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In the fast-changing solar technology business, companies rise and fall before we ever know who the winners are. At one time it appeared Evergreen Solar (Nasdaq: ESLR ) would be one of those winners after a successful IPO in 2000. Oh, how times have changed.
Silicon prices have fallen for polycrystalline manufacturers while CdTe companies like First Solar (Nasdaq: FSLR ) figured out a way to make panels efficiently at costs only imagined 10 years ago. The String Ribbon technology touted by Evergreen never became the low-cost solution some thought it would be, and expensive U.S. operations have become a drag. At $1.94 per watt in the past quarter, that's still higher than high-cost provider SunPower (Nasdaq: SPWRA ) , which manufactures at $1.71 per watt.
Right now, the company is planning a move to China, outsourcing cell and panel production, hoping to lower costs that led to a paltry 8.6% gross margin in the most recent quarter. Still, anticipated costs of $1.25 per watt are higher than Trina Solar (NYSE: TSL ) , Yingli Green Energy (NYSE: YGE ) , and Solarfun (Nasdaq: SOLF ) , which have larger, more established operations.
Amid all this bad news, Evergreen only burned through $37 million from continuing operations last year, which is a significant improvement from 2008. With $115.4 million in cash on the balance sheet, there is still leeway for the company to establish lower cost operations in China and get some of its mojo back. In case Evergreen can't overcome competition in the solar business, investors may still make out with something. Evergreen had $375 million in net tangible assets on its balance sheet last quarter and a current market cap less than $140 million.
I'll be watching gross margins and cost per watt over the next couple of quarters looking for progress. In the most recent quarter, gross margins did improve 0.9% from 7.7% in the first quarter, a step in the right direction. If Evergreen can reach extremely lofty cost targets over the next year, there's a chance it could be competitive again in the solar business. Don't count Evergreen out quite yet.
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