OVERVIEW

Our key priorities for 2007 remain unchanged from the previous three years:
protect our financial health, improve our profitability, and invest in the future. During the first quarter of 2007, we made the following progress against these priorities:

Financial Health

Our balance sheet remains strong, and we generated significant positive cash flows from operating activities.

• In the first quarter, we repurchased $223 million of our 6.25% Euro notes due in 2010.

• Our debt to capital ratio declined from 19% at December 31, 2006, to 16% at March 31, 2007.

• Operating cash flow in the first quarter of 2007 was $193 million.

Profitability

For the three months ended March 31, 2007, we generated net income of $327 million or $0.20 per share compared to net income of $257 million or $0.16 per share for the same period in 2006. The improvement in net income was due largely to the following items:

• Lower asbestos settlement expense of $110 million in the first quarter of 2007 compared to expense of $185 million for the same period last year resulting from the change in fair value of Corning's asbestos settlement liability. The change in fair value for the asbestos settlement liability was primarily attributable to the change in the value of 25 million shares of Corning's common stock to be contributed to the proposed settlement. For additional information on this matter, refer to Note 3 (Commitments and Contingencies) to the consolidated financial statements.

• Higher sales and increased net income in the Telecommunications operating segment.

• An increase in equity earnings primarily driven by the absence of an impairment charge for Samsung Corning which was recognized in the first quarter of last year.

Improvements in net income were offset somewhat by the absence of a $38 million valuation allowance release for a portion of the Company's German deferred tax assets recorded in the first quarter of 2006.

Investing in Our Future

We continue to focus on the future and on what we do best - creating and making keystone components that enable high-technology systems. We remain committed to investing in research, development, and engineering to drive innovation and continue to work on technologies for glass substrates for active matrix liquid crystal display (LCD) glass substrates, diesel filters and substrates in response to tightening emissions control standards, and the optical fiber and cable and hardware and equipment that enable fiber-to-the-premises.

Our research, development and engineering expenses for the three months ended March 31, 2007, increased by $6 million when compared to the same period last year but remained constant as percentage of net sales. We believe our spending levels are adequate to support our technology and innovation strategies.

Capital spending totaled $262 million and $280 million in the first quarter of 2007 and 2006, respectively. We remain committed to investing in manufacturing capacity to match increased demand in our businesses. As a result, capital expenditures are heavily focused on expanding manufacturing capacity for LCD glass substrates in the Display Technologies segment and diesel products in the Environmental Technologies segment. We expect our 2007 capital spending to be in the range of $1.1 billion to $1.2 billion, of which approximately $700 million will be directed toward our Display Technologies segment and approximately $100 million will be directed toward our Environmental Technologies segment. In addition, in April 2007, we announced a $300 million facility improvement plan for the Company's Sullivan Park Research and Development campus near Corning, New York. The expansion is expected to be completed over a six-year period.

RESULTS OF OPERATIONS



Selected highlights for the third quarter follow (dollars in millions):

                                                    Three months ended March 31,         % Change
                                                    2007                   2006          07 vs. 06

Net sales                                        $       1,307          $       1,262             4%

Gross margin                                     $         591          $         573             3%
(gross margin %)                                           45%                    45%

Selling, general and administrative expenses     $         214          $         223           (4)%
(as a % of net sales)                                      16%                    18%

Research, development and engineering expenses   $         130          $         124             5%
(as a % of net sales)                                      10%                    10%

Restructuring, impairment and other charges      $           0          $           6         (100)%
(as a % of net sales)                                       0%                     0%

Asbestos settlement                              $         110          $         185          (41)%
(as a % of net sales)                                       8%                    15%

Income before income taxes                       $         167          $          56           198%
(as a % of net sales)                                      13%                     4%

(Provision) benefit for income taxes             $        (56)          $           2       (2,900)%
(as a % of net sales)                                     (4)%                     0%

Equity in earnings of affiliated companies,      $         216          $         200             8%
net of impairments
(as a % of net sales)                                      17%                    16%

Net income                                       $         327          $         257            27%
(as a % of net sales)                                      25%                    20%

Net Sales

For the three months ended March 31, 2007, the net sales increase compared to the same period in 2006 was the result of year-over-year increased volumes in the Telecommunications and Environmental Technologies segments offset somewhat by lower sales in the Display Technologies segment. For Display Technologies, sales volume increases were more than offset by price declines. Movements in foreign exchange rates did not have a significant impact on sales for the first quarter of 2007 when compared with the first quarter of 2006.

