Corning (GLW) this morning said it suffered a power disruption over the weekend at its LCD glass manufacturing facility in Taichung, Taiwan which affected some glass-making operations. Corning said the disruption “is expected to have a material impact” on Q4 glass volumes. The company said the power disruption caused the shutdown of several glass melting tanks.

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Things keep getting worse for Corning (GLW), as demand for large-screen LCD televisions sags in the face of a global consumer recession.

The LCD glass maker this morning said it is now withdrawing the financial guidance it provided just a few weeks ago for the fourth quarter and for 2009.

In a statement, CFO James Flaws said that “Panel makers, particularly those in Taiwan, have continued to reduce the utilization of their factories heading into the second half of this quarter in response to weakened retail demand for LCD televisions and desktop monitors.” He added that demand in the company’s wholly owned display glass business “has dropped more precipitously than we expected just a few weeks ago,” with “additional, but less severe, reductions in demand at Samsung Corning Precision Glass,” its joint venture in South Korea.

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Corning (GLW) plans to cut the production capacity of its wholly owned glass business by 30-40 percent in response to a slowdown in the LCD television market, CFO Jim Flaws said this morning in an interview with Tech Trader Daily on the company’s disappointing fourth-quarter outlook.

Flaws noted that the company has been operating with a “conundrum in the LCD business” for most of the year: While there have been constant fears about the economy, LCD demand through most of the summer remained strong. But he notes that after Labor Day, weekly data have shown a decline in LCD TV sales at retail. Flaws says the combination of rising unemployment, low consumer confidence and weak financial markets has lead people to “retreat” on LCD television spending. He says unit growth is still positive, but nowhere near the 37 percent level seen in the first eight months of the year.

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So the logical appears to true: In a recession, people buy fewer big screen TVs.

That’s the obvious conclusion from Corning’s (GLW) disappointing fourth-quarter outlook.

For Q3, the company posted revenue of $1.56 billion and profits before items of 46 cents a share; the Street had expected $1.59 billion and 44 cents. The company noted that currency factors gave a lift to profits. Glass volume was up two percent sequentially and 18 percent year over year. The company’s wholly owned business fell 10 percent sequentially and two percent year over year, while the Samsung Corning venture saw volume rise 12 percent sequentially and 38 percent year over year.

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The troubles are deepening at LCD glass maker Corning (GLW).

This morning, Corning CFO James Flaws said in a statement that third-quarter glass shipments grew 2 percent sequentially, which was lower than expected. Corning said volume was was up 12 percent at Samsung Corning joint venture, but down 10 percent at the wholly-owned business.

The company still expects Q3 EPS of 43-45 cents a share before special items.

Flaws is not providing specific Q4 guidance at this time. But he did offer some cautionary comments. “We believe that many Taiwanese panel makers may decide to continue to run at lower utilization rates for much of the fourth quarter,” he says. “We actually think this may be more beneficial to the supply chain heading into the first quarter. If this happens, we would not be surprised if volumes at our wholly-owned business decline sequentially in the fourth quarter. Regarding SCP, we believe their volumes could be higher if the Korean panel makers continue with their higher utilization rates.”

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Corning (GLW) this morning said it now sees Q3 profits before special items of 43-45 cents a share, down from previous guidance of 48-51 cents. Sales are now expected to be $1.58 billion to $1.62 billion, down from $1.65 billion to $1.72 billion. The company also dropped its gross margin expectation for the quarter to about 47 percent from “at least 50 percent.”

In a statement, Corning said the reduced guidance reflects lower-than-expected shipments of LCD glass in the company’s wholly owned display business.

In a statement, CEO Wendell Weeks said the “supply chain correction … is taking longer than we expected.”

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Shares of glassmaker Corning (GLW) and LCD panel producers AU Optronics (AUO) and LG Display (LPL) are all down sharply today amid a new wave of market jitters on the prospects for the flat-panel display market.

Several recent Street research reports note that conditions in the LCD panel sector have been difficult for much of the third quarter, raising questions about the companies’ ability to hit current Street estimates.

Brian White, an analyst with Collins Stewart, noted in a roundup piece on the electronics supply chain today that he visited last week with three leading Taiwan-based LCD panel makers, and came away with a “reinforced” cautious stance on AU Optronics, which he rates Hold.

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The selloff in Corning (GLW) shares today reflects disappointment with the company’s third-quarter revenue outlook. In an interview with Tech Trader Daily this morning, Corning CFO Jim Flaws says the lower-than-expected forecast reflects two underlying issues.

One, the company expects some strengthening of the yen against the dollar in Q3. Corning is forecasting an average exchange rate of 108 yen to the dollar; the rate in Q2 was 105 yen. And Flaws notes that the Street had been forecasting 103 yen to the dollar for Q3. The 5-yen difference represents a $45 million swing in the top-line, he notes.

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