Shares of the hydrogen fuel cell energy pioneer called -- can you guess it? -- FuelCell Energy (NASDAQ:FCEL) plunged 5% yesterday, on news that despite hitting its expected revenue number for the fourth quarter of fiscal 2006, the company was unable to improve on last year's $0.40-per share loss. Worse, the loss actually expanded to $0.47 per share. And that was the good news.

The bad news is that even the expected "improvement" in FuelCell's loss wouldn't have been an improvement at all. In yet another example of corporate dilution solution-ism, what the Street was really expecting was essentially the same loss this year as last, but spread out over a larger number of shares. What we got instead was a much bigger loss than anticipated, spread out over 9.3% more shares, for a per-share loss that was still larger than last year's.

Aside from that, Mrs. Lincoln, how was the quarter?
Mixed, at best. On the one hand, it was good to see that in hitting its revenue number, FuelCell derived the bulk of its revenue growth from selling stuff, as opposed to just performing R&D work on the government's dime. While overall revenues grew 15% year over year, sales of goods increased 61% even as R&D revenue declined 34%.

However, this commercial success seems to have been a mixed blessing to management, which explained its growing GAAP losses as resulting primarily "from higher product sales, largely sub-megawatt units, and costs associated with transitioning to produce larger units." Contrasted with that, the company earned a 20% gross margin on its R&D contracts this year, whereas last year it had a negative gross margin on its R&D revenues.

So I guess you could say it was perversely good news that the reported backlog of work shows commercial orders growing only 6% year over year, while the backlogged R&D contracts have nearly doubled. Though neither activity actually earns FuelCell money (or seems likely to in the foreseeable future), it tends to lose less money on R&D than on its commercial efforts.

In fact, perhaps this company should remain an R&D shop indefinitely. Because as far as I can tell, the commercial side of the business seems to operate on the principle of "the more we sell, the more money we lose."

How does FuelCell's performance compare with that of peer fuel cell researchers Plug Power (NASDAQ:PLUG), Ballard (NASDAQ:BLDP), Millennium Cell (NASDAQ:MCEL), and Hydrogenics (NASDAQ:HYGS)? Find out in:

Looking to power up your portfolio? David Gardner is always on the lookout for energetic stocks on the cutting edge. Interested? Then check out Motley Fool Rule Breakers free for 30 days.

Foolanthropy is celebrating its 10th year! To learn more about our five Foolish charities or to make a donation, visit

Fool contributor Rich Smith does not own shares of any company named above. Could you guess?