Updated from 12:39 p.m. EDT

In a surprise announcement, Cypress Semiconductor ( CY) said it will pursue an initial public offering for its SunPower unit. Also, Manny Hernandez, the longtime chief financial officer at Cypress, will become SunPower's CFO and Cypress will begin a search for a new top financial executive.

Shares spiked on the news, advancing 13% to $13.03. Cypress made the announcements during its first-quarter financial conference call on Thursday during the trading session.

"We've decided that we are going to begin investigating an IPO for SunPower," says Cypress CEO T.J. Rodgers. He said SunPower needs funds to build out its manufacturing capabilities and that Cypress can accommodate the expansion, but that an IPO for SunPower would be the best way for its unit to grow.

IPO plans for the unit overshadowed a disappointing first quarter. Cypress reported a loss of $65.1 million, or 50 cents a share, on sales of $200.3 million. Excluding charges, the chipmaker posted a loss of 19 cents a share. Analysts had expected a loss excluding charges of 13 cents a share and sales of $210 million, on average, according to Thomson First Call.

However, Rodgers said the results represent the bottom of the current slowdown. The company predicted second-quarter sales between $210 million and $235 million with a loss between 8 cents a share and earnings of 2 cents a share. "Our aspiration is to break even this quarter," says Rodgers.

Analysts had expected a loss of 1 cent a share and sales of $224 million.

Cypress reported separate results for its SunPower unit for the first time in its just-completed first quarter. The subsidiary reported a loss of $5 million on sales of $11 million. Sales at the unit were expected to be $10 million.

"We need money to fund SunPower's growth," says Rodgers. "We don't want SunPower to be limited by money." He said Cypress could fund the expansion, but that the growth potential of the silicon solar industry will likely yield a better valuation -- and thus more money -- for SunPower through an IPO.

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