Thursday, January 26, 2006

The World is Flat: Sony/Corning

Sony (SNE) crushed earnings early Thursday morning.

The world's second- largest consumer electronics maker posted a record quarterly profit on sales of electronics such as flat-screen TVs, allowing it to drop a forecast for the first annual loss in 11 years.

Net income rose 18 percent to $1.5 billion.

Analysts had expected profit to drop.

Even Ray Charles can see that Sony's en fuego -- they are in the middle of a tight restructuring regimen, the consumer electronics business is hitting all cylinders, and to top it all off, a third version of the coveted Playstation video game console is in the pipe.

Sony said sales of flat panels TVs contributed to the stellar quarter. But if you've been tracking Best Buy (BBY) and Circuit City (CC), you probably already knew that.

This could only mean one thing: buy Corning like it's going out of fashion.

Our LCD supply play Corning (GLW) continues to edge higher ever since we pitched it hard back when it was a teenager. On Wednesday, Corning reported another robust quarter, with both margins and net income up from a year ago period.

We believe Corning is a stock analysts serenade in their sleep (13 analysts and not one sell), but investors are woefully overlooking.

LCD glass accounted for about 35 percent of Corning's revenue and 75 percent to 80 percent of its profit last year; we believe that the mushrooming flat panel TV/LCD business should remain robust.

Corning itself is restructuring -- the company is axing off debt, improving gross margins, and reinventing it's revenue driver so that it can wake up from the 5 year telecom coma.

During the gold rush, the suppliers of shovels and picks made all the dough.

Guess who's the main supplier of glass in our current flat panel rush?

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