Solar Energy Firm Shines

The solar energy industry has become a black hole for many manufacturing companies and their investors, as low-cost Asian solar panels have pushed down prices. But one local solar company can see some light. Power-One Inc. in Camarillo has spent much of the last few years developing new products to add to its line of inverters, which turn sun and wind power into usable energy. Now the strategy is paying off. The firm recently inked an agreement with Osaka, Japan electronics giant Panasonic Inc. to co-develop energy storage products, and it is expanding operations in the growing Asian market. And late last year, it announced a planned roll out of a new series of products designed to capture business as utility-scale solar plants expand. For analysts, this means the company is a good bet. “They’ve had a steady stream of new products, and they’re in ramp mode right now preparing to launch more,” said Carter Driscoll, a senior research analyst at Broomfield, Colo. equities firm Ascendant Capital LLC. “And because of those, they’ve consistently generated revenue even when the solar industry was really at its worst.” The company has an 11 percent worldwide market share of power inverters, which transforms the direct current electricity produced by solar cells into useable alternating current. It also has hedged its solar bet by launching products that convert wind power to energy that can be transmitted to the grid. The firm, which employs more than 3,200 employees worldwide at three main facilities, opened an Arizona facility in 2010 to focus on large-scale projects. “When most of the companies were closing facilities, they made a decision to position themselves in that market,” Driscoll said. “I think in the long-term that’s going to work well for them.” Niche market But the company isn’t out of the woods just yet, say solar industry experts. “The solar industry is still struggling,” said David Yang, an analyst with Santa Monica industry research firm IBISWorld Inc. “The market has just been so flooded with solar panels, so it’s still going through a contraction.” Despite several recent analyst upgrades and positive investor buzz, Power-One reported a net loss in the fourth quarter of $17 million, and the consensus estimate for the first quarter of 2013 also points to a loss. A recent streamlining included about 300 layoffs in Camarillo earlier this year, as well as others throughout the company. But officials say the streamlining will keep the company more competitive as it expands. “We expect that these actions should result in annual cost savings of over $6 million with a full impact being realized in the second quarter of 2013,” Chief Financial Officer Gary Larsen said in a January conference call with investors. The company trades on the Nasdaq, and has a market capitalization of $513 million. Shares have hovered in the $5 range for more than a year, a fraction of the the $70 highs it saw in the early 2000s when solar was getting started. Power-One was founded in 1973 making devices that converted energy from power outlets for use in small appliances and electronics. In 2006, it acquired a solar inverter manufacturing division from Wisconsin energy company Magnatek Inc. and began to focus primarily on its renewable energy products. Much of its initial products focused on small-scale uses, such as solar panels on top of a home or office. The strategy worked. Today, the company is topped in market share only by German firm SMA Solar Technology, which has a 31 percent market share, according to data from Ascendant. Analysts say the weakness with Power-One’s business model is that it depends heavily on the rest of the alternative energy industry. Despite rebounds and growth in some areas, the European market remains in a slump and the North American market is still on the rebound. In response, the firm is looking toward emerging markets in Asia and Australia. Power-One declined through a spokesman to comment for this story, but Chief Executive Richard Thompson addressed the expansion efforts in a January conference call with investors. Thompson said the company plans to grow through strategic alliances, such as its deal with Panasonic and one with Chinese firm Phono Solar. “We believe that utilizing various business structures such as strategic alliances, joint ventures and private-labeling relationships will enable Power-One to gain access in markets where relationships are critical,” he said. The firm has also made inroads in Australia, where it doubled revenue in 2012. Now it is eyeing India and Japan. Analysts who like Power-One focus on its potential for future growth. “I haven’t upgraded it yet, it’s still at neutral, but I think in the long-term, it’s a good company,” said Driscoll. “They have a strong management team that can streamline when they need to.” For now, the firm is focused on its expansion, and says it has the cash flow to get through the prolonged market slump. Driscoll, the analyst, believes the long-term strategy will work. “The industry can probably support eight to 10 companies in this niche, and there aren’t that many big ones right now,” he said. “The solar industry is on its butt as much as it can be, and there’s nowhere to go but up.”