SunPower's Cloudy Communication

• Email
• Share
• Print

Here are some of the bullet points you didn't see in SunPower's (Nasdaq: SPWR) financial press release:

• Return on capital employed was 1% in 2007, down from 8% in 2006.
• Quarterly stock-based compensation was 43% of non-GAAP operating income.
• By "non-linear deliveries," we mean "lower deliveries."

OK, I think those first two are pretty self-explanatory. This leading solar firm isn't generating much profit today from its massive capital base, and executives are being handed much of the spoils. If you're a shareholder in this company, you can't be too bothered by these small details, because somewhere down the road there will be bounteous cash flows that make this mediocrity moot. Or not.

That third bulleted item is a little more obscure, but it bugs me no less. Within its prepared statement, the company noted that a silicon ingot supplier changed its production process to produce TCS gas in-house -- an option that wafer wunderkind LDK Solar (NYSE: LDK) has officially decided to forego.

Anyway, this supplier's overhaul disrupted the steady flow of ingot deliveries and constrained SunPower's solar cell output for the quarter. SunPower chose to characterize this ingot inflow as "non-linear." Not only do I find that geek-talk sort of condescending, I also find it unclear. Were the deliveries just erratic, or were they lower in absolute terms as well? "Non-linear" is non-informative.

Obviously, I'm skipping the many operational high points of the quarter, but the company told you all about that. Then, of course, there's the guidance of about 60% revenue growth this year, followed by 40% to 50% growth in the following year. If the firm gets there, it's valued at about three to four times 2009 sales. That sounds about right, given the fiery growth forecast.

Personally, I don't find this a particularly desirable time to be taking on speculative risk with my own stocks, but the solar story painted by the likes of SunPower, JA Solar (Nasdaq: JASO), and Trina Solar (NYSE: TSL) is certainly not the most far-fetched growth scenario out there.