AIG (NYSE:AIG) and Bear Stearns were too big and entangled to fail. Is it possible that Capstone Turbine (NASDAQ:CPST) is too inspirational to fail? This clean-energy company could be, pound for pound, the biggest underdog story in alternative energy. Having recently finished yet another year of negative earnings, it continues chugging along with resilience.

Some highlights from Monday's second-quarter fiscal 2009 earnings call:

  • Revenue was up 82% to $13.1 million over last year's second quarter.
  • Its margins slightly improved, but costs still exceeded sales.
  • Net losses were $9.9 million -- or $0.06 per share.
  • Management provided no timetable regarding when it may become profitable.

Capstone's turbines may not pollute, but as a company it burns enough cash to put a sizable hole in the ozone. Its operations used up more than $17 million last quarter -- which exceeded its revenue by around $4 million. That said, some of this money was necessary for inventory buildup, as it intends to fill $50 million in backlog orders, mostly over the next year.

So, why is Capstone still alive?
Microturbines are modern marvels, and the industry could potentially benefit from environmental legislation. In fact, Capstone's management is especially hopeful about its prospects under the Obama administration. To date, Europe has been its largest market, but it has room for growth in the United States.

Additionally, its product line includes units of varying sizes used in a wide array of applications. Its microturbines are capable of powering buses, small buildings, and even skyscrapers. Internationally, incentives have helped Capstone sell its products to biogas, landfill gas, and wastewater treatment plants.

Foolish takeaway
To some people, microturbines represent the future of clean energy. For them, Capstone's story is as inspirational as the Rocky III soundtrack, and they ignore the fact that economics aren't exactly working in its favor at this point. Also, you could call it an underdog because if it ever became profitable, conglomerates like General Electric (NYSE:GE) and Siemens (NYSE:SI) could crush it like a bug.

As I see it, Capstone attracts two main classes of investors. First, there are those who truly believe in its cause and want to support its survival. Then there are speculators willing to bet that legions of true believers will keep it on life support until it succeeds one way or another. Whatever the outcome, I'll enjoy watching this one -- from the sidelines.

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