How Corning Measures Up
There are many ways of analyzing a business. But perhaps one of the best ways is by creating a SWOT analysis. This sheds light on the good and bad points of a business in terms of its strengths and weaknesses, which are mostly internal in nature; as well as opportunities and threats, which are largely external. Here's how glass king Corning Incorporated (NYS: GLW) fares in a SWOT test.
- Corning has a strong foothold in the booming smartphone and tablet market, thanks to its scratch-resistant "Gorilla Glass" cover. The company's fourth-quarter sales almost tripled from the comparable period last year. Gorilla Glass is currently being used on more than 600 million devices sold by 30 major brands worldwide.
- The company has a long legacy of research and development in glass manufacturing. Its latest offering is Gorilla Glass 2, which is 20% thinner than its predecessor and allows a device to be much more touch-responsive.
- Corning has long-term supply agreements with many manufacturers. Of late, it has been able to secure similar contracts with heavy-duty diesel engine, truck, construction, and agricultural equipment manufacturers for its environmental products as well.
- Although a major chunk of the company's revenue comes from its display technologies segment, it has diversified its operations and made significant technological advances in life-science industry products as well. Product and industry diversification bodes well for the company.
- Corning has a healthy balance sheet with $4.6 billion in cash and equivalents that easily cover its $2.3 billion long-term debt.
- As the demand for LCD display glass stagnates, Corning will be compelled to reduce the prices of its glass substrates. Price erosion in the segment may continue to be a drag on earnings.
- The company made significant investments in the solar industry through its Dow Corning joint venture, expecting the solar market to climb by the end of 2012, but the possibility of that happening now seems remote due to overcapacity.
- Corning stands to gain from strong sales of its Gorilla Glass products through long-term relationships with customers such as Samsung, one of the leaders in the tablet and smartphone segment in emerging markets.
- Corning leads the market in particulate filters and ceramic substrates used in exhaust filters. The company should be able to cash in on increasingly stringent U.S. and European emission norms that will boost the market for filters used in automotive and industrial applications.
- Fellow Fool Anand Chokkavelu believes that Corning can generate up to $7 billion in FCF by 2014. That should give it plenty of opportunities to make acquisitions to supplement organic growth, if they choose to do so.
- Corning's highly popular Gorilla Glass does have its share of potential competition. For instance, Japan's largest glass manufacturer Asahi has developed a tough, scratch-resistant glass dubbed "Dragontail." If it is successful, this could encourage price competition between the two players.
- The company's Dow Corning joint venture faces external threats from political spats between the U.S. and China, which may also hurt its polysilicon business.
The Foolish takeaway
While Corning has a significant amount of expertise in making glass-based products, it faces significant headwinds in its display technology business. While there are reasons to cheer, I am watching this one keenly for any potential slips.
You can also stay up to speed with the latest on Corning by adding it to your Watchlist. It's free and lets you stay on top of the latest news and analysis for your favorite companies.
At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Corning.Motley Fool newsletter serviceshave recommended buying shares of Corning. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.