FuelCell's Burning Cash

The old test of a person's optimism is to show him a glass of water, filled to 50% of capacity, and ask whether it is half empty or half full. Shown such a glass, I have full confidence that investors in hydrogen fuel-cell pioneers such as Plug Power (Nasdaq: PLUG  ) , Ballard Power (Nasdaq: BLDP  ) , or FuelCell Energy (Nasdaq: FCEL  ) would declare the glass half full.

Why? Because despite a history that proves these companies burn a lot of cash but produce precious little energy in doing so, optimistic investors continue to shovel more and more cash into the fire. FuelCell, which reported its fiscal third-quarter results yesterday, illustrates the point as well as any of the others.

From a green-eye-shaded perspective, FuelCell's results were nothing to be optimistic about. Over the past nine-month period, revenues were down 15% from the first nine months of 2003. Profits remained elusive, but losses were there in abundance, ballooning 26% over last year's figures. Of course, losses per share increased by only 4%, but you know the old story -- the more shares you issue, the fewer losses per share you need to report.

And the increase in FuelCell's share count is worth considering in its own right. Year on year, shares outstanding have increased 22% -- that's a lot of optimists buying into the hydrogen future. It's also a lot of cash being invested, and not by venture capitalists -- who can afford to lose the dough -- but by little guy investors like you and me. By the optimists who, thinking FuelCell would report good news today (when the company had been expected to release its results), bid the shares up by 4.5% on a down market day yesterday.

Those investors don't seem to have been disappointed by yesterday's news, bidding up FuelCell's shares again today. Be thankful for their optimism and for their willingness to keep pumping cash into companies such as FuelCell, financing the research into alternative sources of fuel that we can all use in the future. That's an admirable goal, and if an investor has to lose money on an investment, I can't think of a much better way to do it.

FuelCell is far from the only company researching the hydrogen dream:

• Read about Plug Power's similar money-losing results last quarter.
• And the quarter before that.
• Meanwhile, Ballard is working with Ford (NYSE: F  ) and DaimlerChrysler (NYSE: DCX  ) to put fuel cells in your car.

Fool contributor Rich Smith has no interest in any of the companies mentioned in this article.