-over-year decline in glass sales for Q3.
Where does an 800-pound gorilla get its money?
What's left for a Corning investor to feel bullish about? Two words: Gorilla Glass. For nearly a year, we've been waiting for Corning to deliver on its promised $300 million annual revenue stream from this new, scratch-resistant glass. Now, it seems Corning's on the cusp of making that happen. "Specialty materials" sales (Gorilla's stomping grounds) grew 26% in Q3, and Corning Chief Financial Officer Jim Flaws says the glass will produce $250 million in sales this year.
To date, we only know that Gorilla Glass is used in a handful of Samsung and LG cell phones, and Dell's (Nasdaq: DELL ) Adamo laptop (not exactly a runaway success). But Flaws tells us that unbeknownst to consumers, Gorilla Glass is now used in 240 products manufactured by 23 "major brands." Why "there's a good chance you ... own at least one product that has Gorilla Glass" already.
Where's all this Gorilla green coming from? Analyst Bernstein Research thinks that as Google (Nasdaq: GOOG ) and its licensees, Research In Motion (Nasdaq: RIMM ) , and Apple (Nasdaq: AAPL ) expand the market for smartphones, and Apple and its imitators roll out new tablet PCs, Gorilla Glass could bring as much as a $1 billion annual revenue stream by 2012. That's nearly half what Corning's display unit brings in today.
And Corning has only just begun.