MEMC: Mixed Signals Abound

SAINT PETERS, MO. (TheStreet) -- Early commentators on Wednesday's after-market earnings report from MEMC Electonic Materials(WFR) are saying the semiconductor and solar manufacturer is sending mixed signals in its latest numbers.

Oppenheimer & Co. put out a research note on Thursday morning covering the MEMC earnings and under the title: 'Nothing to Write Home About'.

Piper Jaffray described the MEMC results as "mixed", and in particular, said the MEMC results were "plagued" by the acquisition of SunEdison. SunEdison had a $10 million operating loss in the fourth quarter.

The MEMC acquisition of SunEdison is one of the biggest bones of contention between the Street and MEMC, as analysts are still trying to comprehend the logic in the deal.

Piper Jaffray analyst Jesse Pichel did reserve final judgment, however, saying that MEMC could rally after its investor day in New York on Thursday, if it can convince analysts and investor of the SunEdison strategy. The fear is that MEMC's strong balance sheet will be dragged down by the need to finance the expensive SunEdison large-scale, and lower gross margin, solar projects.

Oppenheimer wrote of the SunEdison issues: "Our initial take is that historical revenue is far lumpier than we would have thought; 2) balance sheet and asset management now become more critical; and 3) synergies with the core wafer business are not straight-forward."

MEMC gross margins of 14.7% in the fourth quarter beat some Street estimates, as problems at MEMC's Pasadena plant in the third quarter took gross margins all the way down to 6.6%.

Collins Stewart was encouraged by short-term pricing strength in semiconductor wafers and volume growth, but still reiterated a hold on SunEdison, due to concerns regarding solar wafer pricing and uncertainty about SunEdison. Collins Stewart noted that SunEdison contributed to a decline in net cash per share from $5.40 at the end of the third quarter of 2009 to just $2.84 at the end of the fourth quarter of 2009. Net cash has been a key asset supporting WFR's shares over the past year, Collins Stewart said.