(First Solar story corrected for 2008-2009 manufacturing defect warranty claims and hot climate warranty accruals)
NEW YORK (TheStreet) -- Imagine a company that has predicated its future on building out large-scale projects in desert conditions. Now imagine the technology the company uses doesn't have a long-term track record of performing under intense heat.
You don't have to imagine the company. It's First Solar (FSLR), and based on the revelation in its Tuesday conference call with analysts that high-temperature degradation issues have surfaced with its panels, it's the most alarming prospect for a company in the midst of a critical strategic transition.
To some First Solar watchers, this looks like a slam dunk reason to sell. Axiom Capital analyst Gordon Johnson more or less made this case on CNBC on Tuesday afternoon, saying that if First Solar technology doesn't work, the stock is essentially worthless.Stifel analyst Jeff Osborne put it more mildly in writing, "We see the disclosed heat-driven degradation issue as lowering the economics of expanding into new markets and potentially posing a product acceptance risk." One thing is certain: First Solar didn't need the added headache of two solar panel warranty issues: a manufacturing process defect that impacted panels made between 2008 and 2009 that has lingered for the company, and the broader issue of solar panel performance in the hot weather areas that are increasingly important to First Solar's future. On the 2008-2009 issue, one could hear the exasperation in the voice of Citigroup analyst Tim Arcuri during the conference call when he questioned First Solar management about the warranty charges taken in the current quarter. The contradictions in the First Solar warranty story warrant notice and are worth laying out:
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