Corning's shares fell about 7.5 percent after the company, whose glass is used for flat-panel displays and fiber-optic cables, said fourth-quarter net income fell to $249 million, or 16 cents a share, from $768 million, or 49 cents a share, a year earlier.

Excluding special items, profit was 13 cents a share, a 70 percent drop from one year ago. Analysts were looking for profit of 19 cents per share, according to Reuters Estimates.

As the economy has declined, demand from manufacturers for liquid crystal displays in flat-panel televisions and computer displays has decreased. The slowdown has been particularly harsh among companies that assemble TVs and from Corning's customers in Taiwan.

As a result, revenue for Corning, named for Corning, New York, where it began as a glass maker more than 150 years ago, fell 30 percent to $1.1 billion in the fourth quarter.

"We experienced a significant momentum shift in many of our core businesses in the fourth quarter as the recession took hold," Wendell Weeks, chairman and chief executive officer, said in a statement "As a result, we are adjusting our operations to reflect anticipated lower sales in 2009."

The specialty glass maker said it anticipates "a slow start to 2009," with first-quarter combined display volume down 20 percent to 25 percent as the supply chain continues to reduce inventory.

Corning reiterated that it expects sales, gross margin and net income will be sequentially lower in the period, with earnings per share excluding one-time items at about break-even in the first quarter.

Analysts were looking for first-quarter earnings of 16 cents per share, according to Reuters Estimates.

Corning said it would cut 3,500 workers, or about 13 percent of its workforce, by the end of the year, and left the door open for more reductions if necessary. In addition, it is also cutting more than 1,400 temporary workers.

The restructuring moves will result in first-quarter charges of $115 million to $165 million. The company hopes to save $150 million to $200 million as a result.

Corning's shares fell to $9.20 in premarket trading, from Monday's close of $9.95 on the New York Stock exchange. At that point, the shares had fallen 10 percent over the past six months, compared with a drop of 24 percent for its top rival, Japan's Asahi Glass Co Ltd <5201.T>.

(Reporting by Franklin Paul; Editing by Derek Caney and Maureen Bavdek)