For four quarters in a row, Energy Conversion Devices (Nasdaq: ENER) has never failed ... to fail to meet analysts' profits estimates. Can it convert this losing streak to a win when it reports fiscal second-quarter 2008 earnings tomorrow morning?

What analysts say:

  • Buy, sell, or waffle? Eleven analysts follow Energy Conversion Devices (ECD), giving it seven buy ratings and four holds.
  • Revenue. Sales are expected to spike 130%, to $52.7 million ...
  • Earnings. ... whilst losses are expected to nearly double, to $0.13 per share.

What management says:
ECD announced three new additions to its management team last month, poaching senior execs from American Axle, CertainTeed, and Berkshire Hathaway's John Mansville subsidiary. So one auto-industry pick, and two guys from the housing industry. Hmm. Wonder where ECD thinks its growth is coming from these days?

If you listen to new CEO Mark Morelli (himself a recent United Technologies poach), the big game will be played in manufacturing, particularly of solar panels. See, ECD hopes to cash in on the solar craze that has treated shareholders of First Solar (Nasdaq: FSLR) and Suntech Power (NYSE: STP) so well over the past few years.

What management does:
Six months ago, I opined that Morelli "has his work cut out for him" trying to convert ECD from an R&D shop into an honest-to-goodness profit-making enterprise. For their part, gross margins continue to slide.





























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
But what about the operating margin, you ask? That, at least, went up for a change last quarter -- or, rather, became a bit less negative than in the past. Why's that? Though it's not the simplest task to separate out R&D costs that ECD funds internally from R&D that it gets paid to do on others' behalf, it looks that ECD is spending less on research and development.

It's too early to call this a "trend" at ECD. After all, Morelli has held the CEO's chair less than two full quarters. That said, de-emphasizing R&D would seem consistent with his objective to shift ECD into manufacturing mode -- but we need to watch carefully to ensure the cutbacks don't go too far. A high-tech firm like ECD needs to juggle both balls simultaneously if it's to keep up with technological advances by its competitors. Sacrificing R&D to save money for manufacturing just isn't an option in this industry -- it would be a strategy for planned obsolescence.

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Fool contributor Rich Smith does not own shares of any company named above; the Fool owns shares of Berkshire Hathaway. The Motley Fool has a disclosure policy.