Corning (NYSE: GLW ) recently released its first-quarter results and although earnings were higher than expected, revenues fell short. The company is in a solid position in the display technology field and enjoys some hefty margins in the sector, but the glaring problem for Corning is its lack of materialized potential and its overdependence on display technologies.
It's not bad, but it's not great
All right, so knocking a company that's been around since 1851, built the glass for Edison's light bulb, and invented the first commercially viable optical fiber may seem a little brash. But the fact is that the company has recently failed to deliver investor gains on great technologies like Gorilla Glass. The glass is used in about 1.5 billion devices in more than 33 brands around the world, and it's the glass that's unofficially used in Apple's (NASDAQ: AAPL ) iPhone and iPads. According to Steve Jobs' biographer, Walter Isaacson, Corning began mass-producing Gorilla Glass at the suggestion of Jobs for the first iPhone.
Gorilla Glass is part of Corning's specialty materials unit, but its display technology division is the one that makes up the vast majority of net profits. Being so dependent on one segment isn't reassuring for investors. Revenue has been mostly flat since 2012, although profits have been stable, but its wholly owned display division saw an 8% revenue decline this past quarter year over year.
Even its joint display venture with Samsung, called Samsung Corning Precision, is expected to have flat production through the coming year, despite the partnership making up more than half of the glass panel market. TVs simply don't excite consumers like smartphones do. No one is waiting in long lines for the newest television release, but they will for a smartphone.
That's why Willows Glass could be the company's night in shining armor, when it becomes available for consumer electronics in 2016. Willow has the potential to usher in a new breed of consumer products like wearable computing, and some have speculated that a possible Apple iWatch would be a prime candidate for the new glass.
But it's hard to make a bet on Corning at this point just on Willow Glass' potential. Many investors made the same bet when Gorilla Glass was first introduced and although it's become widely used in the mobile industry, Corning still relies too heavily on its television and computer screen display segment. At this point, investors may want to wait and see if Willow Glass will revolutionize the consumer electronics industry like some think it will. Buying Corning's stock right now and waiting for Willow to bring big gains seems too much like a repeat of Gorilla's path.
With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this brand-new premium research report on Corning, our analyst walks through the business as well as the key opportunities and risks facing it today. Click here to claim your copy.