Cost of Sales

The types of expenses included in the cost of sales line item are: raw materials consumption, including direct and indirect materials; salaries, wages and benefits; depreciation and amortization; production utilities; production-related purchasing; warehousing (including receiving and inspection); repairs and maintenance; inter-location inventory transfer costs; production and warehousing facility property insurance; rent for production facilities; and other production overhead.

Gross Margin

As a percentage of net sales, gross margin for the first quarter of 2007 was even with the same period last year. The improvement in overall gross margin dollars was due primarily to increased sales of the Telecommunications segment.

Selling, General and Administrative Expenses

For the first quarter of 2007, selling, general, and administrative expenses decreased $9 million when compared to the same period in 2006. As a percentage of sales, the decline equaled 2% for the first quarter of 2007 when compared to the first quarter of 2006. The decline in selling, general, administrative expenses was primarily due to lower compensation-related expenses in the first quarter of 2007 when compared to the first quarter of 2006.

The types of expenses included in the selling, general and administrative expenses line item are: salaries, wages and benefits; stock-based compensation expense; travel; sales commissions; professional fees; depreciation and amortization, utilities, and rent for administrative facilities.

Research, Development and Engineering Expenses

Research, development and engineering expenses increased by $6 million in the first quarter of 2007 when compared to the same period last year but remained consistent as a percentage of net sales. Expenditures are currently focused on our Display Technologies, Environmental Technologies and Telecommunications segments as we strive to capitalize on the growth opportunities in those segments.

Restructuring, Impairment and Other Charges

There were no restructuring, impairment, and other charges recorded in the first quarter of 2007. In the first quarter of 2006, we recorded $6 million of restructuring expenses for revisions to existing plans. Refer to Note 2 (Restructuring, Impairment and Other Charges) to the consolidated financial statements for additional information.

Asbestos Settlement

The asbestos settlement activity relates to changes in the estimated fair value of certain items to be contributed by Corning under the Pittsburgh Corning Corporation (PCC) asbestos settlement agreement if the PCC Plan of Reorganization receives judicial approval. For additional information on this matter, refer to Note 3 (Commitments and Contingencies) to the consolidated financial statements and Part II - Other Information, Item 1. Legal Proceedings.

Income Before Income Taxes

In addition to the items identified above, the following items had an impact on
the results of our income before income taxes:

                                                   Three months ended March 31,
                                                     2007                2006

Loss on repurchases and retirement of debt, net $          (15)
Movements in exchange rates                                           $        (23)

Provision for Income Taxes

Our provision for income taxes and the related tax rates follow (in millions):

                                        Three months ended March 31,
                                          2007               2006

Provision (benefit) for income taxes  $         56       $        (2)
Effective tax (benefit) rate                  33.5%              (3.6)%

For the three months ended March 31, 2007, the effective tax rate reflected the following items:

• The impact of not recording tax benefits (expenses) on losses (income) generated in the U.S. until an appropriate level of profitability is reached and sustained in the U.S.

• The benefit of tax holidays and investment credits in Taiwan.

• The impact of discrete items for which no tax benefit was recorded, including asbestos settlement expense of $110 million and a loss on the repurchase of debt of $15 million. Refer to Notes 3 (Commitments and Contingencies) and 4 (Debt) to the consolidated financial statements for additional information. Discrete items increased our effective tax rate by 14.3 percentage points.

For the three months ended March 31, 2006, the effective tax rate reflected the following items:

• The impact of not recording tax benefits (expenses) on losses (income) generated in the U.S. until an appropriate level of profitability is reached and sustained in the U.S.

• The benefit of tax holidays and investment credits in Taiwan and China.

