Corning (GLW) Invests Heavily in Life Sciences

Corning (GLW: Charts, News), a 160-year old company that has dominated several eras with cutting edge technologies, is a controversial stock that splits bulls and bears evenly down the middle. The stock has seen some incredible highs, peaking at $113 in September 2000, and some pitiful lows, hitting $1 per share two years later, in October 2002.

Today shares trade at approximately $13, which is a mere 7.5 times forward earnings. The company currently operates in five main business segments - Display Technologies, Telecommunications, Environmental Technologies, Specialty Materials and Life Sciences. Its key products include specialty glass, ceramics, optical fiber, cable equipment, emissions control technology, LCD glass and life science products, which are produced in 60 plants in 13 countries. What does the future hold for Corning, one of the most resilient and unpredictable companies in its field?

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To understand Corning, investors need to understand its history. Originally founded as a glass company in Corning, New York in 1851, Corning moved on to develop ceramics inventions, which became the company's bread and butter between 1913 and the 1970s. Following World War II, Corning focused on disruptive technologies, which could catch industry peers off guard by creating previously non-existent markets. From 1968 to 1971, Corning focused on toughened windshields, which it believed would revolutionize auto windshields worldwide. Unfortunately, the windows were too expensive and never reached the mass production goals that Corning envisioned. Despite this massive failure and the decline of its ceramics business, Corning bounced back from the brink just in time with revolutionary advances in optics technology. From the 1970s to 1990s, this business replaced its ceramics business as its main source of revenue, and eventually produced cutting edge fiber optics which were essential for telecommunications and networking. With the rapid evolution of the Internet, Corning was poised to capitalize on the increasing demand for high speed fiber optic cables. However, the 2000-2002 dot com crash changed all that, decimating not only Corning but most of its industry peers. Investors had all but given up on Corning when it surprisingly pulled back from the brink of bankruptcy, again, to become the world's largest producer of LCD displays. Although shares were nowhere close to its dizzying 2000 highs, the company continued to recover from 2002 to 2007, posting five consecutive years of financial improvement.

The company's talent for coming in with a completely different product to replace an aging one is what excites investors about Corning. It's no secret that the LCD display market is dismal, due to poor margins and pricing power, and investors are looking to Corning once again to change the company's direction in a radically new profitable direction. Over the past five years, Corning has invested heavily in its Life Sciences division, producing two major inventions over the past five years. In 2007, Corning Life Sciences made a drug discovery which reduced drug testing errors drastically, and in 2010 it revolutionized the stem cell experimentation process by producing better results at a lower cost. In June 2011, the company hired Dr. Richard Elgen as vice president and general manager of the Corning Life Sciences business segment, hinting at accelerating growth in the division. On December 1, the company acquired MediaTech, a manufacturer of cell culture media and molecular biology reagents, for an undisclosed amount. The following week, Corning appointed Richard Clark, the former CEO of pharmaceutical giant Merck MRK, to its board of directors, further suggesting that the company was getting ready for a major shift towards biotechnology and pharmaceuticals. Corning has also been aggressively hiring for its Life Sciences division, suggesting that the division may soon become more important than its primary revenue generator of display technologies.

For long-term investors, the message is clear - with the exception of its big bet on stronger windshields four decades ago, every major paradigm shift Corning has made over the past century has been successful and redefined the company. However, the stock has remained in neutral due to shortsighted investors focusing on the weaknesses of its Samsung Corning (LCD displays) and Dow Corning (silicon products) joint ventures. In particular, weakness in Europe's solar industry has severely hurt demand for Dow Corning's polysilicon components, which are key materials in the production of solar modules. If Corning continues to increase the weight of its Life Sciences division, investors should watch carefully for the next stage of the company's evolution, as it dumps unprofitable businesses and shifts into yet another new industry.

Other News About GLW
Corning Worth $16.50 Despite U.S.-China Trade Spats, Euro Mess
The bullish case for Corning, as analyzed by Trefis.
Corning Is Making A Big Bet On Life Sciences
Why is Corning investing so heavily on Life Sciences? Other Stocks in the News
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Published on Jan 5, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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