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

To: i-node who wrote (1713)	5/11/2002 10:48:26 PM
From: Robert T. Quasius	Read Replies (1) \| Respond to of 2260

I Agree with your comments about the Barron's article. I worked for Corning until late last year, and will add my own two cents here. "On Wednesday, Quanta Services, one of the leading ditch diggers for fiber, said its telecom business had fallen by a third since December." This relates only to new fiber, and in the U.S. There are other areas of the world that lack fiber in the ground. China will be installing a large base of fiber optic in the near future, a market that Corning dominates. Also, as demand for bandwidth grows, unlit fiber will require photonics to light it. I would also add that there's quite a bit of fiber in the ground that will never be lit because it is already obsolescent for current photonics technologies. There seems to be a misconception on the street that fiber is fiber. There are significant differences that preclude using older generations of fiber optic for 10 Gig and/or 40 Gig, DWDM, etc. "Corning's prospects matter more, of course, than its miserable recent past. Some investors take solace in the nearly half of revenues that don't come from telecom businesses; among other things, Corning makes glass for flat-panel displays. But the non-fiber businesses don't have an exciting upside. Their operating margins run in the single digits. Corning's hope remains in a telecom recovery." Corning generally has very high margins for its products, and often is quick to dump businesses that don't offer high enough margins or good growth prospects. The only notable exception on margins is the flat glass business, where gross margins are low but the growth rate is very high. There are several non-telecom related products with exciting upside potential. One could start with catalytic converters for diesel engines. New regulations will drive a whole new market for diesel catalytic converters, which are significantly different than automotive catalytic converters. Corning has good technology for diesel catalytic converters, and stands to gain a dominant position in that market sector. Don't forget also that Corning has a history of continuously improving automotive catalytic converter substrates. "Pricing for fiber remains terribly weak. Even on a 10% rise in fiber miles, the dollar value of Corning's fiber sales dropped 16% in the last quarter. Other optical-component makers, such as Furukawa Electric and JDS Uniphase also announced lousy quarters. In reporting its last quarter's results, Cisco Systems told investors that its optical unit was doing the worst." True. Corning's gross margins for fiber optics are down because the product mix has changed from newer high margin fiber to older technology fiber sold to Russia or China. As bandwidth demand uses up excess capacity in the U.S. and Europe, watch for the product mix to shift back to newer technology fibers where Corning has a technology edge and commands higher margins.

To: i-node who wrote (1713)	5/11/2002 11:20:39 PM
From: E_K_S	Respond to of 2260

Hi David - I agree with your observations. This is from GLW's latest 10Q dated May 7, 2002: "...Liquidity and Capital Resources At March 31, 2002, Corning had $1.8 billion in cash and short-term investments and an unused revolving credit facility of $2.0 billion. Cash and cash equivalents decreased $79 million from December 31, 2001, while short-term investments decreased $315 million for the quarter. The total decrease in cash and short-term investments of $400 million includes $136 million of net debt repayments and $58 million of restructuring payments. Cash and short-term investments increased $676 million from March 31, 2001, primarily due to the issuance of convertible debt for $665 million in November 2001...." ===================================================== Corning has all ready booked the bulk of their 2002 $600 million restructuring charge (40% to be paid in cash) with only about $115 million left for all of 2002. As of March 2002 Corning maintained a total debt to capital ratio of 47% even after reflecting almost 80% of the one time $600 million restructuring charges. (Note their short term credit line of $2 Bil includes a covenant requiring Corning to maintain a total debt to capital ratio not greater than 60%.). Their short term revolving credit facility is current and is used mainly to finance current day to day operations with an average period of 11 days. It appears to me that the tough part is behind them. They plan to use $240 million of their banked cash to cover their restructure charge and this is the main reason for the rise in their debt to capital ratio (now 47%). IMO, there is more than enough padding to stay under that 60% bank covenant. Finally, I believe the company has greater book value than as reported simply because all their real estate holdings are recorded at cost rather than at market. I assume for a 150 year old company, they have some booked real estate assets valued at $0.10 when in fact (just factoring for inflation) are worth $1.00. To summarize, as long as their books are accurate and there are no out of the ordinary unforseen "aspetos type" liabilities, GLW becomes a great value play IMO. Many of their current business segments have huge potential for future growth. Even if you forget about the fibre business for the short term and look at their current operations, the company looks like a good keeper to me. If I get the chance to buy any below $6, I may just load up the truck. EKS

To: i-node who wrote (1713)	5/12/2002 4:23:24 PM
From: John Koligman	Respond to of 2260

At these prices (although Barron's does carry some weight and it may affect the stock this coming week), I think it's more a matter of picking which telecom firms will survive and hold them. I've been knocking firms like JDSU for a long time due to valuation, but bought in the low 4's and high 3's last week. I'm a trader, and think I'll make money on a bounce when sentiment turns, but long term holders should make out pretty well, as when things do turn stocks in the 3-6 range can double and triple pretty quickly. On the other hand, it's hard to see 'bubble buyers' ever seeing their money again in stocks like GLW and JDSU. Regards, John