• The release of a $38 million valuation allowance on a portion of our German tax benefits because we achieved an appropriate level of profitability in certain of our German operations leading us to conclude that it is more likely than not that tax benefits are realizable and the impact of discrete items for which no tax benefit was recorded, including asbestos settlement expense of $185 million. Refer to Note 3 (Commitments and Contingencies) to the consolidated financial statements for additional information about this item. The net impact of the release of the valuation allowance and the other discrete items reduced our effective tax rate by 18.5 percentage points.

As more fully described in Note 7 (Income Taxes) to the consolidated financial statements in the 2006 Form 10-K, all of our U.S. deferred tax assets had full valuation allowances at December 31, 2006 and this continues to be the case at March 31, 2007. We will maintain this valuation allowance until an appropriate level of profitability is sustained or we are able to develop tax planning strategies that enable us to conclude that it is more likely than not that our U.S. deferred tax assets are realizable. Until then, we will not record tax benefits (expenses) on losses (income) generated in the U.S.

Certain foreign subsidiaries in China and Taiwan are operating under tax holiday arrangements. The nature and extent of such arrangements vary. The benefits of such arrangements phase out in various years (2006 through 2011) according to the specific terms and schedules of the relevant taxing jurisdictions. The impact of the tax holidays on our effective tax rate is a reduction in the rate of 8 percentage points and 38 percentage points for the three months ended March 31, 2007 and 2006, respectively.

We adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," (FIN 48) effective January 1, 2007. As a result of the implementation of FIN 48, we recognized a $25 million increase in the liability for unrecognized tax benefits and a decrease to the January 1, 2007 balance of retained earnings of $4 million. The amount of unrecognized tax benefits at January 1, 2007 is $56 million of which $38 million would impact the Company's effective tax rate, if recognized.

Refer to Note 5 (Income Taxes) to the consolidated financial statements for additional information.

Equity in Earnings of Affiliated Companies, Net of Impairments

The following provides a summary of equity in earnings of associated companies
(in millions):

                             Three months ended March 31,
                               2007                2006
Samsung Corning Precision  $         113       $         140
Dow Corning Corporation               92                  69
Samsung Corning                       (1)                (22)
All other                             12                  13
Total equity earnings      $         216       $         200

Equity earnings for the first quarter of 2007 reflected earnings increases for Dow Corning Corporation and Samsung Corning, offset somewhat by a decline in equity earnings from Samsung Corning Precision, when compared to the same period in 2006. The decline in equity earnings for Samsung Corning Precision is explained in the discussion of the performance of our Display Technologies segment.

The improvement in equity earnings recognized from Dow Corning for the three months ended March 31, 2007, compared to the same period in 2006, was largely attributable to a 15% increase in sales volume and the impact of a lower effective tax rate.

The improvement in Samsung Corning's equity earnings was primarily due to the absence of an impairment charge, which was recognized in the first quarter of last year. In the first quarter of 2006, Corning reduced its investment in Samsung Corning by $21 million due to an impairment of long-lived assets incurred by Samsung Corning.

In 2003, 2005, and 2006, Samsung Corning recorded significant fixed asset and other impairment charges. As the conventional television glass market is expected to be negatively impacted by continued strong growth in the LCD glass market, it is reasonably possible that Samsung Corning may incur additional restructuring or impairment charges or operating losses in the foreseeable future. Samsung Corning is currently investing in several developing businesses which Samsung Corning management believes will offset the decline in conventional television glass market over time. Should these new businesses not achieve expected results, additional operating losses, asset impairments, and restructuring charges are likely to occur, and Samsung Corning's long-term financial viability may come into question. These events could result in Corning incurring an additional impairment of its investment in Samsung Corning. Corning's management believes it is more likely than not that an impairment of our investment will occur in the foreseeable future. Corning's investment in Samsung Corning was $249 million at March 31, 2007.

Refer to Note 9 (Investments) to the consolidated financial statements for additional information relating to Samsung Corning Precision, Dow Corning, and Samsung Corning's operating results.

