Difficulty finding a favorable market for their thin-film flexible solar laminate products and systems, less than impressive financials, job cuts and a competitive industry are just some of the problems facing Energy Conversion Devices, Inc. (NASDAQ: ENER). While at one time this solar technology company looked like it would be leading the alternative energy pack times have changed and their solar laminates that convert sunlight into electricity have yet to be embraced on a large scale.
Shares in ENER have tumbled to the 4.60 – 4.65 range, a dramatic drop from its 52-week high of 12.75 posted on January 8 and while it’s on par with its 50-day moving average it still lags behind the 200-day moving average of 6.16. At a time when key competitors like SunPower Corporation (SPWRA) and First Solar, Inc. (FSLR) are trading well above their 50-day moving average ENER has found less favor among investors.
ENER has tried to grab a competitive edge in the solar technology market with their solar films but they have encountered problems with price and efficiency. While companies concentrating on traditional solar panel technology have managed to keep costs down provide an efficient method of converting sunlight to energy the same cannot be said for Energy Conversion Devices.
As important as holding advanced technology is, it is clear ENER still has a number of hurdles to jump before they have a viable alternative to their competitors’ products. In an article published on DailyFinance.com on Aug. 11 it was pointed out that the largest solar market is Europe and because many countries have implemented policies that are economically beneficial to solar projects that can generate the most power those project developers often implement the traditional solar panels.
The acquisition of Solar Integrated Technologies back in August 2009 was thought to be a sales pipeline for ENER’s thin film laminate, something that could be implemented in SIT’s design and installation of rooftop built-in photovoltaic (BIPV) systems but that pipeline has yet to pay off the way investors had hoped. At the time that acquisition was announced Mark Morelli, ENERs President and CEO said, “the acquisition of SIT enhances our BIPV value proposition by significantly improving our field engineering and technical capabilities in rooftop solar to better support our channel partners in Europe and the USA. Our combined organization will also be well positioned to meaningfully participate in the expected growth in the US market, including under the stimulus plan.”
While the market has certainly grown ENER’s participation in that growth has fallen short of expectations. Investors won’t have to wait much longer to find out just how far back ENER is as they are scheduled to announce financial results for the first quarter of fiscal year 2011 ended September 30, 2010 before the market opens on November 9, 2010.
According to some analysts ENER’s first quarter figures will show an improvement in gross margin from 3.5% in the fiscal fourth quarter 2010 to a range of 15% to 18%. As significant as that is ENER will need to show some kind of improvement in revenue, something to offset their limited cash flow over the past 12 months.
It will be hard for ENER to spin the first quarter figures and even if the results appear positive the company could be facing more negative news when they implement a previously announced job cut. That job cut is said to involve 140 jobs in its Michigan operation with plans to move some of its manufacturing to Mexico as a cost cutting measure. Morelli has said the move was being made to remain competitive in the global market but judging by the company’s recent performance it is hard to see how that will help.
ENER may continue to be a play for shorts but as a long it appears as if investors have lost faith and moved toward more stable options.