A Dark Day for Solar Power

First Solar Corporation was indeed first at something: It was the first solar company to lose more than $15 billion of market value. FSLR's stock plummeted from $140 per share a year ago, and $170 a few weeks before that, to under $21 per share early this week before rebounding modestly on Tuesday. In fact, $15 billion substantially understates the peak-to-trough drop in the company's value, as the stock traded above $250 per share for most of 2008, briefly peaking over $300. As of Tuesday, the company's value was just under $2 billion; at its all-time high stock price, that number was over $25 billion.

In a press release on Tuesday morning, the company announced that a massive decline in its business, especially its European business, will cause it to record about $300 million in restructuring charges while firing 2,000 employees, about 30 percent of its total work force. This is due primarily to Germany's recently cutting its solar subsidies, following a similar move in Spain.

According to the company's Chairman, Mike Ahearn: "After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable, and maintaining those operations is not in the best long-term interest of our stakeholders."

Further: "The solar market has fundamentally changed, and we are quickly adapting our market approach and operations to maintain and build upon our competitive advantage," said Ahearn. "After a period of robust growth, First Solar is scaled to operate at higher volumes than currently exist following the reduction of subsidies in key legacy markets. As a result, it is essential that we reduce production and decrease expenses to reflect the smaller volume of high-probability demand we forecast."

As usual, one has to wonder about certain stock analysts, with one firm reiterating a buy (how much has that cost the firm's clients so far?) and Goldman Sachs cutting from buy to hold (in a business where "better late than never" is not a wise approach). Amusingly, the Goldman analyst's cut preceded the stock's biggest percentage gain in months, as "short covering" and a sigh of relief that the company is at least recognizing that its business is a shadow of its former self brought buyers into the game. (Fully one third of the company's "float," the number of shares issued and available to trade, has been sold short, representing bets on the stock price falling.)

Please read the rest of my article for the American Spectator here:

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