Net Income

As a result of the above, our net income and per share data follow (in millions,
except per share amounts):

                                              Three months ended March 31,
                                                2007                2006
Net income                                   $         327     $           257
Basic earnings per common share              $        0.21     $          0.17
Diluted earnings per common share            $        0.20     $          0.16
Shares used in computing per share amounts
Basic earnings per common share                      1,563               1,541
Diluted earnings per common share                    1,600               1,592

OPERATING SEGMENTS

Our reportable operating segments include Display Technologies, Telecommunications, Environmental Technologies, and Life Sciences. The Environmental Technologies reportable segment is an aggregation of our Automotive and Diesel operating segments, as these two segments share similar economic characteristics, products, customer types, production processes and distribution methods. The following provides a brief description of the products and markets served by each reportable segment:

• Display Technologies - manufactures liquid crystal display glass for flat panel displays;

• Telecommunications - manufactures optical fiber and cable, and hardware and equipment components for the telecommunications industry;

• Environmental Technologies - manufactures ceramic substrates and filters for automobile and diesel applications; and

• Life Sciences - manufactures glass and plastic consumables for pharmaceutical and scientific applications.

All other operating segments that do not meet the quantitative threshold for separate reporting have been grouped as "All Other."

We prepared the financial results for our reportable segments on a basis that is consistent with the manner in which we internally disaggregate financial information to assist in making internal operating decisions. We included the earnings of equity affiliates that are closely associated with our operating segments in the respective segment's net income. We have allocated certain common expenses among segments differently than we would for stand-alone financial information prepared in accordance with GAAP. Segment net income may not be consistent with measures used by other companies. The accounting policies of our reportable segments are the same as those applied in the consolidated financial statements.

Display Technologies

The following table provides net sales and other data for the Display
Technologies segment (in millions):

                                                       Three months ended March 31,         % Change
                                                      2007                     2006         07 vs. 06

Net sales                                         $          524           $          547     (4)%
Income before equity earnings                     $          267           $          275     (3)%
Equity earnings of affiliated companies           $          113           $          142     (20)%
Net income                                        $          380           $          417     (9)%

The decrease in net sales for the first quarter of 2007 compared to the first quarter of 2006 reflects volume gains of 13% (measured in square feet of glass sold) which were more than offset by price declines. Year-over-year volume gains are driven by increased LCD monitor and TV market penetration, demand for larger-size substrates (generation 5 and above), and continued strong demand for glass for notebook computers. As demand for LCD television increases, we expect this business to become more seasonal. As expected, first quarter 2007 volume declined 12% from the seasonally strong fourth quarter of 2006. Although prices were down significantly compared to last year, prices declined only slightly compared to the fourth quarter of 2006 as we implemented a new pricing strategy at the beginning of 2007.

For the first quarter of 2007, large-size glass substrates accounted for 85% of total sales volumes, compared to 80% for the first quarter of 2006. Because the sales of the Display Technologies segment are denominated in Japanese yen, our sales are susceptible to movements in the U.S. dollar - Japanese yen exchange rate. Sales in the first quarter of 2007 were not significantly impacted by movements in foreign exchange rates when compared to the first quarter of 2006.

For the three months ended March 31, 2007, income before equity earnings was down slightly resulting from a decrease in sales offset somewhat by lower manufacturing and operating expenses and an increase in royalty income from Samsung Corning Precision. Corning licenses certain of its patents to Samsung Corning Precision, as well as to third parties, which generate royalty income. Refer to Note 9 (Investments) to the consolidated financial statements for more information about related party transactions.

The decline in our equity earnings from Samsung Corning Precision for the first quarter of 2007 compared to the first quarter of 2006 was due to a decrease in sales. In the first quarter of 2007, net sales at Samsung Corning Precision reflected volume gains of 23%, which were more than offset by the impact of price declines when compared to the same period last year. First quarter 2007 volume declined 5%, and prices declined in the upper single digits (expressed as a percent) when compared to the fourth quarter of 2006. Equity earnings for the first quarter of 2007 were also impacted by an increase in manufacturing, operating, and royalty expenses. The impact of movements in foreign exchange rates was not significant during the first quarter of 2007 when compared to the same period last year. Equity earnings from Samsung Corning Precision are susceptible to movements in the U.S. dollar-Japanese yen and U.S. dollar-Korean won exchange rates.

