Technical brilliance always has been a strong point for 45-year-old Energy Conversion Devices Inc., but making money hasn’t. Until now.
And it’s not because of one “next big thing,” but three — solar panels, car batteries and computer memory chips.
continued below
Advertisement
Rochester Hills-based ECD (Nasdaq: ENER) last week reported a profit of $50.3 million for fiscal 2005 ending June 30. It was the first time the company finished in the black since 1999, when it had a profit of about $1 million.
Shares of ECD stock neared the $40 mark last week compared with a 52-week low of $13.26 on Sept. 30, 2004.
And ECD reported in a conference call Monday that it had 65 new institutional investors in fiscal 2005.
The company is adding a $70 million production line to its solar panel manufacturing plant in Auburn Hills to double capacity. Waste News, a Crain’s sister publication, reported Aug. 29 that the company wants to build a $40 million to $60 million hydrogen battery plant in Akron, Ohio.
“They have made huge strides in the commercialization of their technologies in the last six to nine months,” said Brion Tanous, an analyst at San Francisco-based Merriman, Curhan, Ford & Co.
“It’s not just talk anymore,” said Jeffrey Bencik, vice president at New York City-based Jeffries & Co. “They’re generating revenue, especially with their solar panel and battery businesses.”
Tanous, who rates ECD a “buy,” said the share price could increase as much as another $30. Bencik also rates ECD a “buy” with a target price of $40.
For the year, ECD reported net income of $50.3 million or $1.70 a share on revenue of $156.6 million. That’s compared with a net loss of $51.4 million or $2.15 a share on revenue of about $66.3 million for the previous year.
Of its $156.6 million in 2005 revenue, about $79.5 million came from a deal in which ECD bought and resold its own stock.
San Ramon, Calif.-based Chevron Corp. (NYSE: CVX) agreed to sell a 17 percent ownership in ECD back to ECD for $4.55 a share.
Chevron also agreed to continue funding its joint venture with ECD, Cobasys L.L.C., in which it has invested about $160 million already.
In exchange, ECD granted Cobasys expanded licensing rights for nickel metal hydride batteries that allow the company to sell into additional markets, such as marine, airport and homeland security applications. Based on market prices at the time, ECD was able to record the deal as being worth about $79.5 million.
But the real excitement on the part of analysts, they said, are the actual revenue-generating contracts ECD subsidiaries and joint ventures are landing and the cost-cutting measures the company is taking.
Orion Township-based Cobasys said in late August that it has received battery pack purchase orders for hybrid vehicle applications from automakers. Robert Stempel, chairman and CEO of ECD, said he couldn’t say what automakers Cobasys is making batteries for but said it would soon be public knowledge.
In a December conference call with media, investors and analysts, Stempel hinted that Ford Motor Co. (NYSE: F) may use Cobasys batteries as part of its hybrid vehicles. Just last week, Ford announced it has delivered five Ford Focus fuel cell vehicles to the city of Sacramento as part of a five-city, 30-car program to gain feedback on the cars. The company said five cars would be delivered in Michigan, but details weren’t released.
Revenue at wholly owned subsidiary United Solar Ovonic increased from $27.6 million in 2004 to about $50.8 million in 2005. United Solar makes flat solar panels.
Like its parent, United Solar was profitable in 2005, reporting net income of about $4.4 million compared with a loss of $6.3 million in 2004. United Solar already has about $51.3 million in backlog orders for the next six months.
Tanous said United Solar would be worth about $25 a share on its own. Cobasys would be worth about $15.
Ovonic Unified Memory, an ECD joint venture with Intel Capital, the investment arm of Intel Corp., could be worth another $30 per share eventually, Tanous said. Ovonic Unified Memory makes a faster memory chip that could cut costs and improve the performance of products such as mobile phones, digital cameras and handheld computers.
“That third piece of the pie is what is left to play out in the stock price,” Tanous said.
Stempel said Ovonic Unified Memory is going to meet those high expectations.
“We’re past the point of having to prove the concept,” he said. “We’ve demonstrated that we have a working product and are coming to the point where we expect a prototype or prototypes to be delivered soon.”
But like many of the products ECD has worked on since Stan Ovshinsky founded the company in 1960, the bridge from cool idea to actual revenue for Ovonic Unified Memory is a long one.
“It could be huge,” Bencik said. “Or it could end up being worth nothing at all.”
Stempel told Crain’s that the company continues to cut costs and improve revenue to sustain profitability. Also, it’s trying to sell the Ovonic Battery metal hydride materials business.
Through buyout packages, closure of three plants and cutting costs on line items such as travel, ECD cut costs by $2 million in fiscal 2005. But ECD had to spend more than $2 million to comply with new Sarbanes-Oxley requirements, which it has yet to do according to its 10-K report filed last week.
And fourth-quarter results missed Wall Street expectations. The company lost $6.9 million or 23 cents a share on revenue of $20.9 million.
Stempel didn’t want to say if he expected ECD to be profitable in fiscal 2006.
“We didn’t quite make the improvements in revenue and costs savings that we expected,” Stempel said.
< < BACK
|
