The once highly touted company clearly is facing challenges, from a critical cash crunch to strong competition, and while some say the company won’t survive, others say don’t bury AstroPower just yet. To keep up-to-date on Astropower and other green investment analysis, subscribe to Progressive Investor.
by Nancy Nachman-Hunt
Four years ago, AstroPower, the Newark, Delaware-based solar energy technology company founded by electrical engineer and entrepreneur Allen Barnett, was riding high. The company Barnett founded to make better, cheaper solar cells was the darling of Wall Street analysts who covered emerging energy companies.
AstroPower figured out a cheaper way to make solar cells by manufacturing crystalline silicon in sheet form rather than in ingots, saving 30% in production costs. Sales were brisk and income was up. Wall Street rewarded the company’s efforts. It went public in 1998 and by 2000, its stock increased by 1000%, breaking $60 a share. The stock weathered the overall market downturn and in 2002 AstroPower made the Forbe’s list of the 200 best small public companies.
Then, in Wall Street’s eyes, the unforgivable happened. AstroPower’s second and third quarter 2002 financials came in weaker than expected. Nasdaq delisted it in July 2003 after it failed to file its 2002 financial statement – which remains unfiled. The stock cratered, ultimately dropping to less than $2 per share.
Unhappy investors filed class action suits that alleged Barnett and CFO Thomas Stiner artificially inflated the company’s value. They both resigned in spring 2003, as did Peter Aschenbrenner, vp, sales and marketing.
How could AstroPower, the cream of the solar industry, fall so far in such a short time? What do the problems say about the solar industry in general?
Carl Young, who is acting as interim CEO, says, “There is no laundry list of actions that I can point to that would bring clarity to this situation. What I can say, and have said on numerous occasions, is that AstroPower is a sound company in terms of its technology, product quality and its manufacturing process. What lacked in the organization was an ability to match expenses with revenues.”
Mike Markowski, director of research at StockDiagnostics.com, says AstroPower’s problems boil down to one key issue, cash flow – or lack thereof. He believes the company will fail because they were burning cash faster than they were creating positive earnings per share.
“The most important point is that this is not about the collapse of a solar energy company, this is about the collapse of a poorly managed company,” he says. “Since it went public, it had access to a whole lot of capital and it had no discipline.”
Young believes that under past management AstroPower probably ramped up its manufacturing capacity too quickly. “AstroPower expanded based on predictions for the future, not on the reality of today,” he says. “A key to success in any industry is for a business to remain focused on meeting the needs of its existing customer base and expanding that base to drive growth.”
AstroPower’s competition also contributes to its problems. Eric Prouty, an analyst at Adams, Harkness & Hill, says it’s very difficult for a small company to compete with majors like Sharp, Kyocera, Royal Dutch Shell and BP, because solar is such a capital-intensive industry. It requires a lot of money and the cost of getting that money is an extremely important variable to the financial success of a company that depends solely on solar product sales.
Also, multinationals enter the solar industry with recognized global brands, which makes it tough for smaller companies to break into the global market or keep what market share they have. When Sharp, for example, began selling solar cells in earnest in Europe in 2002, AstroPower lost ground it had plowed in that market, Prouty says.
But as AstroPower struggles, another pure play, publicly traded company, Evergreen Solar (ESLR), has grown from $419,000 – $5.3 million in sales from 2000-2002. Former CEO Mark Farber strongly believes that “AstroPower’s challenges are company-specific, not industry-wide. The solar industry as a whole is healthy and growing.”
Glenn Hamer, executive director at the Solar Energies Industry Association, says, “In terms of its future, it’s brighter than any other energy sector. Solar has been growing by 20% plus for more than a decade and grew by 40% worldwide in 2002.
“I can’t predict the future, but given the strong demand for solar products and given the fact that AstroPower blazed relationships with companies like Home Depot, I expect AstroPower to be in the market for many years to come.”
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Nancy Nachman-Hunt is a freelance writer and editor specializing in technology business and financial news.
Excerpted FROM Solar Today, a SustainableBusiness.com Content Partner
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