The demand for LCD televisions has stalled. The price of glass is falling thanks to an oversupply in the market. Gorilla Glass is a goofy name for a product. We've heard all the complaints about Corning [NYSE: GLW], the world leader in specialty glass and ceramics, and the market has priced the critiques into its shares.
But while there might be some headwinds at the moment for some of its products, those who discount the company based on the monthly sales of its latest new thing are missing the story of this venerable company. Sure, management warned recently that major LCD television players such as AU Optronics [NYSE: AUO] and Sony [NYSE: SNE] will soon be buying less of its glass at a lower price. And yes, its critical display business (the glass used to build LCD TV sets) is on the decline.
But more importantly, Tom views Corning as an R&D machine.
The company is constantly pumping profits into research and development, essentially creating new industries along the way. When Corning engineers made the glass for Edison's first light bulb, they weren't necessarily thinking about large-screen television sets. And when the company started making large-screen TV sets, it wasn't necessarily thinking about changing the composition of that glass in order to make it more durable and scratch-resistant (the aforementioned Gorilla Glass) for handheld devices.
But innovation is hard-coded into Corning to the point that it is an ever-changing company. From generation to generation, from decade to decade, it's a constantly evolving entity so that it could well be a different company in 10 years from what you might buy today. Corning constantly has an eye toward the next wave and adapts to capitalize on the industries that others can't yet envision.
As CEO Wendell Weeks told the Fool in an interview in 2005, "Corning has never been an easy company to categorize. Even during the explosive growth of our telecommunications business in the late 1990s, we were about more than communications equipment. While display is our fastest-growing and most significant segment today, we are not narrowly defined as a TV parts supplier.
"Simply put, Corning is a diversified technology company with a unique history of innovation. We combine our materials and process expertise to solve difficult systems problems for customers. We develop unique products -- keystone components -- that enable new complex systems. We don't play in one market or industry. We invent technologies such as optical fiber, which revolutionized telecommunications networks. We invented and perfected the glass-fusion manufacturing process that enabled our leading position in the production of liquid crystal display glass substrates for desktop monitors, laptop computers, PDAs, and now, flat-screen televisions. We invented the ceramic substrate that is the centerpiece of emissions control systems on gasoline-powered automobiles and diesel engines, and we are heavily involved in the life sciences field. So, Corning doesn't fit neatly into Wall Street's industry categories."
So analysts who downgrade Corning and investors who sell their shares based on the latest quarter or the success or failure of a particular product line are a benefit for long-term investors. Adoption for Gorilla Glass is heating up, and the company's CFO thinks it could bring as much as $1 billion annual revenue by 2012 -- nearly half what Corning's display unit brings in today.
That's great. But a decade down the road, the primary driver could well be wit