1. nprfreak June 20, 2010 8:42 pm

   ECD is a hard nut. The company has been public for something like 40 years but has shown a profit in only 4 or 5 quarters total. I accumulated shares for some time but got completely out (rare for me - I like to keep at least a nominal position)on the back side of the monster runup a few years ago.

   The intellectual property developed under founder Stan Ovshinsky (the mad scientist without a doctorate featured in “Who Killed The Electric Car”) is extensive but only NiMH batteries have really hit. All that remains of NiMH is royalties in and R&D costs out. Other Hydrogen technologies showed promise but the new management seems to have largely abandoned them. Phase change memory was groundbreaking but has yet to be commercialized and more robust replacements for and upgrades to flash memory may leave it in the dust.

   I fear that amorphous thin film solar is but another great idea executed too late. Efficiencies are improving but are still far below crystaline cells. There are some advantages in low and angled light, partial shade, less output reduction during the hot part of the day, and ease of building integration for flat or standing seam roofing. With cheap silicon and the huge number of companies competing for installations, I just can’t see Unisolar recovering in a big way.

   Too bad for Michigan if I’m right. ECD had aggressive plans to ramp up production plants with some state subsidies that could have employed many people.

   Had the company gotten machine 2 and 3 running (1 was essential R&D and demo) even a year earlier, built a solid distribution channel, and put more emphasis on residential instead of just commercial installations I might feel differently. Some think they bought their biggest installer (SIT) just to clear inventory. (I’m not quite that cynical and think it was a reasonable business decision.) Flat roof installations seem to be where they are most competive but I wonder if that can last as green roofs become more common, necessary, and possibly mandated (except in the US of course).

   The company gained some disipline when Stan retired but a lot of the revenue has been diverted to management compensation and a lot of the fun went out of it for this investor. Unless I see some indication that phase change memory is close to realization, I’ll find my solar investments somewhere else.

   It’s been sub-$5 for the last few weeks. Great buy or death throes? Who knows.

2. Yehuda Fruchter June 21, 2010 12:34 am

   The major trouble with ENER (other than business issues, which you covered well) is that management did a convertible a few years back when the stock was at its high. These converts are the kiss of death, as they bring in all sorts of short hedge funds who conspire to destroy companies (see VG as an example). However, if ENER is able to demonstrate even a slight turnaround, they may be able to wean themselves off the converts slowly (I did see they got one to convert to some shares), or quickly depending on where the stock is. Once the converts have moved on, and assuming the business gets back on track, you’ll see a marked improvement in the stock price. Of course, it’s possible the situation is not reparable, as you mention. Time will tell. I’m already down big on my position, but I’ve learned to never pay attention to the market price.

3. nprfreak June 21, 2010 6:44 am

   Yehuda,
   Thanks for reminding me about the convertible bonds. I now recall those were a big factor in my decision to liquidate vs. reduce my position. It wasn’t the bonds so much as the loaning of shares to Credit Suisse (I think) for the explicit purpose of shorting them. The rationale was that this would protect the bond holders. I couldn’t see that it would do much but enrich CS to the detriment of equity holders with little benefit to ECD itself.

   You are correct of course. If they can convert those bonds to equity rather than continuing to pay the interest and having to fund redemption, they will be much better off.

   Zero debt was a big attraction to me early on. I will say that ECD has gone to the market for cash less often than many solar companies. Sunpower seems to mount a share offering about twice a year plus did a convertible bond offering recently. (I have tiny positions in SPWRA/B and YGE.)

4. Yehuda Fruchter June 21, 2010 11:50 am

   FYI, my top solar pick remains: RSOL. You can see my initial post here: http://www.envoyglobalresearch.com/real-goods-solar-rsol/

   Given the seasonality in this business (Q1 is the slowest quarter), the Q1 earnings report is indicative of a tremendous rebound in sales+earnings this year. Nobody really follows RSOL (as opposed to the capital-starved Chinese companies that are investor favorites), as far as I can tell. I believe that will change due to a wide variety of factors.

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