Here at the Fool we know you've got a life. Between working while the sun shines and catching Zzzs when it doesn't, you may find it difficult to keep up to speed on Wall Street events -- corporate "investor conferences," for instance.
These meetings ostensibly benefit investors, but the companies behind them rarely transcribe their proceedings and file them with the SEC. As a result, unless you can attend in person, you're often left out in the cold. That's where our "Fool on the Street" series comes in. We listen to the conferences so you don't have to.
Without further ado ...
Today, we'll recap the news from Corning's (NYSE:GLW) Sept. 5 presentation at the Citigroup Technology Conference, where CEO Wendell P. Weeks made the company's case to Wall Street. As presentations go, this was a long one. Today, we'll whittle it down to just the three of the key-est of key points -- plus a bonus.
Guidance games
Corning's earnings guidance will grab all the headlines, but because it's already grabbed ours, we'll leave it at that. What I found even more interesting than the "accounting earnings" expectations, though, was Weeks' projection of $600 million-plus in free cash flow this year. Weeks called this "a significant achievement for the Company," but for my part, I must say I'm disappointed to note that even if this goal is achieved, $600 million will still leave a significant gap between cash profits and their accounting cousins.
How liquid is the crystal display market?
As I mentioned earlier, one of the biggest money makers for Corning is its business selling ultra-thin glass to the world's LCD TV panel-makers. Corning dominates this market, selling "almost three times the amount of glass as our nearest competitor." Now, with the credit markets melting down around us, fewer people buying houses and sometimes losing the ones they have, pundits are predicting a fall in sales of flat-screen TVs -- which, as a rule, are installed in houses (and, more seriously, which often have hefty price tags offset with generous financing arrangements offered by downstream retailers such as Best Buy (NYSE:BBY) and Circuit City (NYSE:CC)).
Weeks put that worry to rest, reassuring us that "the supply chain remains healthy," "inventory levels at ... the panel makers are within normal levels," and that he sees "no evidence of issues in other parts of the supply chain." Furthermore, Weeks observed that "none of the major U.S. retailers have changed their financing incentives, and our industry check of the market indicates that LCD product shipments are on track with our forecast, including shipments of LCD TVs." Weeks added that while the credit crisis seems centered in the U.S., only 29% of global LCD TV sales are actually made in the U.S., and that 70% of those sales are of sub-40-inch sets that consumers can often afford without taking out a second mortgage.
Ending this section with a bang, Weeks "pre-announced" a landmark deal with the world's LCD TV leader, Sharp, to co-locate a glass fab on site at Sharp's new "Generation 10" panel plant. Generation 10, or G10, refers to the size of the sheets of glass that can be sliced and diced into screens for LCD panels, later to be incorporated into LCD TVs. Sharp's will be the first G10 plant ever built, processing sheets of glass approximately three square meters in surface area.
Fiber is good for you ... and for Corning
And now we come to the big news of the day. Expanding on a reference to "Corning's recent breakthrough optical-fiber technology" made in the pre-conference press release, Weeks sketched out the advantages of the product, adding a few facts and figures to give an idea of its potential.
The product in question, optical fiber "based on a nano structure," marries the bandwidth of optical fiber to the flexibility of copper wire. Fifty patents in the making, Corning's product is supposedly "at least 10 times better than anything we've seen to the alternative."
The product aims to solve a significant problem in connecting big pipe optical-fiber trunk lines to individual buildings -- and in particular, to multiple dwelling units (MDUs in industry parlance, or "apartment buildings" in English).
The problem is that to feed the wires into multiple individual residences requires several sharp turns. In standard optical fiber, those sharp turns seriously degrade signal integrity, which is why the "last mile" of your Internet connection is so often paved in copper. Yet Weeks said Corning's new product, which is "100 times more bendable than standard fiber ... will allow cable fiber to be bent around very tight corners with virtually no signal loss."
Weeks didn't specify how replacing copper with flexible fiber along the last mile of an Internet connection will improve connection speeds. But a Fool can presume that if the improvement is significant, firms like Verizon (NYSE:VZ), AT&T (NYSE:T), Comcast (NASDAQ:CMCSA), and Level 3 (NASDAQ:LVLT) won't be able to avoid getting drawn into a flexible-fiber arms race. All it should take is one firm installing flexible fiber, and then billing itself as offering "faster connections" than the other guy, to make the other guy willing to ante up for the upgrade just to remain competitive.
When the starter pistol fires on this arms race, the potential market size could be huge. How huge? Weeks tossed around figures such as "over 680 million multiple dwelling units around the world and over 25 million in the U.S. alone." He even played the China card, announcing an expansion of the firm's Shanghai facility that will "insure we have adequate capacity to meet this opportunity and maintain our strong position in the China fiber market. The expansion will begin immediately and is expected to be completed in 2009."
Wild cards
In case all the above weren't enough to get investors in a buying mood, Weeks also drew back the curtain on a few of Corning's secret weapons, offering a "peak at our growth portfolio." Without going into much detail (Weeks didn't provide a whole lot), let's end with a rundown of some things Corning may offer for investor edification in future conferences:
- "Microreactor technology" could "fundamentally redo the way specialty chemicals are manufactured and pharmaceutical chemicals are manufactured"
- A "new epic drug discovery system which is a way to do drug discovery in a label-free environment"
- "Single crystal silicon on glass and green lasers."
Lack of details notwithstanding, just the bare outlines of the above ideas should leave little doubt in investors' minds that Corning remains a company on the cutting edge.
