Flat-Panel Chaos: Corning melts down despite strong LCD sales (see Corning’s Sharp Edges).Cracking up the $100 Laptop: The electricity-free laptop gets a test drive (see The $100 Laptop).

iPod’s Cracking Halo: Has iPod lost its cool (see iPod’s Cracked Halo)?

iPod’s Cracked Halo

Corning’s Sharp Edges

Don’t say we didn’t warn you. When we wrote about Corning’s risky bet on glass for flat-panel displays, we argued that every time there’s a hint of inventory trouble Corning will get smacked (see Corning's Unbreakable Glass).

CorningCorning's Unbreakable Glass

That’s exactly what has happened. Corning shares have fallen 26 percent since April, when Corning managers said they expected liquid crystal display (LCD) glass volume to be flat to down 5 percent for the quarter, compared to the earlier guidance of flat to up 5 percent (it’s still up over 8 percent since our cover story appeared on newsstands).

So is the glass giant melting down, again? Corning collapsed during the telecom bust when carriers stopped spending on networks built on Corning’s advanced optical fiber. But this time, analysts say, long-term consumer demand remains strong. “This is not that situation,” says Sweta Dash, an analyst with market researcher iSuppli.

Corning

It seems the companies that turn Corning’s glass into flat-panel displays got too eager to grab a piece of the booming LCD market. Panel makers AU Optronics and LG Philips LCD reeled in their sales projections this month, even as retailers like Best Buy and CircuitCity reported strong sales of LCD sets. In fact, John Slack, an equity analyst with investment-based research firm Morningstar, raised his “fair value” estimate on Corning shares to $23 from $12 last May. “Some of the vendors just got a little ahead of themselves,” says Mr. Slack.

Corning

But while the competition is bruising for the Asian companies cranking out flat-panel displays, Corning still owns the lion’s share of the market for the glass going into those pricey displays. That means the company should continue to profit even as prices for sets fall and demand soars, analysts say. Televisions with liquid-crystal displays will make up 56 percent of all sets sold by 2010, up from 11 percent in 2005, according to iSuppli. Until that growth stalls, Corning won’t melt down again.

Contact the Writer:BCaulfield@RedHerring.com

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The $100 Laptop

To some, the $100 laptop looks like something the professor might have jury-rigged on Gilligan’s Island. The laptop will need little power thanks to a hand-crank mechanism that juices up batteries, ideal in regions that don’t have electricity. It will use a low-cost AMD processor, open-source software, and will be built cheaply by a Taiwanese manufacturer (see Poor Kid's Laptop Cranks Up).

Poor Kid's Laptop Cranks Up

This machine is from MIT, however, not an episode of Survivor. After unveiling plans for a low-cost laptop computer for poor children in January 2005, Nicholas Negroponte, co-founder of MIT’s Media Lab, will test his hand-cranked notebook computer for poor children at the National Educational Computing Conference July 5-7.

Survivor

The idea has its detractors. They point out that hand-cranked power lasts only 10 minutes per one minute of winding. Another criticism: the idea of all the laptops creating their own peer-to-peer network, rather than connecting to the Internet, means users still won’t have the same access to educational information as their counterparts in developed nations. Intel Chairman Craig Barrett dismisses the laptop as a “$100 gadget.” Microsoft founder Bill Gates earlier this year told the Microsoft Government Leaders Forum, “Jeez, get a decent computer where you can actually read the text and you’re not sitting there cranking the thing while you’re trying to type.”

But this machine isn’t about running the latest version of Windows. Instead, Mr. Negroponte hopes to make laptops cheap enough that governments can buy large numbers of computers for poor school kids. He’s betting access to computers will help lift children out of poverty.

Of course, laptop prices have been falling fast. A brand-new Dell notebook with a 1.5-Gigahertz Intel processor, a 40-Gigabyte hard drive, and a 15.4-inch screen can be had for $499. In addition, AMD has already had limited success with cheap machines that come bundled with Internet access plans in markets like the Caribbean and India, and Intel plans its own low-cost portables. As a result, regardless of whether Mr. Negroponte’s project succeeds or fails, cheaper laptops are on the way.

Contact the Writer:ECubarrubia@RedHerring.com

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iPod’s Cracked Halo

Has the iPod lost its cool? Factories in China that make Apple’s music player have come under fire for mistreating workers. A new Wi-Fi portable music player finally offers users something the iPod doesn’t. European regulators are gearing up for round two against the iPod’s tight pairing with Apple’s iTunes music service. And now analysts say they expect slowing iPod sales to harm the company’s upcoming earnings report.

the iPod lost its cool? Factories in China that make Apple’s music player have come under fire for mistreating workers. A new Wi-Fi portable music player finally offers users something the iPod doesn’t. European regulators are gearing up for round two against the iPod’s tight pairing with Apple’s iTunes music service. And now analysts say they expect slowing iPod sales to harm the company’s upcoming earnings report.

That’s a lot of grief for one little device to shoulder. Yet Apple relies heavily on the hot-selling digital music player. iPods and music-related sales make up more than half of the company’s revenue. A problem with the iPod would mean more pain for Apple shareholders, who have seen Apple’s stock slide 37 percent to $57.47 from $85.59 since January (see Sluggish iPods May Hurt Apple).

That’s in part due to cooling iPod sales. Bear Stearns analysts have slashed their iPod sales expectations to 8 million from 8.9 million for the quarter ending in June. That’s lower than the 8.5 million units sold in the March quarter. Both figures are a drastic reduction from the 14 million iPods Apple sold in the quarter ending in December. “[The] ‘halo’ effect seems to be playing out,” the analysts wrote, referring to the theory that iPod popularity gets consumers to buy other Apple products, such as Macs.

Meanwhile, competitors keep coming. Microsoft is reportedly readying an iPod killer that matches a sleek gadget with an integrated music service. SanDisk is trying to chip away at Apple’s hipster customer base with ads attacking the iPod’s image (see above). Another novel challenge comes in the form of the Gremlin MG-1000, a gizmo equipped with Wi-Fi so that it connects wirelessly to maker MusicGremlin’s content store. That’s a trick Apple’s iPods and Motorola’s iTunes-equipped phones haven’t mastered.

And while competitors continue to try to replicate the iPod’s magic, government agencies and music associations in Norway, Sweden, and the United Kingdom have hinted they may work to enact laws requiring iTunes compatibility with all players.

NorwayUnited Kingdom

Worse yet, Apple’s hipster customer base may be turned off after British newspaper The Mail On Sunday reported on the conditions of Chinese workers who put together the portable devices. Allegations included forcing employees to live in factories behind guarded gates and docking wages for food and rent. An Apple spokesman says the company is taking the allegations seriously, since “we do not tolerate any violations of our supplier code of conduct.”

The Mail On Sunday

Of course, Apple isn’t standing still, introducing fresh products such as the iPod Nano last year. Meanwhile, France has already rejected laws demanding a more open iTunes business model. And as convenient as Gremlins may be, they’re also about as attractive as the destructive critters in the movie by the same name. And looks matter mightily to the Apple faithful, who proudly tote the company’s white modular computers and music players. Apple better hope style continues to add substance.

France

Contact the Writer:ECubarrubia@RedHerring.com