I hate to say that falling revenue and a widening loss are progress for A123 Systems (Nasdaq: AONE), but that's exactly what we saw in the first quarter. As I discussed in my earnings preview yesterday we won't really be able to tell where A123 stands based on financial results, but rather by the continuing ramp of customers during the second half of the year.

The crescendo begins
Like a conductor directing an orchestra, A123 is hoping this is the silence before a loud crescendo for the company. And hopefully it's right.

Revenue fell to $18.1 million, from $24.5 million in the first quarter of last year, and net loss exploded to $53.6 million, or $0.51 per share. But the focus was on the future and expected growth during the rest of the year.

The company began ramping production for Fisker Automotive in the first quarter and other automakers will follow. BMW, Daimler, and Navistar are all expected to move into mass production during this year. But the surprise of the day was an agreement with Smith Electric Vehicles on a production and supply agreement. Valence Technology (Nasdaq: VLNC) counted Smith as its main customer, so, depending on details of the contract, it might be out as supplier, a big blow for Valence.

As a result of these product ramps, A123 is expecting revenue to double during 2011 from 2010 levels. Fisker will drive that growth, but grid shipments are also expected to double as utilities test their systems.

Competitor Ener1 (Nasdaq: HEV) reports earnings later today and investors hope to see more tangible progress on commercial vehicles and grid projects from the company. These projects have had a more consistent ramp so far, but A123 could speed ahead if electric vehicles sell well. With Chinese company Advanced Battery Technologies (Nasdaq: ABAT) in turmoil, investors may have to wait to see if North American manufacturers have the ability to turn financial results around.

Battery makers are too risky right now, with losses mounting and periodic capital raises, but if they ramp sales fast enough, that could change by the end of the year.

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