I have to say that, while serving two markets that have too much supply and are under considerable cost pressure, GT Advanced Technologies (Nasdaq: GTAT) held things together pretty well at the end of 2011. The headline numbers -- like revenue falling 42% from last year -- don't necessarily look good, but the underlying fundamentals don't look nearly as bad.
Holding it together in a bad market
Like I said, revenue tumbled compared to last year, falling to $153 million in the fiscal third quarter of 2012. But there are some positives in that number. Sapphire revenue jumped from $8 million last quarter to $31 million this quarter, further proof that the business is diversifying. And $431.1 million of deferred revenue has already shipped, meaning the company has a stockpile of future revenue just waiting to be unleashed. So the revenue number wasn't nearly as bad as it first appears.
On the profit side, gross margin fell to 43.1% from 43.7% last quarter. Earnings per share fell to $0.12 per share, from $0.46 a year ago and $0.29 last quarter. But remember, the deferred revenue pushes some earnings into the future.
Technology improving by leaps and bounds
What investors should be very interested in is the company's new products, particularly the HiCz Continuous Cz technology. According to the company, this technology can improve solar-cell efficiency by up to 2% when using a Ga-doped version, or to 22.0% to 24.0% cell efficiency with phosphorous doping.
The company is starting to work with potential customers, and beta partners will be selected in the second half of this year. Production is targeted for the first half of 2013.
On the sapphire side of the business, the progress is slow but steady. Shipments have been rolling out to customers, and revenue should continue to improve. The company is trying to encroach on markets that Aixtron (Nasdaq: AIXG) and Veeco Instruments (Nasdaq: VECO) are already in and, as opposed to PV, I wouldn't expect a dominant position there soon. That said, this diversification is a major plus.
A bet on solar's future
The reason I'm high on GT Advanced Technologies is because they provide the technology that solar manufacturers need to remain competitive. Efficiency continues to be the number one challenge for manufacturers trying to differentiate their products.
LDK Solar (NYSE: LDK) and Trina Solar (NYSE: TSL) are known GT customers, and if they can be beta partners and take a step forward in efficiency before competitors get there, it could be a big advantage. What's good for LDK and Trina would be good for GT, and these customers should be clamoring for equipment to make modules more efficient.
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