) has planned restructuring of its Philippines manufacturing
operations, which also includes reduction of its employees.
SUNPOWER CORP-A (SPWR): Free Stock Analysis
SUNTECH PWR HLD (STP): Free Stock Analysis
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As per the plan, SunPower will make six of the 12 lines in its
Fab 2 cell manufacturing plant inactive for the time being as
well as stop 20% of the panel manufacturing in Philippines. Apart
from significantly reducing inventory, lowering operational costs
and improving efficiency, these steps would result in an overall
blended utilization of approximately 60% for the fourth quarter
In addition, the restructuring plan includes lowering the
workforce by approximately 900 employees with majority reductions
mainly in the Philippines.
The company is moving well with its cost reduction programs in
order to reach its cost per watt goal of less than 75 cents per
watt on an efficiency adjusted basis for the lowest cost solar
panels by the end of fiscal 2012. The company expects
restructuring charges to be in the range of $10 million to $17
million with majority of it to be incurred in the fourth quarter
of 2012. The company's restructuring charges include severance
benefits, lease and related termination costs and other
associated costs. SunPower anticipates more than 90% of the
charge to be in cash.
The company re-affirmed its fiscal 2012 earnings guidance. At its
second-quarter 2012 earnings call, the company had indicated that
it will remain committed to achieving break even or better
non-GAAP profitability. These initiatives would allow the company
to effectively compete during the current industry transition and
On November 1, 2012, the company is expected to release its
third-quarter 2012 earnings results. The Zacks Consensus
Estimates for third-quarter 2012 and fiscal 2012 are currently a
loss of 19 cents and 39 cents, respectively.
One of the company's competitors,
Suntech Power Holdings Company Ltd.
) also recently announced its restructuring plans to reduce
imbalance between demand and supply, and improve trade
protectionism, which will subsequently decrease the level of
competition and generate higher profitability.
Suntech's current strategy includes 5 important facets, such as
technology and customer-service, right-sizing of production
capacity, drive down cost, streamline its operating structure and
improve its financial position. Suntech plans to reduce its
operational solar cell capacity to 1.8 gigawatt ("GW"). The
module capacity and wafer capacity will remain at 2.4GW and
1.6GW, respectively. Suntech intends to reduce its operating
expenses by 20% year over year. In addition, the company targets
to create a sustainable business model and return to positive
operating cash flow in 2013. Also, Suntech plans to
strengthen its financial position, which includes extension of
the maturity of credit facilities, while continuing to reduce
total debt and related interest expenses.
Sun Power Corporation is a vertically-integrated solar
manufacturer. Going forward, we are bullish on the company due to
its diversified channel strategy and has a strong presence in the
residential and commercial market, along with its status as a
conversion efficiency leader. The company also has a steadfast
focus on spreading its revenue stream by climbing the solar value
However, we remain concerned due to the sharp decline of average
selling prices of modules due to an industry-wide oversupply
glut. Moreover, SunPower operates in an industry with increasing
competitive pressure as the photovoltaic industry's total
manufacturing capacity exceeds the current demand for solar
modules. The company presently retains a short-term Zacks #3 Rank
(Hold) that corresponds with our long-term Neutral recommendation
on the stock.