Corning Flexes its Muscles
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The latest news of out New York-based Corning (NYSE: GLW) is that they have developed a flexible and insanely thin glass that can be wrapped around a device like a smartphone. Between this and the new Gorilla Glass 2 that is just making its way into the market, Corning looks to be pushing the envelope of glass technology where others are not. Gorilla Glass 2 is 20% thinner, or 800 microns thick, and just as strong as the original Gorilla Glass. In 2011 Gorilla Glass accounted for $700 million of Corning’s revenue growing at a 13% pace.
The new glass, dubbed Willow Glass, can be rolled out between 50 and 200 microns -- similar to a sheet of paper (100 microns). In the world of consumer electronics, thinner, lighter and less obtrusive is name of the game. So while Gorilla Glass 2 represents a moat around Corning’s business in that market by providing them patent protection that the original Gorilla Glass could not (being 50-year-old technology resurrected by Steve Jobs and his quest for the iPhone), Willow Glass provides an even bigger advantage and opens up the possibility of the often-rumored curved glass Apple (NASDAQ: AAPL) TV.
The market has yet to see the full impact of the smartphone and tablet revolution on Corning’s bottom line as sales of Gorilla Glass has not replaced their substantial business in providing glass for LCD and LED displays. But that market is set to grow slowly at best going forward as the smartphone and the tablet cannibalize notebook sales. The latest reports from Digitimes project LCD TV sales in emerging markets to be strong, but in mature markets to stagnate at best. Laptop sales in Brazil are expected to rise 50% in the second half of 2012 with Hewlett-Packard along with Acer and Lenovo expected to see strong sales.
It is, however, the rise of the touchscreen device and the need for thinner glass layer between the finger and sensor layer that is what will drive Corning’s sales of these two new products. Touchscreen sensitivity is inversely proportional to thickness, which drives more accuracy and a better overall user experience.
Saying that the new Gorilla Glass is 20% thinner is marketing to the head while Apple and those manufacturers that embrace it will market to the hearts of consumers who will fall in love with how much more responsive their smartphones and tablets are.
Technology is crossing that love affair Rubicon with the average person. Microsoft’s (NASDAQ: MSFT) Windows 8 is going to try and leverage these new physical technology advancements into more natural devices across a spectrum of idioms: smartphones, touch screen computers, tablets, kiosk displays etc. The problem for Microsoft is that they do not control the hardware onto which their OS will be placed and sub-standard implementations of Windows 8 will likely result in Microsoft getting the blame as opposed to the hardware manufacturer.
Apple does not have this problem, having built into their brand and their organization a complete user experience. As little control as Microsoft has over their hardware, Google (NASDAQ: GOOG) exerts even less and this is the Achilles Heel for Android and its eventual merger with Chrome OS.
Regardless of who wins the market share war, the mobile computing revolution will be sheathed by glass created by Corning. If they partner with a company to develop graphene-based computing solutions as that technology matures then a great number of people will be looking back at the summer of 2012 with Corning trading at a multiple of 8 with a 2.5% dividend yield and 25% operating margins and wondering how in the world they didn’t see the future coming.
PeterPham8 has no positions in the stocks mentioned above. The Motley Fool owns shares of Corning, Google, and Microsoft. Motley Fool newsletter services recommend Corning, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.