The battery industry is a world of turmoil right now, and when Valence Technology (Nasdaq: VLNC) reported earnings yesterday it may have been the last smooth quarter for the sector's most financially solid company. Valence has been much closer than A123 Systems (Nasdaq: AONE) or Ener1 (Nasdaq: HEV) to being profitable, but after losing one of its most promising customers, the company's future is now up in the air.

For the fiscal fourth quarter, things couldn't have been much better. Revenue exploded to $13.9 million from $3.9 million a year ago. Gross margins expanded to 21% from 12%, and net loss was just $2.5 million, or a shiny penny per share. But that's where the good news ends.

A123 Systems announced this month that it had signed a deal with Smith Electric, one of Valence's biggest customers. Even Valence doesn't know how Smith's dual sourcing plan will work, but revenue guidance for the first quarter is just $8.5 million to $10.5 million without Smith. There's an upside if Smith does come through with orders in the quarter, but there will likely be a big decline in revenue sequentially.

Lots of questions, few answers
What was once a promising group of companies has now become a game of dodging landmines for investors. Advanced Battery Technologies (Nasdaq: ABAT) has been thrown out with the bath water along with other Chinese reverse merger companies. Ener1's future viability has come into question after it wrote off its investment in Th!nk. And even A123 Systems, which appears to be leading the group after stealing at least some business from Valence, has let us down before.

I'm still waiting to see which company emerges as the winner before buying into these stocks. The champion might hit a gold mine, but as we've seen, there are land mines it will have to avoid before getting there.

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