Investors continued to bid down shares of Plug Power (NASDAQ:PLUG) today, with shares off more than 9% on top of yesterday's 7% drop. The fuel-cell developer reported Wednesday that its revenues ran out of juice in the fourth quarter, declining to $3 million -- a 12% year-over-year drop.

Like the shares of competitorsBallard Power Systems (NASDAQ:BLDP) and FuelCell Energy (NASDAQ:FCEL), Plug Power's stock has had quite a ride over the years. After spiking to around $150 in 2000, the stock plummeted to about $3 in 2002, before bouncing back to its current level of around $7. It's clear that investors continue to wrestle with the proper valuation for this company. Its technology seems to hold promise, but its ultimate success is far from certain.

One of the more telling aspects of Plug Power's results was that while total revenues for full-year 2003 grew 6%, product and service revenue actually declined 20%. Increased research and development contract revenue from government partners and Honda Motor Co. (NYSE:HMC) made up the difference and accounted for the rise in the top line.

Plug Power's alliances are important for the company's long-term success. But the revenue mix suggests that the firm is becoming more reliant on alliance money, rather than moving toward greater independence and eventual profitability from increased product sales.

Plug Power also went to lengths to stress that it improved its cash position, and that it's reducing cash used in operating activities. While more cash is certainly good, and the firm should strive to operate as efficiently as possible, cutting back on operating expenses when sales are flagging seems odd. Of course, the market for fuel cells is still very limited, so any sales increase would be small and largely symbolic of future market share. Still, Plug Power needs to spend ample sums to stay visible and carve out as large a position as possible, so when fuel cells do take off, it can be a leader.

In fact, success in this industry will probably require lots of spending over many years. Plug Power currently has approximately 10 years' worth of cash based on its current burn rate, but even this may not be enough. Utilities don't appear ready to give up on the traditional power grid system anytime soon, and the rise of hybrid vehicles makes it likely that a true "hydrogen economy" is at least a decade, and probably two or more, away.

These factors, coupled with the emergence of automakers and other established firms as competitors, mean Plug Power and other fuel-cell outfits need to be big and cash-rich to survive and compete. Consolidation seems to be the best way to achieve these ends, and Plug Power took a stab at this by buying competitor H Power. Nonetheless, this sector seems ripe for more M&A.

Have your own take on the future of fuel cells? Then electrify the Fools on the Plug Power discussion board.

Fool contributor Brian Gorman is a freelance writer in Chicago, Ill. He does not own shares of any companies mentioned in this article.