Solar panels manufacturer Energy Conversion Devices (Nasdaq: ENER) reported earnings in line with the rest of the industry, reporting wide losses in its fourth quarter. However, in spite of the dismal numbers, the stock jumped a whopping 25% as the company announced plans to manufacture solar products for military and consumer use.

Let's take a look at how the company may perform for the rest of the year.

A look at the quarter
Revenue for the quarter fell 15%, to $73.1 million from $86.2 million in the year-ago period. The first half of 2011 has been daunting for the solar industry since subsidy cuts were announced by Germany and Italy, the two leading markets for solar products. This measure led to a fall in average selling prices of solar products.

Falling prices have had a profound impact on operating margins. The operating loss at Energy Conversion Devices almost doubled to $26.5 million in the quarter. Even as bigger players such as JA Solar (Nasdaq: JASO) and MEMC Electronic Materials (NYSE: WFR) forecast that prices will continue to fall, Energy Conversion expects the industry to look up. Under such circumstances, the company may find it difficult to swing to profitability.

Slowdown in industry
The slowdown has deeply affected the financials of various companies. SunPower (Nasdaq: SPWRA), for example, reported a wider-than-expected net loss of $147.9 million in its just-concluded quarter. The decline in prices, coupled with rising costs, puts Energy Conversion Devices in a bind.

The company slashed its production capacity in the quarter by a stupendous 84% from the previous one, which inflated its manufacturing costs to $3.40 per watt from $1.45 earlier. Hence, it has to chalk out a more competitive cost structure.

The silver lining
The company is diversifying its offering by integrating its products for domestic use; it previously specialized in commercial applications. This will certainly expand the addressable market to a considerable extent and probably result in higher revenue. The company is also looking toward expanding its business in North America, where it recently concluded the largest solar rooftop project in Ontario.

As far as cost control is concerned, the company is exploring technologies to deliver cost-efficient products. It looks to integrate its products into building materials and daily applications to drive down costs.

The Foolish takeaway
The stock has lost an incredible 82% of its value this year, and looks like it is rebounding after the announcement of development initiatives. However, I believe that until and unless those steps materialize, Energy Conversion will not be able to break the current range it is trading in.

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