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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Steve Lee who started this subject	11/6/2001 9:29:36 AM
From: marginnayan	of 99280

MSDW on GLW: Corning (GLW-$8-N-V) A Closer Look at GLW's Debt & Cash Flow David Jackson GLW has $2.2B of convertible debt putable in 2005. The terms of the note state that it can be put back to GLW for stock or cash. If GLW pays in stock, 25% dilution would occur based upon yesterday's closing stock price. We think GLW will not have enough cash to pay for the putable debt in 2005. We forecast 3 possible cash flow scenarios. Each scenario implies that GLW's cash position will not be sufficient to pay the $2.2B in 2005. To avoid dilution, GLW must strengthen its balance sheet. We think GLW could accomplish this by issuing $1B of mandatory convertible debt a la Motorola (MOT-$17-O-V, covered by A. Shah). This may enable GLW to issue additional long-term debt to pay for the put in 2005. However, we think 11% equity dilution would result. We maintain a Neutral-V rating. We do not recommend GLW's convertible debt given GLW's weakening balance sheet. We estimate fair value for GLW's stock at $5-7.

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