TEMPE, AZ. ( TheStreet) -- First Solar ( FSLR) bears took aim at the U.S. solar bellwether's latest acquisition on Wednesday morning, and the skepticism goes right to the heart of concerns from the Street headed into First Solar's earnings report, scheduled for after the market close on Wednesday. How does the large-scale solar project development business play out in the second half of 2010?

The expectations for First Solar's earnings report are consistent with the general notion that solar companies will have a strong first quarter, with shipment levels buoyed by the ridiculous levels of demand in Germany ahead of the feed-in tariff cuts in solar's largest market.

There are analysts, like Mark Bachman of Auriga Securities, who believe that consensus expectations for First Solar are setting up the U.S. solar company for an earnings headline miss, though Bachman's First Solar earnings miss is for the second quarter of this year, and not first quarter results released after the market close on Wednesday.

Yet for the most part, analysts seem more concerned about the outlook for the second half of the year, when the insatiable appetite in Germany for solar modules wanes and First Solar has to focus on the still unproven, lower margin utility-scale solar business.

Case in point: even Wedbush Securities analyst Christine Hersey, who has been a bear on First Solar shares for some time already, is slightly ahead of the Street consensus estimate for first quarter earnings per share from First Solar.

The Street is expecting $1.61 to $1.65 per share earnings from First Solar.

The criticism from Wedbush's Hersey and other skeptical analysts about the First Solar outlook was triggered again on Wednesday morning when First Solar announced a $285 million purchase of a southwestern U.S. project pipeline of 1.1 gigawatts.

The Street is concerned about the changing nature of the First Solar profile, as more of its business -- by its own previous guidance -- shifts to the lower margin, large-scale solar project market in the second half of the year. Even the analysts who remain convinced of the First Solar strategy remain unsure of how to model the shift to the lower margin systems business.

Steven O'Rourke, an analyst at Deutsche Bank Securities, said investors are focused on how the project development business plays out throughout 2010. "Investors want clarity and detail on when projects will land and how to layer the project development business into the financial model," the Deutsche Bank analyst said. "What will hit and when it will hit is the unknown," O'Rourke said.

The fact that First Solar has only provided a total pipeline number in the past, and a revenue expectation from the large-scale solar business, doesn't allow analysts and investors to completely understand the financial model for the larger projects over the course of the next few years.

"With the German business falling off, a lot of solar modules need to be re-routed to the U.S. and the systems business. But as uncertainty about the feed-in tariff changes in Germany ends, uncertainty about the project development business comes into focus. It's still a source of confusion," the Deutsche Bank analyst said.

Deutsche Bank is at a hold on First Solar shares, arguing that there is little reason to expect a major catalyst for an upward move in the stock on the first quarter earnings.

Collins Stewart analyst Dan Ries also evinced the uncertainty over the First Solar systems business headed into the earnings report on Wednesday in a research note. The Collins Stewart analyst wrote, "Forecasting FSLR's quarterly performance will be more difficult than usual in the next few quarters as the company's project business ramps and causes revenue recognition delays and the company to hold modules in inventory instead of selling them to third-party customers.... FSLR has power purchase agreements for 1,400 MW of projects it is developing. However, it currently has only 192 MW of these systems sold, or roughly 50% of the 370 MW of projects we expect it to build in CY10."

First Solar announced on Wednesday morning that it is acquiring 1.1 gigawatts in a southwestern U.S. project pipeline from NextLight Renewable Power for $285 million in cash, adding to the focus on the systems business.

The deal may also have implications for First Solar competitor SunPower ( SPWRA).

The news of the Nextlight acquisition on Wednesday morning added to the total level of projects that First Solar will begin work on in the second half of 2010 -- something that Collins Stewart's Ries had specifically hoped for in his earnings preview piece. However, First Solar bears see the latest deal as a capitulation to the problems inherent in the solar market, as opposed to a sign of smooth transition from the module selling frenzy in Germany to a stable average sales price in the systems market.

FBR Capital Markets analyst Mehdi Hosseini, among the First Solar bears, noted in a note on Wednesday morning that the 26 cents per watt price implied in the $285 million purchase of 1.1 GW from Nextlight, exhibits a "hefty premium" over the 21 cents per watt that First Solar paid for its first big acquisition in the systems business, from Optisolar. SunPower ( SPWRA) recently paid $277 million for a 1.2 GW pipeline, primarily located in Europe.

FBR described the pricing on the Nextlight acquisition as one sign that the deal would be an "incremental negative" for First Solar. Hosseini wrote that the premium being paid by First Solar "illustrate the incremental concerns/desperation by FSLR management in securing project pipeline as agricultural land solar subsidies in Germany are removed on July 1."

FBR estimates that the deal will bring down 2010 earnings by 9 to 10 cents.

The FBR analyst also voiced concerns about the lack of guarantees on project deals paid for in cash, something that Street skeptics always point out when solar companies pay in cash for project pipelines that have not been translated into a source of revenue yet. The analyst noted, "Next Light adds about 1,100 MW of projects to FSLR pipeline, of which nearly half are PPAs (requiring FSLR to flip the project for it to recognize profits) and the remaining 50% have yet to be developed!"

Hosseini thinks that the First Solar acquisition leads to the conclusion "that FSLR has become incrementally concerned with policy changes in Germany."

Wedbush Securities analyst Christine Hersey evoked a similar concern, in more subtle terms, on Wednesday morning in a note on the First Solar deal, writing, "We view this deal as confirmation that end market demand may be down in 2011, forcing module companies to continue to move downstream and develop projects themselves in order to sell modules."

While the conclusions of the FBR analyst are only the opinion of one already skeptical First Solar Street bear, Hosseini's concerns do circle back around to the big issue for First Solar: just what does happen after the Germany party ends and the systems business becomes a much bigger focus of First Solar's module shipments?

Solar investors can probably expect that no matter what level of dancing on the German rooftops that First Solar was doing in the first quarter, the earnings conference call will be focused on the view out from the German rooftop and toward the still-uncertain second half 2010 horizon, and the horizon beyond that, into 2011.

After a losing day on Tuesday in a solar sector selloff -- as the European debt fears and the Euro slide weighed on many sectors of the market -- First Solar shares were up close to 2% on Wednesday morning.

-- Reported by Eric Rosenbaum in New York.

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