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Technology Stocks : Corning Incorporated (GLW) -- Ignore unavailable to you. Want to Upgrade?

To: Curtis E. Bemis who wrote (587)	6/15/2000 9:28:00 PM
From: flopwedge	Respond to of 2260

Great looking chart! eom

To: Curtis E. Bemis who wrote (587)	6/16/2000 2:31:00 AM
From: pat mudge	Read Replies (4) \| Respond to of 2260

Curtis -- Thanks for the DLJ upgrade. I've finally finished transcribing ML's report and will post here and on SI: Merrill Lynch Corning Inc 12 June 2000 Investment Highlights: ú Corning is one of the world's leading technology companies and deserves a multiple at least in line with other technological leaders that have leading shares in their key markets. ú We are raising our price objective to $275, which assumes the shares trade at a multiple into the 70?s to our new cash EPS estimate, which we think offer opportunity for upside if the company continues to execute. Fundamental Highlights ú Corning announced that Q2 cas EPS would be much better ($0.78-0.80) than current Street estimates ($0.69). ú The upside is broad based and due to a combination of better fiber unit and pricing trends; excellent momentum in the photonics business; surging demand for liquid crystal display glass; and better gross margins, which is related mainly to the fiber business as well as the integration of the recent Siemens acquisitions. ú For the full year 2000, we are raising our single point cash EPS estimate from $2.75 to $2.93. We are raising our 2001 EPS estimate from $3.45 to $3.70. Excellent Execution This morning Corning announced that Q2 EPS would be better than current Street estimates. Management now expects cash EPS to be $0.78-0.80 in Q2 vs Street consensus of $0.69 and our projection of $0.68. This range is around 50% higher than a year ago EPS of $0.52. For the full year 2000, the company indicated that it now expects cash EPS to increase by 45% vs. previous guidance of 35%. Street consensus and our full year 2000 EPS estimate were $2.75 (+37% from 1999). This outlook includes small but strategically important acquisitions (e.g., IntelliSense) that are pending, which could be dilutive in 2000. The upside to the quarter is broad based and is mainly related to the following trends: ú better unit shipments and slightly better pricing for the company?s fiber products; ú excellent demand for the company's fiber cable and hardware products. These businesses are now grouped together under the trade name Corning Cable Systems, following the acquisition of the 50% of Siecor the company did not own and Siemens? worldwide optical cable and hardware business; ú continued momentum in demand for the company's photonic components and modules (approaching 15% of sales), which management now expects to increase by at least 80% in 2000 vs. prior expectations of at least 70% and 50% as recently as the end of 1999. ú surging demand for Corning?s precision flat glass (around 5% of reported sales) for producers of liquid crystal displays as the company ramps capacity to meet demand. As a result, consolidated sales (e.g., including joint venture operations) from this business should increase at least 70% from a year ago levels and profits should triple in this business; and ú somewhat better than expected gross margins, which is largely related to better demand and pricing in fiber as well as a smoother than expected integration of the Siemens business. In our view, the common theme of all these trends is that Corning has been able to meet robust demand by ramping up capacity at a rapid pace and without any missteps. We believe this pre-announcement is a testament to the company's manufacturing capabilities. Also, it is important to remember that incremental production capacity relative to expectations in the fiber business can have a major impact on profitability levels. . . . Highlights from SuperComm Our optimism for 2001 was also supported by our visit last week to SuperComm2000 where we met with a number of Corning managers at the company?s booth. SuperComm is one of the year?s biggest trade shows for the communications industry. As we expected, the company announced some positive developments during the week, including: ú Marconi Communications said it will incorporate one of Corning's new optical switching products into the design of Marconi's next generation Wavelength Division Multiplexing (WDM) product. This is an important step as Corning begins to realize revenues from its new portfolio of wavelength management devices in coming quarters. ú LightSpeed Fiber Network announced plans to use Corning's new MetroCor fiber for the metropolitan access networks it is building. Corning's modt recent fiber product is attractive with service providers and systems operators because it reduces network building costs by allowing for the use of less expensive optoelectronics. The company has now signed on four customers for its new MetroCor fiber, including Williams Communications, which should be the largest customer for this product over the next year. We think MetroCor is important because (1) it allows Corning to further benefit from the rapid growth of the nascent metropolitan market, and (2) further improves the company's fiber sales mix over time. Additionally, we were impressed with Corning's display of an end-to-end solution for the metropolitan market (e.g., pump lasers, fiber, multiplexing products, attenuators, amplifiers and switches) at SuperComm. This is probably the best example of how management plans to leverage its optical product breadth to drive sales even faster in coming years. This trade show was also Corning's first chance to present the company's complete communications offering at one booth following the Siemens? acquisitions. Following the acquisition of the 50% of Siecor that Corning did not own and Oak Industries, management has renamed its cable and hardware businesses, which includes a broad offering of interconnect products, as Corning Cable Systems. At the Optical Fiber Communications (OFC) conference in March, Corning, Siecor and Lasertron (Oak) each hosted their own booth to display product and meet with customers. We think this $750 million communications hardware business has a number of interesting opportunities in fiber, copper and coaxial forms of transmission. For example, demand for a number of Corning Cable Systems products used in the DSL rollout by companies such as SBC Communications are currently exceeding supply. Cable Systems is also well positioned for the broadband rollout with its CATV provider customers, especially with the recent addition of Gilbert Engineering (coaxial cable connectors, acquired with Oak Industries). Finally, over time we think there are more opportunities for corporate synergies as Corning Cable Systems supplies products used in manufacturing Corning's photonic modules.