"From the Sun I learned this:
when he goes down, overrich; he pours gold into the sea out of inexhaustible riches, so that even the poorest fisherman still rows with golden oars.
For this I once saw and I did not tire of my tears as I watched it."
-- From Thus Spoke Zarathustra, by Friedrich Nietzsche
If it walks like a solar power company and quacks like a solar power company, it's probably not a semiconductor business. That's why I think of Cypress Semiconductor (NYSE: CY ) as the majority owner of SunPower (Nasdaq: SPWR ) that happens to do a bit of chip design on the side, rather than the other way around.
The company's approximately 52% stake in SunPower accounted for $274 million of sales, or 62% of the entire $442 million revenue cake. That's a long way from contributing a mere $11 million in all of 2004, and less than 22% of sales in 2006. Sure, the solar-cell operation carries lower margins than the various semiconductor lines, but it still managed to make a $0.04 GAAP profit per share, while the chips made a $0.16 per-share loss. The end result: $0.12 of red ink per stub.
Investing $8.8 million in its initial 44% stake in SunPower five years ago may have been the best decision Cypress ever made. With oil prices shooting through the ionosphere, and the global fossil-fuel supply likely to dry up in our lifetime, solar power seems predestined for ridiculous growth.
I'm not sure that Cypress would be a useful vehicle for investing in that sector, given that its semiconductor divisions are essentially diluting the solar gains at the moment. You could think of that dynamic as a hedge against market volatility, though, and hope that the current chip weakness is the bottom of that cycle. You'd have Cypress CEO T.J. Rodgers on your side there.
Alternately, you could simply invest in SunPower directly, or in some of its competitors. Suntech Power Holdings (NYSE: STP ) and Yingli Green Energy (NYSE: YGE ) both have a higher rating than SunPower in our CAPS investment community. Then there's PowerShares WilderHill Clean Energy (AMEX: PBW ) , for those who prefer a wider sector exposure in a single bite.
Ribbit. I mean, quack. Thus spoke Cypress Semiconductor.
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