Gorilla Glass 2 and Corning

One of the poorer performers in the high tech area recently has been Corning Incorporated (symbol GLW). Today, however, brings a positive announcement of great importance to that company. Corning will be introducing the second generation of its Gorilla Glass product at the consumer electronics show in Las Vegas. So what, you may say. Another generation of a product is hardly a major event for most companies. But Gorilla Glass is not just another product for Corning.

Gorilla Glass is stronger, harder, more scratch resistant and overall better than the regular glass that was used for laptops, smart phones, touch screen devices, etc. for many years. Corning introduced the glass to the market about four years ago and it sold 700 million dollars of the stuff in 2011, triple the amount it sold in 2010. Anyone who had an early smart phone that was destroyed due to a cracked screen knows that importance of Gorilla Glass.

Until last year, Corning had the super strong glass market all to itself, but recently other glass companies have started to come out with their own versions of the product. Gorilla Glass remained the premier product in the field, but the lead was getting narrow. With the intorduction of Gorilla Glass 2, that lead has widened substantially once again. The new product is strong enough that a manufacturer can use 20% less of Gorilla Glass 2 to achieve the same strength as the original. This is a major design advantage and cost savings. Indeed, it is most likely that many large televisions will start to use the Gorilla Glass in order to allow lighter and more interesting designs for these products. Phones and other devices that have not yet adopted Gorilla Glass will inevitably be forced to move to the product in order to compete.

Overall, the new Gorilla Glass should be enough to push back hard against the new competitors to Corning. Most likely, the improved product will quickly make the competitors unprofitable or at least much less profitable. This will reduce competition for the Gorilla Glass product.

In 2011, Gorilla Glass was about ten percent of Corning's total sales. With the new Gorilla Glass, revenue growth from the product should continue to soar. This should be a major earnings center moving forward. Right now, Corning is selling at just under eight times expected earnings for 2012. In other words, it is extremely inexpensive. With today's announcement, the stock moves into the category of "greatly undervalued".

Of course, Gorilla Glass is just part of the Corning portfolio of products, so problems elsewhere could overwhelm the good news here. Nevertheless, at the current price, Corning remains a great buy in my opinion.

DISCLOSURE: I am long Corning stock.