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Technology Stocks : Corning Incorporated (GLW)
GLW 40.05+0.5%Jun 21 4:01 PM EDT

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From: Asymmetric12/17/2014 12:13:13 PM
   of 2260
The pioneering tech company you've probably never heard of
John Lynch / The Independent / Published 15/12/2014

Believe me, it's hard to be far away from the company we are perusing today. The company is called Corning and if you like to watch the telly, turn on the internet, cook a casserole, drive a car or indulge your compulsive interest in the revelations from the Hubble telescope, then Corning has already had a big bearing on your life.

Based in Corning, New York, and founded in 1851, the company's influence on technology began when it was asked to produce the glass envelope for Thomas Edison's light bulb. It has evolved into a global leader in specialised glass, ceramic and optical physics.

One would imagine that a company so ubiquitous would be tripping off every investors' tongue. The fact that this is not the case with Corning may be due tothe fact that its bewildering volume of sales are transacted with only a handful of customers. So, astute readers will conclude, it must have something to do with the mobile phone revolution or with the motor trade. To this I can only respond, well spotted!

Though around for a century and a half, the US firm now operates in five business areas; display technology, Corning optical communications, environment technology, specialty materials and life sciences. It has 70 plants in 15 countries employing 28,000 and has been behind innovations like thinner TVs and monitors. It also developed 'Lotus glass' for high performance portable devices such as smartphones.

The company is the largest LCD glass provider in the world; as a result its display technology business represents 32pc of Corning group sales last year and accounted for net income of $1.2bn. Four customers were responsible for 94pc of sales.

One of Corning's great inventions was optical fibre, an extraordinary product that's pound-for-pound stronger than steel, lighter than cotton, as thin as human hair and as flexible as silk.

Having first produced the optical fibre, it has built a large business in optical-based solutions for wireless networks, data centres and, of course, personal devices.

Another breakthrough for Corning was the development of an economic high performance ceramic that is the standard for catalytic converters in cars.

The company developed a ceramic solution, reducing car emissions by 99pc. Together with filter products for diesel and petrol applications, this forms the basis for Corning's environmental technology business. The business represents 12pc of Corning sales and while competitive, Corning's market position is stable, only three customers account for 87pc of sales.

Its specialised material business provides over 150 formulations for glass, ceramic glass and crystals with a variety of markets including aerospace, astronomy, ophthalmic and communications. It recently launched damage- resistant thin glass to protect screen displays. This business accounts for 15pc of sales, three customers' accounts for half its sales.

Corning life science business is a manufacturer and supplier of scientific lab equipment including vessels and surfaces used for microbiology, chemistry and bio-processing. Revenue from this business is $1bn but a recent purchase is expected to boost revenue and earning.

Sales last year were $8bn and group net income $2bn, up 20pc. Higher sales in optical and life science were offset by declines in display, environmental, technology and specialised materials. In response to global uncertainties, it implemented cost reductions and initiated a share buy-back scheme of $2bn. While investors are pleased with the increases in dividends, they still have some worries. Depending on so few customers (10 large clients provide 50pc of sales revenue) is the stuff of boardroom nightmares.

On the positive side, Corning is valued at $27bn, with a modest price earnings multiple of 12, a healthy financial position and a strong cash flow.

Its shares, trading in the low $20s, are up 35pc on the year and are worth watching.
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