GT Advance Technologies Doubles Down on Solar

GT Advanced Technologies (Nasdaq: GTAT  ) , formerly known as GT Solar, is still making moves to expand its business and capabilities. After jumping into the LED business last year with sapphire crystallization furnaces, the company is expanding its reach in solar.

GT is buying privately held Confluence Solar, developer of a continuously fed Crochralski growth technology, which is intended to add to the company's technology capabilities. GT is expecting the acquisition to lower the production cost of monocrystalline solar ingots, which have more efficient than multicrystalline ingots.

The deal is for $60 million, with $20 million of earn-out potential if operational, financial, and technical milestones are reached.

Most solar manufacturers (and GT Advanced Technologies customers) like Trina Solar (NYSE: TSL  ) , LDK Solar (NYSE: LDK  ) , and Yingli Green Energy (NYSE: YGE  ) manufacture both mono- and multicrystalline ingots. But because multicrystalline ingots have a lower manufacturing cost, they result in lower cost per watt.

If GT is successful in lowering costs for monocrystalline solar ingots, that could lead to a shift to higher efficiency panels at lower costs. And Chinese manufacturers may catch up more quickly with current leader in efficiency, SunPower (Nasdaq: SPWRA  ) .

Right now the market doesn't seem to be too excited about the deal, with GT Advanced Technologies shares down over 5% as I'm writing. It is expected to have a negative impact on earnings, operating expenses, and capital spending for this fiscal year. But I see this as a short-term view of a technology that could help send solar power to the masses.

With the solar sector fighting over capacity, it's hard to see massive demand picking up in the short term. But long-term I think this is a move in the right direction. GT is trying to stay ahead of the curve by providing the best products and lowest production costs to customers. And that's a strategy this Fool can believe in.

Interested in reading more about GT Advanced Technologies? Click here to add it to My Watchlist, and My Watchlist will find all of our Foolish analysis on this stock.

Fool contributor Travis Hoium owns shares of LDK Solar and SunPower, and has sold puts in SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (1)

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  • Report this Comment On August 26, 2011, at 12:10 PM, GrussGott wrote:

    Agreed. GTAT projects that the Confluence acquisition could add $3-$450m to annual revenues starting in Q3 2013, when it will for the first time it will offer a merchant solution, with up to 30% improvements in cell efficiency, to existing monocrystallization solar cell producers. The latter are currently unserved by any merchant equipment producer, including GTAT, and with GTAT's efficiency moat, no other producer will be able to compete.

    At GTAT's existing 31% gross margin, this could add $1-150m to gross profits, or another $.75 to 1.15 EPS. I am long this stock.

  • Report this Comment On August 26, 2011, at 12:16 PM, GrussGott wrote:

    Bear in mind that increased cell efficiencies vs. continually lowered cell production costs will enable solar producers to tap more and more areas of the overall energy market. GTAT is very much the arms merchant of this significant secular trend.

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