At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.
But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
And speaking of the best ...
My, how a couple of weeks can change things. Just two weeks ago, I described for you how Corning (NYSE: GLW ) aimed to replace weakening LCD TV glass revenues with a super simian product by the name of Gorilla Glass -- and how smartphone makers like Apple (Nasdaq: AAPL ) and Research in Motion (Nasdaq: RIMM ) were key to Corning's effort. But fast forward 15 days, and what do we hear now?
That LCD TVs are going the way of the dodo -- and that it's all Apple's fault.
Yesterday, the ace analysts at Oppenheimer issued a pair of downgrades in tech, dropping Corning to "perform" and knocking AU Optronics all the way down to "underperform." The reason: Were I to sum it up in one word, it would be "iPad."
According to Oppenheimer, you see, there's trouble on the horizon -- and on the living room couch. Across the nation, consumers are rebelling over the high-and-increasing cost of hi-tech services for the home. They're "cutting the cord" on their landlines, imperiling revenue streams at AT&T (NYSE: T ) and Verizon (NYSE: VZ ) . And lately, they've begun pulling the plug on cable TV as well.
Between the continuing improvement of bandwidth and video resolution on laptop computers, the advent of smartphones, and the recent arrival of the iPad, consumers are finding it less and less necessary to absorb their daily dose of digital amusement with buttocks planted firmly on the family couch, eyes attached to the big screen TV. Instead, they're picking up their mobile devices, logging onto Hulu, Vudu, and video services making use of alternative vowels as well -- such as e/i advocate Netflix (Nasdaq: NFLX ) -- and taking their business elsewhere.
What's it mean to Corning?
The most obvious losers from this trend are, of course, AT&T and its U-verse service, Verizon and FiOS, Comcast (Nasdaq: CMCSA ) , Cablevision, Cox, and all the rest of the cable monopolies. But they're not the only ones. According to Oppenheimer "it's the TV market that should really be worried."
After all, if consumers can watch TV everywhere, and at a distance measured in inches-from-eyeballs, rather than feet-across-the-floor, how necessary is it to possess a 50" plasma TV hung upon the living room wall? For that matter, do you still need multiple televisions, spaced strategically across the length, breadth, and several stories of your McMansion, when you can simply pick up your iPad and carry it with you from room to room?
In Oppenheimer's view, the answer is: No, you don't. And that's bad news for glassmakers like Corning, which derives "more than 60% of its demand" from sales of the ultra-large sheets of glass that flat panel TV makers require to build their super-sized sets. Smaller glass panes on devices like the iPad, in contrast, can be made by many companies, bring lower profit margins -- and call into question the wisdom of the billions of dollars Corning has poured into the construction of large-panel glass manufactories, to maintain its edge over the competition.
Foolish final thought
Personally, I've been warning of this risk for years. I've argued that the same capital expenditures that bought Corning its lead in manufacturing capacity have sapped strength from its cashflows, and put the company at risk of obsolescence as tech trends evolve.
Now we have a real analyst making much the same argument: That Corning's been caught flatfooted as the iPad forges "a new paradigm for the consumption of video content." That "no industry may be more vulnerable than the LCD supply chain, which has depended on large-area TV panels for the majority of its business" -- and now has to contend with the growing popularity of a product that uses just one-tenth "the amount of glass used in an average 34-inch television."
It's time to wonder: Should an Apple a day scare you away from Corning?
Well? Should it? Click over to CAPS now, and cast your vote!