The Display Technologies segment has a concentrated customer base comprised of LCD panel and color filter makers primarily located in Japan and Taiwan. On October 1, 2006, AU Optronics Corporation (AUO), a customer of the Display Technologies segment, completed its previously announced merger with Quanta Display Inc. (QDI), another customer of Corning's Display Technologies segment. In addition, through two recently announced transactions, AUO now holds a 49% equity stake in Toppan CFI, a subsidiary of Toppan Printing Co., Ltd., also a customer of the Display Technologies segment. As a result of these transactions, AUO, QDI, and Toppan CFI are considered to be a single customer reported as AUO. For the first quarter of 2007, AUO (including QDI and Toppan CFI), Chi Mei Optoelectronics Corporation, and Sharp Corporation, which individually accounted for more than 10% of segment net sales, accounted for 72% of segment sales when combined.

In addition, Samsung Corning Precision's sales are concentrated across a small number of its customers. For the three months ended March 31, 2007, sales to two LCD panel makers located in Korea, Samsung Electronics Co., Ltd. and LG Phillips LCD Co., Ltd., accounted for approximately 93% of Samsung Corning Precision sales.

In 2005 and 2004, Corning and several customers entered into long-term purchase and supply agreements in which the Display Technologies segment agreed to supply large-size glass substrates to the customers over periods of up to six years. As part of the agreements, these customers agreed to make advance cash deposits to Corning for a portion of the contracted glass to be purchased. In the first quarter of 2007, Corning did not receive any customer deposit payments and issued $33 million in credit memoranda. In the first quarter of 2006, Corning received $13 million of deposits and issued $21 million in credit memoranda. Refer to Note 11 (Customer Deposits) to the consolidated financial statements for additional information.

In the event the customers do not make all customer deposit installment payments or elect not to purchase the agreed upon quantities of product, subject to specific conditions outlined in the agreements, Corning may retain certain amounts of the customer deposits. If Corning does not deliver agreed upon product quantities, subject to specific conditions outlined in the agreements, Corning may be required to return certain amounts of the customer deposits.

Outlook:

We expect to see a continuation of the overall industry growth and the trend toward large-size substrates driven by increased end market demand for LCD televisions. We have increased our estimates of volume growth in the LCD glass market to 35% to 40% in 2007. Our previous estimate was in the mid-30% range.

For the second quarter of 2007, we expect glass volumes of Corning's wholly owned business and Samsung Corning Precision to increase in the range of 8% to 12%, both individually and in the aggregate, when compared to the first quarter of 2007. Price declines in the second quarter of 2007 for Corning's wholly owned business are expected to be in the same range as the first quarter of 2007. Price declines at Samsung Corning are expected to mirror those of Corning's wholly-owned business.

Although we believe that end market demand for LCD televisions, monitors, and notebooks remains strong, we are cautious about the potential negative impact that economic conditions and political tensions could have on consumer demand. There is no assurance that the end-market rates of growth will continue at the rates experienced in recent years, that we will be able to pace our capacity expansions to actual demand, or that the rate of cost declines will offset price declines in any given period. While the industry has grown rapidly, consumer preferences for panels of differing sizes; prices; or other factors may lead to pauses in market growth. Therefore, it is possible that glass manufacturing capacity may exceed demand from time to time. In addition, changes in foreign exchange rates, principally the Japanese yen, will continue to impact the sales and profitability of this segment.

Telecommunications

The following table provides net sales and other data for the Telecommunications
segment (in millions):

                            Three months ended March 31,       % Change
                             2007                 2006         07 vs. 06

Net sales:
Optical fiber and cable  $          211         $        205          3%
Hardware and equipment              228                  192         19%
Total net sales          $          439         $        397         11%

Net income               $           29         $          1      2,800%

For the three months ended March 31, 2007, increases in segment sales were driven by market growth for telecommunications products. Movements in foreign exchange rates, primarily the Euro, did not have a significant impact on sales for the three months ended March 31, 2007, when compared to the same periods last year.

Effective April 1, 2006, Advance Cable Systems (ACS), an equity company affiliate, assumed responsibility for optical cable and hardware and equipment sales in Japan. Since April 1, 2006, ACS has been accounted for under the equity . . .