Solar Is Hot! Well, Maybe Not

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You know, one of the things I love about the Internet is its archiving capabilities. Take Energy Conversion Devices (Nasdaq: ENER), for example -- this was a candidate for our former Rule Breaker portfolio a long while ago, and it may be instructive to see just how the company turned out. Tom Jacobs outlined the six markets that ECD was targeting for success in 2001:

• Photovoltaics, or PV
• Regenerative fuel cells
• Hydrogen storage (to enable hydrogen-fueled vehicles)
• Nickel metal hydride (NiMH) batteries (recyclable, no memory problem as with nickel cadmium)
• Rewriteable optical memory (CD-RW, DVD)
• Advanced computer memory (to replace DRAM, FLASH, and field-programmable gate arrays)

How has the company fared since then? I am going to give them 1 for 6, and I think I am being generous here.

In the company's fourth-quarter 2006 results, revenues were $27 million, up 34% year over year. Meanwhile, the company's net loss was only $769,000, helped greatly by $5.1 million generated in net interest income from the company's $404 million in cash. Actual operating losses were $5.9 million, not much of an improvement over last year's $7.2 million. This leaves me to believe that the Street is valuing the company at an enterprise valuation of $900 million because of the $8.6 million in annual operating profits and $87 million in annual revenue (or 85% of overall sales) from the United Solar Ovonic Unit. Now, that's just an absurd valuation at roughly 10 times sales.

But, but -- what about all those other awesome technologies I listed above? Well, revenue-wise and profit-wise, they have delivered basically -- bupkis. We have known that the battery technology has been a bust since 2001, when revenue was $7.8 million. Sure enough, 2006 battery revenue was $8.9 million. Hydrogen-fueled vehicles and fuel cells? The survey I highlighted last week says a mass-produced hydrogen car is expected in 2018. ECD doesn't even break this segment out in its10-K. Definitely a non-starter -- especially with hybrid cars like the Prius now stealing the show.

Memory? Let's see -- the company owns 39.5% of Ovonyx, along with Tyler Lowery, Intel Capital, and other investors. We also interviewed Lowery in 2001, and he talked about billion-dollar markets for Ovonic Unified Memory (OUM). Now? From ECD's latest 10-K: "While BAE has announced a product based on OUM technology, Ovonyx has not yet realized any royalty revenues since its licensees have not begun commercial sale of products based on OUM." Oops.

So solar technology has been the one big hit for ECD in the last few years, but even that may be faltering a bit. The company had a small one-liner in the 10-K about its backlog for 2007 declining from $51.3 million to $30.6 million year over year due to a substantial decline in sales of PV modules to SIT. That doesn't exactly sound like a positive indicator to me.

Then again, investors in Evergreen Solar (Nasdaq: ESLR), Plug Power (Nasdaq: PLUG), Ballard Power (Nasdaq: BLDP), FuelCell (Nasdaq: FCEL), Medis (Nasdaq: MDTL), and ECD have, in my opinion, needed quite a bit of faith to persevere with these investments, given the incredible patience required for some of these technologies to pay off. Like I've said before, that is patience I just don't have.

More solar-powered goodies:

• Foolish Forecast: Energy Conversion Devices
• Suntech Power: The Future Is Bright
• These Stocks Are Cooler Than You

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Fool contributor Stephen Ellis doesn't hold shares in any companies mentioned. You can see his holdings for yourself . The Motley Fool has a highly searchable disclosure policy .