Corning: 2008 had a split personality, Q3 saw decline in demand, continuing to 2009 Q1. A defensive strategy was in place

[corning] Weeks (CEO) described 2008 as a year with a “split personality.” He reminded shareholders that Corning had been on track for another year of record-breaking performance through the first half, but as the global credit crisis took hold of the economy in the third quarter, Corning’s business momentum began to decline. He reported that the first quarter of 2009 remained weak, with company sales down 9 percent sequentially and down 39 percent year over year. However, he noted that Corning benefited from strong LCD TV demand, and the company was profitable and free-cash-flow positive for the quarter.

Despite better-than-expected first-quarter performance, Weeks said the “reality is that we are experiencing a deep and prolonged recession. So, our 2009 priorities are clear.” He said Corning is focused on protecting the financial health of the company by preserving and conserving cash; investing in the future to create new revenue streams; and continuing to live the company’s values.

Weeks said that the need to protect the company’s financial health “has made it necessary to take painful actions, including closing plants and letting some of our people go.” He described Corning’s “Rings of Defense” model, explaining it begins with moderate cost-cutting steps and moves on to more severe ones as conditions worsen. He said, “It isn’t a scientific formula and it’s not something we rigidly follow. It really describes directionally how we choose among a range of difficult actions.”

Weeks explained to shareholders that the first ring was part of cost-cutting measures decided last year and implemented in the fourth quarter when the company curbed capital expenditures, questioned discretionary spending and stopped outside hiring. The second ring involved extended plant shutdowns, eliminating contractor and temporary positions, and returning employees from overseas assignments. As the recession deepened in January, the company implemented the third ring which included a global workforce reduction of 13 percent, salary freezes, and plant consolidations.

Weeks cited several examples of successful recent product introductions, including the ClearCurve® bend-insensitive fiber suite of products; the Epic® system drug screening technology; and Corning’s durable and lightweight Gorilla™ glass, which has now been designed into 20 different electronic devices including cell phones and notebook computers. He also described several initiatives that would create Corning's next wave of growth. These include:

synthetic green lasers that make it possible to project large, high-resolution images from portable devices like cell phones;
glass reactors that increase the efficiency and quality of chemical processing, while reducing the materials and energy used; and
photovoltaics technology that leverages Corning’s flat glass for solar energy.