Less than a year ago, President Barack Obama held it up as a poster child for clean energy, saying during a visit to its headquarters that "companies like Solyndra are leading the way toward a brighter and more prosperous future." But now, despite having raised more than $1 billion in venture capital and receiving a $535 million loan guarantee from the Department of Energy, Solyndra is struggling and analysts can't see a way forward.
Solyndra canceled its plans for an IPO in June, citing "adverse market conditions." Then in July, Chris Gronet, the company's founder, was replaced as CEO by Brian Harrison. Gronet remains at the company and chairs the board of directors.
"In 2010, the market changed, and we had to change with it," said Steven Mitchell of Argonaut Private Equity, Solyndra's largest shareholder. "We spent the first three months of 2010 trying to figure out where the bottom was. But we believe we have a fantastic product, and we have great confidence in Brian Harrison."
Harrison's first big move was to shut down Solyndra's older factory, consolidating production in Fab 2, the newer Fremont factory, and disrupting the company's plans to add 1,000 jobs.
Now he faces the formidable task of putting Solyndra on the road to profitability and reviving its much-maligned reputation in Silicon Valley.
"Solyndra developed a technology and was very focused on building a factory," said Harrison, who was president and CEO of Numonyx, a flash memory company, and an executive at Intel before joining Solyndra in August. "Now we need to build demand and get cost-effective.
"We're not yet cash flow positive, but we've adjusted our spending and slowed the rate of cash we are consuming," he added.
But Ramesh Misra, a semiconductor and solar energy analyst at Brigantine Advisors, says excessive spending is just one of Solyndra's problems. Another is that there doesn't appear to be much demand for its product.
Solyndra is one of several Silicon Valley companies making thin-film solar panels using a semiconductor compound known as CIGS, shorthand for copper indium gallium selenide. But instead of making flat panels, Solyndra manufacturers cylindrical tubes that are then fitted together in what it calls "the new shape of solar." The idea is that the cylindrical modules capture more sunlight throughout the day, can handle heavy winds and are better in snow storms because the snow falls between the tubes instead of covering them the way it would a conventional flat panel.
Solyndra's lightweight panels are designed for flat, commercial rooftops -- malls, distribution centers and big-box retailers like Costco and Walmart are ideal customers. Its largest installation in the United States is a 1-megawatt system at the Frito-Lay plant in Modesto that at peak production should reduce the plant's electricity use from outside sources by 25 percent.
The company says it shipped 60 megawatts worth of panels last year and expects to double that quantity this year. One megawatt of power is enough to power about 200 California homes.
But analysts question whether it can capture enough of the market.
"At the end of the day, customers pay the bills," Misra said. "Where are their customers? That's where the story starts to unravel. Solyndra is a disaster waiting to happen."
The solar industry is driven by metrics like "manufacturing cost per watt" and "cost per installed watt," which includes other factors such as the price of inverters, mounting hardware and permitting fees.
Many low-cost Chinese manufacturers, which benefit from massive government support, are manufacturing at costs in the $1.10 to $1.20 a watt range. Thin-film leader First Solar, based in Tempe, Ariz., manufactures at 75 cents a watt and aims to be at 53 cents a watt by 2014. Solyndra says its current manufacturing costs are about $3 per watt..
"Our manufacturing cost per watt is coming down every quarter," Harrison said. "By the end of 2012 we should be at the $1.30 to $1.40 per watt range, or $2 a watt if you include installation."
But even if Solyndra hits that goal, analysts such as Jeff Bencik of Kaufman Brothers warn that competitors are similarly racing to drive down their costs -- and have a head start.
"It's a moving hurdle," Bencik said. "It will be really difficult for Solyndra to match (other manufacturers' costs) at this point. I'm not saying they can't do it, but I haven't seen it."
Solyndra executives say they are aware of the challenges, and that the attention the company received at the time of Obama's visit set expectations unrealistically high.
"You want to be known for business, not politics," said senior vice president of marketing Karen Alter, who joined Solyndra in September and previously worked at Better Place, the Palo Alto-based electric-vehicle charging startup. "A lot of people know Solyndra, but they don't really know that much about us. The company didn't tell its story as well as it should have."
Now Solyndra is telling its story. The company, which has a penchant for secrecy, has been more visible of late -- attending trade shows, talking to journalists, boosting its sales and marketing staffs. Harrison has made a point of meeting with customers and being more accessible to Solyndra's 1,000 employees. And the company says there's still a huge, untapped market for Solyndra's product.
"Globally, there are 11 billion square meters of commercial rooftop space. In the United States, there's 3.5 billion. It's a really big market," Alter said. "We're not doing solar farms in the desert or residential -- we're focused on commercial rooftops, and our product is optimized for that environment. We have to keep telling that story."
SOURCE: http://www.mercurynews.com/business/ci_17221170?nclick_check=1
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