SunPower Speaks! And Says ... Not Much - TheStreet

(SunPower article updated for market close share price and trading volume)

SAN JOSE, Calif. (


) --



finally spoke this morning on the issue of its accounting irregularities, but the solar company did not hold a call with analysts at some had hoped -- or, really, say much beyond a few vague sentences in a press release about the investigation.

In a tersely worded press release, SunPower said it had made "significant progress in its internal investigation of unsubstantiated accounting entries previously announced on November 16, 2009."

SunPower continued: "The investigation to date is consistent with the preliminary findings announced on November 16, 2009. The audit committee is working with its experts and appropriate SunPower personnel to promptly complete a thorough investigation."

And that was about all SunPower said. Where does that leave investors in trying to figure out if things are going to get worse before they get better, with more than a dozen class-action lawsuits filed against SunPower if the accounting irregularities are of a serious nature?

It's hard to tell from SunPower's lack of explanation. Whether the lack of explicit clarification on the accounting irregularities favors those who believe SunPower is a buy because the market overreacted to the accounting irregularities -- or is a sell because it will be tied up in the courts -- will continue to be debatable.

The indication by SunPower that the investigation was "consistent with the preliminary findings" could be read by those bullish on SunPower as a sign that the accounting irregularities were isolated.

Indeed, SunPower shares were up more than 5% mid-morning after a pre-market gain of 3.5%, and ended Tuesday up 4% on slightly higher than average trading volume, suggesting investors believed that the SunPower release was a positive indicator.

Gordon Johnson, analyst at Hapoalim Securities, however, who has been critical of SunPower accounting, said he found it hard to understand why investors were viewing the SunPower release as good news.

"If everything was rosy, they could have said they completed the investigation and found an error and it was isolated and things are not as bad as we expected," Johnson argued, adding, that would have driven the stock back to $30. "I thought SunPower would have been down more on this news."

Johnson said the tangible risk for SunPower has not changed based on the terse statement issued this morning: the class-action lawsuits are still pending and SunPower gave no definitive indication today that it is in the clear.

Barclays Capital analyst Vishal Shah took the opposing view, saying that the SunPower release was an incremental positive. "If SunPower had found anything more beyond what they already stated, their lawyers would have asked them to report on it, and the fact that they reiterated the previous message is a sign that the issue is basically limited to the three quarters they already talked about in November."

Mark Bachman, an analyst with Pacific Crest Securities, which recently

upgraded SunPower, said that in terms of the dollar amounts involved, he read the statement to mean that in the least SunPower has not uncovered anything worse. However, he conceded that the downside is that it is clear SunPower did not finish the investigation. "People were hoping for closure," Bachman said.The market, at least, seemed confident in at least a speculative form of closure to the SunPower accounting saga. At a 4% gain, SunPower shares were up by a hefty amount over the solar sector as a whole on Tuesday, which only posted a 1.2% gain.

-- Reported by Eric Rosenbaum in New York.


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