Tough Questions Ahead For Solar Titan

By Peter O'Dowd
November 02, 2011

The Golden Boy of the American solar industry doesn’t look so bright anymore.

Arizona-based First Solar will hold its quarterly earnings call Thursday with nervous investors. They’re on edge because First Solar announced a CEO shake-up late last month and have said almost nothing publicly since then.

2011 has been a difficult year for the solar industry. There was a bankruptcy at Solyndra; subsequent political fallout over government loan guarantees; and now the quasi-mysterious firing of First Solar CEO Robert Gillette in late October.

"Whenever you put out a terse, two-sentence release in the middle of the trading day, that’s a bit odd," said Tim Arcuri, Citigroup Global Markets analyst.

Photo by Peter O'Dowd
First Solar is building a new factory in Mesa, Arizona that will produce photovoltaic panels that produce energy from sunlight.

First Solar stock fell 25 percent after the announcement. Some analysts downgraded the stock. And to stem the bleeding, company executives issued an earnings report ahead of schedule. Third-quarter sales topped $1 billion – an improvement over last quarter. But the company isn't off the hook.

“I think they may have to lay some employees off and run the factories underutilized," Arcuri said. "And that’s a very tough pill to swallow for a company that since its inception has been the cost leader."

Cheap competition from China and weak demand in Europe have made it harder for First Solar to sustain its enviable cost advantage. That's also a big reason why Solyndra failed earlier this year.

But the shake up at First Solar doesn’t say anything fundamental about the company, according to Shayle Kann, who follows the industry for GTM Research.

"It’s important to look how First Solar is positioned long term,” Kann said. “Which from my standpoint is still quite good."

For its part, First Solar said in a release that it needs a new chief to navigate industry turmoil. For more, investors will have to wait until after the trading day Thursday when First Solar has its call.

"There's going to be a lot of questions, at the very least," Kann said.