News Article

Demand "drops Off A Cliff" At Emcore

As it records a large negative gross profit margin in its solar business and order cancellations in fiber-optics, the company still has high hopes for CPV.

Emcore has cut 100 jobs after its results for the September quarter were hit by $5 million worth of order cancellations right at the end of the period.

The shortfall in its core fiber optics business contributed to a $19.7 million loss that surprised market analysts covering the diverse compound semiconductor company.

Emcore subsequently lost a third of its market value, falling from $1.54 at close of trading on December 10 to $1.02 at close the following day.

“During the September quarter we were tracking well for our revenue plan, but the demand seemed to drop off a cliff after September 15," explained Hong Hou, Emcore's CEO. “As a result the optical revenue decreased from $53.6 million to $46.1 million sequentially."

The company's concentrating photovoltaic (CPV) business also failed to ship against some orders because the customers concerned were too great a credit risk. Emcore also saw delays in more concrete orders, as companies reacted to uncertainty over the future of solar power incentives in the US and Spain.

Although Hou didn't say exactly how overall photovoltaic revenue was earned, the headline figure fell 8 percent from the previous quarter to $14.5 million.

Despite its problems CPV actually boosted this figure, compensating for a $5.3 million fall in revenue from the US government for GaAs-based solar cells to be used on satellites.

A further blow to the company's profitability came in the three months ended September as it took a $4.5 million charge for CPV system inventory that has now become obsolete.

The stock will still be offered for sale in small projects, but the charges brought the quarter's photovoltaic gross profit margin crashing to -31.6 percent.

These systems and modules became obsolete because Emcore has upgraded from its second-generation to third-generation CPV technology.

“For generation two the cost was not very competitive," said Hou. “Generation three, our cost target, fully installed, is less than $3 per watt."

“I think if we sell the module at $2.30 to $2.40 per watt or fully installed at $4.50 that still will be very competitive."

On the basis of the potential for these systems Emcore is cautiously optimistic, with nearly 150 MW of orders in negotiation in the southwest US alone. Since the end of the September quarter the solar business has also been boosted by the US congress passing an 8-year extension of the solar investment tax credit incentive, Hou points out.

Despite this the company is taking measures to reduce costs and boost profitability. Other than job losses, this includes cutting staff bonuses this year, while eliminating them and “merit" increases in salary for 2009.

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