Corning Inc. ( GLW - Analyst Report ) slashed its fourth quarter Gorilla Glass sales outlook when a majorSouth Korean customer dishonored its glass display purchase contract.

Corningcut its Gorilla Glass fourth quarter sales forecast to a sequential decline of 25% from a 15% sales decline. LCD glass prices are also expected to decline sequentially in the fourth quarter. As a result, consolidated equity earnings are expected to be down 30% as opposed to down 5% guided originally.

Corninghad taken the initiative to recapture its market share in Korea by cutting prices. But unfortunately, its long-term contract fell through because the supply of LCD glass outpaced demand, causing share prices to plunge 10%. Hence, the company plans to reduce its glass capacity in the fourth quarter by delaying the start of new tanks.

Corning makes Gorilla Glass for LC TVs, smartphones and tablet computers. Management believes that Corning’s Gorilla Glass outlook clearly indicates lower global demand for cover glass used in tablet computers and LCD TVs.

The lower adoption of Gorilla Glass on TVs and decline in tablet demand are matters of concern. We do not expect much improvement in the near term as glass price decline is also expected to continue, resulting in weaker-than-expected results in the fourth quarter and beyond.

However, a few analysts indicated that Amazon ( AMZN - Analyst Report ) is using Gorilla Glass in its ‘Kindle Fire.’ With preliminary sell-through data points for Amazon Fire appearing to be strong, we expect the demand for Corning's glass substrates to improve in the near future.

Corning faces significant competition due to excess capacity in the market place, price pressure and product launches. For hardware and equipment products, significant competitors are 3M Company ( MMM - Analyst Report ) , Tyco Electronics, Ltd. ( TEL - Snapshot Report ) , Furukawa OFS, CommScope and ADC Communications.

Currently, Corninghas a Zacks #3 Rank, which implies a Hold rating on a short-term basis.