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Solar Partner Critical To Emcore's Prospects

Triple-junction cell sales are resisting the recession, but with its optical communications business continuing to shrink could a mystery investor be the company's salvation?

Compound semiconductor component and subsystem producer Emcore is looking to investment in its photovoltaic division to keep it afloat after another quarter of worrying losses.

“Last month we signed a letter of intent with a major international investment group," explained chief executive officer Hong Hou on February 10. In the conference call with analysts to discuss financial results for the last three months of 2008, Hou underscored the importance of the conglomerate s backing.

He explained that the partner is slated to provide funds for major concentrating photovoltaic (CPV) installation deals in a more flexible way than banks are currently able to.

After Emcore reported a $52.5 million quarterly loss "“ impacted by a $33.7 million devaluation of its recent acquisitions "“ such a partner appears a vital development.

The company had just $18.8 million in cash, and had used $15.4 million of its $25 million credit at the Bank of America at the end of 2008. Since then, however, Emcore has sold investments to provide it with another $14 million.

“We are still consuming cash," warned the CEO.

Hou said that the prospective collaborator would “organize equity investment" capital that will allow Emcore to produce, install and maintain CPV systems for major deployments.

That could play a crucial role in the southwest US project for up to 80 MW of systems that Emcore has been shortlisted for after passing basic technology qualification.

Emcore and its partner submitted a joint bid to the utility company assessing the systems, which will progress the project further in the second half of 2009.

Solar cell manufacturing at Emcore has gained a tangible boost after the signing of official supply agreements with two companies that have had their CPV systems qualified for the Spanish market. It also signed a $70 million contract in December to provide cells for satellites, a business in which Hou says Emcore still has relatively good visibility.

GaAs-based cells contributed to both year-over-year and quarter over-quarter increases in revenue for Emcore's photovoltaic business. At $14.9 million, this is a $2 million increase over the same period in 2007 and $400,000 better than the previous quarter.

Sales of fiber-optic components fell 15 percent sequentially to $39.2 million but the businesses acquired from Intel actually pushed revenues up 15 percent from the same period in 2007. However, the adjustment to what it can now reasonably value the business at contributed to the $33.7 million addition to its losses.

The company now expects fiber-optic component sales to fall up to 15 percent in the current quarter.

Cost reductions - including 160 job losses - have already been made and the company will now work to further improve its operating efficiency to try and offset the sales decline.

“2009 is off to a rough start," Hou said.

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