October 8, 2008 - Energy Conversion Devices, Inc. (ENER-NASDAQ) commercializes materials, products, and production processes for the alternative energy generation, energy storage, and information technology markets. The company operates in two segments: United Solar Ovonic and Ovonic Materials. The United Solar Ovonic segment designs,manufactures, and sells proprietary thin-film solar (photovoltaic or PV) modules for converting sunlight into electricity. It sells these PV modules to commercial roofing materials manufacturers, builders and building contractors, and solar power installers/integrators.

Here's the first thing you need to know about Energy Conversion Devices: the stock sold fo $83.30 a share only a few months ago. Now you can buy all you want in the low $40 range. It carries a beta of 1.25, making it 25% more volatile than the S&P 500 index for the last year. In other words, if you own this one, put on a seat belt. The ride's bumpy.

The major reason for the downdraft in price is that Energy's largest customer, Solar Integrated Technologies, a roofing systems manufacturer, revised its estimates for this year, taking down sales from growing by 75% to 100% to more like 25% to 50%. That means a lot fewer sales for the industry in general and Energy Conversion in particular. It also makes investors question the market demand for solar energy currently and in the future. Solar Integrated represents about 23% of total sales for ENER.

Another factor for the lower stock is the loss of the Investment Tax Credit (ITC) for solar projects. The law states that any solar projects not finished by the end of this year won't qualify for the full 30% tax credit but will still receive a 10% credit. The ITC is up for renewal but until it is decided, many customers are hesitating to install solar energy projects. The other element hurting new projects is the lack of funding as banks are much more reluctant to make loans.

It's not all bad news. Overseas sales have been growing and should stay strong. One product made by ENER is UNI-SOLAR laminates which was recently selected to power the world's largest solar rooftop installation in Spain, a 12-megawatt project for General Motors. The company is also building a rooftop system for one of the largest steel mills POSCO's Gwangyang Steel Works in South Korea.

More numbers: Market Cap is $1.89 billion. Analysts see $1.70 in earnings for 2009 and $3.31 for 2010 (fiscal year ends June 30). That puts the forward P/E using 2010 numbers at 13. Price to Book is 3.10. Profit margin for the last 12 months was 1.51%; Operating margin was 2.52%. Return on Equity went positive last year at .66%. Total revenues in the last 12 months was $255.86 million. Current ratio is 11.365. There is $500 million in cash in the bank. The company lost money every year since 1997 until this year, bringing in 9 cents a share.

Energy Conversion may be just fine, even with the lower sales to Solar Integrated Technologies. Enough worldwide demand is filling that vacuum. Solar energy isn't going away. It will only become more important as the U.S. weans itself from foreign oil. More applications are certainly in the works, and as those become viable, Energy Conversion Devices will be one of the companies that will produce them.

- Company Web site: www.ovonic.com

- Ted Allrich