Is it Lights Out for U.S. Solar Dogs?

NEW YORK (TheStreet) -- Energy Conversion Devices(ENER) and Evergreen Solar(ESLR) reported less-than-encouraging earnings this week.

UBS analyst Stephen Chin downgraded Energy Conversion Devices to a sell and revised his price target from $11 to $6. Chin cut his June 2010 Energy Conversion Devices earnings forecast to a loss of $2.40 per share, from a loss of 71 cents; for 2011, the UBS analyst forecasts a loss of $1.50, as opposed to his previous forecast for a profit of 18 cents.

Wedbush Securities analyst Christine Hersey wrote that Energy Conversion Devices will continue to struggle with oversupply, and did not see the fact that company management chose not to provide fiscal 2010 production or revenue guidance as a good sign. The Wedbush analyst is now forecasting an Energy Conversion Devices loss of $3.19 for fiscal 2010, versus a previous estimate of a loss of $1.94. For 2011, Wedbush expects a loss of $2.32, versus a previous estimate of $1.69.

None of which are promising signs, but it all ultimately comes down to the cost reductions that these solar firms are able to execute on at a time when price and cost is under considerable pressure across the solar industry.

Energy Conversion Devices president and CEO Mark Morelli said in the earnings release, "We are confident in our ability to achieve 12% laminate conversion efficiency and less than $0.95 cost per watt."

However, Energy Conversion Devices' CEO provided no timeline for that cost reduction. Energy Conversion Devices did say it will hold a technology roadmap day in the spring 2010.

What's more, Wedbush analyst Christine Hersey noted that Energy Conversion Devices, after operating at 50% capacity in the previous quarter, will now be at 25% capacity in the next quarter. Hersey described the situation as a Catch-22 for the company -- they need capacity to go up to be able to drive cost reductions, but they have an existing inventory backlog to work through first, at a time of declining prices.