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(Energy Conversion Devices earnings story updated with stock price movement.)



) -- Shares of

Energy Conversion Devices

( ENER) soared Tuesday after the maker of photovoltaic products posted a narrower-than-expected quarterly loss.

Energy Conversion Devices said it booked a loss of $20.4 million, or 48 cents loss per share, beating expectations for a loss of $27.1 million, or 60 cents loss per share.

The bottom-line figure represented a wider loss than the one in the fourth quarter last year, attributed to one-time items bringing a negative effect of $11 million, including under-absorption of factory overhead costs, restructuring charges, inventory reserves and unfavorable foreign currency exchanges.

Revenue skyrocketed 67.7% to $86.2 million, topping expectations, with solar revenue up 77% year-over-year. Solar product and system sales for the quarter were $81.3 million, compared with $46 million in the year-earlier quarter.

Energy Conversion shares skyrocketed in trading Tuesday, gaining 13.3%, off earlier highs, to close at $4.51. More than 8 million shares were in play, compared with their trailing 3-month average volume of just 1.2 million shares.

The sharp stock movement was "short-term trading on the headline beat," Wedbush Securities analyst Christine Hersey told


. "But if you look at the quality of the earnings there is still a lot of execution risk, and it's going to require some cash to fully turn this company around and be competitive in the solar space."

Hersey questioned whether Energy Conversion had enough cash to continue its operations, and cautioned that investors should be looking out for some sort of dilution event in the not-too-distant future.

"In solar you have to scale up and grow to stay in the game," she said.

Energy Conversion will have to add capacity quickly

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drive down costs, key steps that will require capital investment.

"The bigger picture issue is they are managing their cash and what plans they have to grow and stay competitive," Hersey insisted. Energy Conversion has increased its conversion efficiency, but the bar rises higher every day as others, particularly China-based solar competitors, do just that.

Hersey pointed out that Energy Conversion has around $250 million in convertible debt coming due in March 2013, and roughly $200 million in cash and investments at the end of the recent quarter.

"They have more debt than cash and the business is still burning cash," she said. The company will either have to refinance that debt with more debt, or through a secondary equity offering.

"It's hard to see as an equity holder when you know there will be some potential dilution event over the next two years," she added. "It's unlikely Energy Conversion will generate enough cash to pay off that debt and fund growth plans."

The manufacture of PV products, used for alternative energy generation, grew its pipeline by more than 150 megawatts (MW) in its recent quarter.

"We expect to grow our business substantially in fiscal 2011, although our quarterly results may show unevenness due to project timing uncertainties and the relative growth in our systems business," said CEO Mark Morelli.

Energy Conversion expects to produce around 33 MW in the current quarter, and up to 140 MW in fiscal 2011, with shipments between 28 and 33 MW in the current quarter and between 120 and 140 in the full year.

The firm forecast first-quarter revenue in a range of $63 to $68 million, and a range of $280 to $330 million for the year. Analysts expect the firm to book revenue of $80.1 million in the first quarter, and $333.8 million for 2011.

Even if you take the high end of their guidance for 2011, Energy Conversion will still lose in the neighborhood of $55 million in fiscal 2011, Hersey added.

Because of Energy Conversion's accounting practices, revenue recognition can be delayed by several quarters, Morelli said, so that while shipments are expected to nearly double year-over-year in the current quarter, much of the revenue associated with those shipments won't be booked until later in fiscal 2011.

Industry peer

Canadian Solar

(CSIQ) - Get Canadian Solar Inc. Report

is due to report its quarterly results on Thursday.

The China-based firm is expected to post earnings of $7.1 million on revenue of $305.7 million.

Last week

Trina Solar


, also based in China,

beat earnings expectations and upped its forecast for solar shipment volume


>>Trina Solar Forecasts Brighter Future

"Trina is speaking for the group and we've heard similar stories from all of Trina's Chinese peers and from

First Solar

(FSLR) - Get First Solar Inc. Report

in the U.S.," Auriga analyst Mark W. Bachman told


. By reporting last in the queue of earnings reports in the sector, Trina had more time to look at future demand and was therefore the first to give a real indication that demand in 2011 will be stronger.

>> Trina Solar Slides on Mixed Analyst Views

Bachman reiterated his buy recommendation, and upped his price target by $5 to $41 per share.

Trina raised its capacity numbers for growth between 40% and 50%, and expects to achieve scale of 1.5 gigawatts by the end of 2011.

-- Written by Miriam Marcus Reimer in New York.

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Miriam Reimer


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