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SunPower Corp and First Solar Inc, the two largest United States solar panel manufacturers, will reorganize as increased competition from China drives down prices and pushes weaker companies into bankruptcy.
SunPower is seeking to cut operating expenses as much as 10 percent next year, it said on Nov 4 in a statement. First Solar said it will consolidate its manufacturing in response to slowing global demand for panels. They’ve both cut their profit forecasts since last week, as did MEMC Electronic Materials Inc, the second-largest US polysilicon maker.
Three US solar companies including Solyndra LLC have filed for bankruptcy this year as a surge in manufacturing capacity in China cut margins across the industry. The Chinese companies are hurting too, with China Sunergy Co on Nov 4 reporting its gross margin turned negative in the third quarter.
“The Chinese guys are building out capacity hoping the customers will come and that’s caused this huge oversupply situation,” said Hari Chandra Polavarapu, an analyst at Auriga USA in New York. “What we need to see a focus on is more market development, and to layer in capacity to meet that demand.”
First Solar rose 2.9 percent to $49.59 in New York. SunPower was unchanged at $8.76.
China Sunergy, updating its forecast on Friday, said its gross margin will be “around negative 14 percent” compared with its previous forecast of positive 4 to 5 percent. It cut its expectation for shipments to 115 megawatts for the quarter from its previous plan to sell at least 140 megawatts.
SunPower expects a net loss of 5 cents to income of 20 cents a share for 2011, on sales of $2.40 billion to $2.45 billion, the company based in San Jose, California, said in the statement. It said in August it expected income of 75 cents to $1.25 a share for the year.
SunPower also reported a writedown of goodwill of $349.8 million, related to “the change in public market valuation of the solar sector”, according to the statement.
That led to a third-quarter loss of $3.77 a share. Adjusted net income, excluding the charge, was 16 cents. Analysts had expected income of 5 cents, based on data compiled by Bloomberg.
As part of the restructuring, SunPower will eliminate redundant positions and prioritize “where we invest our resources”, Chief Financial Officer Dennis Arriola said in a conference call with analysts. “These activities are expected to reduce our non-manufacturing operating expenses by as much as 10 percent in 2012.”
Under the plan, Arriola will leave the company in March and Jim Pape, president of SunPower’s residential and commercial unit, will leave this month.
First Solar, the world’s biggest thin-film solar panel company, will delay completion of a factory in Vietnam “until global supply and demand dynamics support the additional capacity”.
The delay demonstrates that demand is less than anticipated, said Daniel Ries, an analyst at Collins Stewart LLC in New York. “The industry, including First Solar, got way ahead of its self in terms of manufacturing.”