Wednesday, January 4, 2012

Satcon to cut costs, another 140 workers worldwide

By Lori Valigra

Satcon Technology Corp. (Nasdaq: SATC) of Boston said it will cut 140 employees globally, close its Canadian plant, and reduce other costs in an effort to improve its financial performance.
 
“These spending reductions, coupled with our accelerated cost reduction programs, significantly lower our breakeven level during the first half of 2012,” Satcon’s Chief Financial Officer Aaron Gomolak said in a statement.

The company had an earlier business retraction in July, when it cut 85 employees and said second-quarter revenue would drop off due to changes in government incentives in Europe, a key market, and delays on several projects.

Under the new restructuring plan, Satcon said it will focus product development and marketing on turnkey solutions for large-scale commercial and utility solar businesses. It will concentrate on North America, China, India, Thailand and other emerging Asia-Pacific region markets.

The company also said it will focus research and development, enhance operational alignment, improve the supply chain to help reduce costs, and improve performance for all of its products, including an increased emphasis on its Prism Platform, a next-generation turnkey multi-megawatt, medium-voltage building block.

The company will close its Canadian manufacturing plant and is currently working to partner with a contract manufacturer to handle Ontario’s feed-in tariff demand. The company also said it has restructured its office and warehouse infrastructure in Europe, China and the United States to better align with market conditions and further reduce costs.

The 140-employee reduction is about 35 percent of its worldwide workforce. That reduction, combined with the Canadian factory closure, will result in charges of approximately $2.8 million to $3 million. Most of the charges are expected to occur in the fourth quarter of 2011, with the rest taking place in the first quarter of 2012. The company said it expects ongoing savings of approximately $15 million to $17 million annually once all actions are implemented by the second quarter of 2012.

The company also is currently analyzing its inventory and certain non-cancellable, supplier-held inventory, and plans to write down the value or take a charge in line with current market conditions. The company expects this to result in charges during the fourth quarter of 2011 of some $20 million to $26 million, with most comprised of non-cash items.

Satcon said the charges were not anticipated when it provided its fourth quarter 2011 guidance in November . “As we look to the remainder of 2011, we expect fourth-quarter revenue to be in the range of $37 million to $42 million,” Satcon President and CEO Steve Rhoades said at the time. “While the slowdown in the worldwide demand for solar has caused 2011 to perform below expectations, we remain optimistic about the future and continue to expect the long term growth of our business to come from North America, with increasing opportunity coming from Asia. We have identified the necessary measures that will enable the company to continue to compete successfully in these regions, and believe we are now on a path to sustainable growth and margin expansion.”

In a statement released with the restructuring news today, Rhoades said, “The compounding effects of reduced panel costs and market demand shifts toward North America and Asia have forced the entire industry to adjust as we enter the next phase of development. Decreasing prices, however, present significant opportunity for Satcon, where the demand for our large-scale inverter solutions nearly doubled in North America and Asia year-over-year.”

The company’s stock was down more than 8 percent in mid-morning trading at $0.58 per share.