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Emcore does the splits

The compound semiconductor maker will spin off its photovoltaics division into a separate business, and use funds from an initial public offering to aid future expansion.

Emcore, the chip maker that currently serves both the solar energy and fiber-optic telecommunication markets, is to split into two separate companies.

The move comes shortly after the Albuquerque-based company revealed plans to convert loan notes into common stock (see newsfeed entry), a switch that will make it much easier to divide the company in two.

At an investor call to discuss Emcore s latest financial results, CEO Reuben Richards said that the spin-off will lead to an initial public offering (IPO) of stock that would help to finance the rapid growth that its photovoltaics business is now beginning to experience.

Emcore s photovoltaics unit has announced a number of potentially very large contracts in the past couple of months, as the momentum behind concentrator photovoltaics (CPV) continues to grow.

As well as servicing an expanding, global customer base (see related stories), Emcore s own second-generation CPV system is now up and running at its chip manufacturing base in Albuquerque. Richards said that the "very impressive" system, which will soon be featured on the Emcore web site via a web cam, was already operating above expectations, generating 8% more electricity than expected.

Surprise dip
Surprisingly, Emcore s photovoltaics division registered a slight dip in revenue in the latest financial quarter, although this was solely due to the delayed installation of a key piece of manufacturing equipment, rather than any drop in demand.

The problem was an automated, high-volume die-attach machine, which should have been delivered in November, but only ended up arriving in January. That delay meant that $3 million worth of solar products were not delivered on time, although Emcore expects to make up the shortfall within the next few months.

Even without the inclusion of Emcore s latest deal with renewable energy specialist SunPeak Solar "“ which should result in Emcore deploying up to 700 MW of CPV systems in the US "“ the soon-to-be-separated photovoltaics business looks likely to begin its independent existence with a very healthy order book.

For calendar year 2008 as a whole, Richards is expecting the photovoltaics unit to bring in some $150 million, as shipments to customers in Europe, Canada and Korea gather steam.

In 2009, that figure should increase to something approaching $230 million "“ even without including the SunPeak deal, which is dependent on the US Congress granting an extension of investment tax breaks relating to renewable energy sources.

But Washington is widely expected to extend those tax breaks, with the likely outcome that the SunPeak deal will add significantly to the Emcore unit s sales from 2009 onwards. That additional business would require some extra investment in manufacturing capacity at Emcore, possibly from the planned IPO.

According to Richards, SunPeak is working on two utility projects, one rated at 200 MW and another at 500 MW. Land for the two sites has already been identified, with permits and access rights said to be on track. SunPeak also has experience in supplying renewable energy on a utility scale, and will be able to finance the projected Emcore deal thanks to the sale of wind power assets that it had previously developed.

With sales of fiber-optic components also on the up thanks to renewed investment in US cable TV networks, Emcore turned in first-quarter sales of $47 million, up 21 percent on the year-ago quarter.

The improving picture is yet to show a profit, however, with Emcore recording a $13.6 million operating loss, and a net loss of $14.5 million.

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