(This is an excerpt from an article I originally published on Seeking Alpha on April 23, 2012. Click here to read the entire piece.)
Last week, First Solar (FSLR) cited a “…lack of legislative support for utility-scale solar projects in Europe” for a significant shutdown of manufacturing facilities in Europe and Malaysia. FSLR is also slashing its sales force, support services, and administrative functions. I am relieved FSLR is being relatively proactive in its withdrawal from an unprofitable operating environment, but I am disappointed that they are not in a position to take the remaining business from competitors forced to exit the market. Perhaps other companies will follow. Regardless, it is a sad signature moment for the solar industry.
I typically get nervous when a company announces such a substantial retrenchment… {snip}
This retrenchment also allows fresh spotlights on old issues. For example, solar bear Gordon Johnson from Axiom Capital appeared on Bloomberg again to offer his commentary on the latest First Solar setback. On Bloomberg Radio, he not only commented on the operational issues, but also rehashed warranty and Cadmium issues. {snip}
Johnson noted that the warranty risks are laid out in the company’s 10K filing. That purported $800M liability motivated me to read it for myself. I scoured the report and simply could not figure out how Johnson came to the $800M figure. {snip} According to FSLR, its total warranty liabilities are substantially lower than $800M:
{snip}
First and foremost, there is nothing here to suggest that First Solar’s products are generally faulty. {snip}
{snip}
After it was all said and done, FSLR’s 10% pop on the restructuring news was mostly erased the next day and was completely gone by Friday. {snip}
Source: FreeStockCharts.com
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on April 23, 2012. Click here to read the entire piece.)
Full disclosure: long FSLR