Dear Simple Simon,
I like your World Series analogy. And I think we can take it further and compare it to the NY Yankess win of three World Series in a row from 1998 to 2000. Last year was a World Series win and it sure looks like this year and next year will be too. <SMILE> BTW, I agree with you that the acquisition of PowerLight was a brilliant move and that SunPower would not be where it is today were it not for TJ and Cypress. Go TJ, Cypress and SunPower!
I do credit Tom Werner. I have no doubt he will execute his cost cutting measures regarding the production of his solar cells.
But his analysis is interesting: He points out that, to meet his goal, cost savings are needed up and down the entire production chain. Hence the early move into solar panels. And hence the very important acquisition of SolarLight. More than Moore is involved here.
I am impressed with Werner because I am impressed with his analysis. I think he has a credible plan to get there and, so far, SPWR continues to execute on that plan and has dealt astutely with every problem - such as the silicon availability issue - that comes along.
I am equally impressed with Werner's continued execution, but, for that, I also give CY and TJ much of the credit. SPWR could not have pulled this off without CY.
TJ, I think, makes the baseball analogy: a number of strikeouts, such as MRAM and NSE, but a few home runs, such as PSOC, USB, and, I'm hoping, West Bridge. But the analogy fails when it comes to SPWR. If things work out, even calling it a grand slam, which it already is, would be an understatement. It's more like winning the world series.
Dear Simple Simon,
I still have about three times as much CY as SPWR, but like you it's getting close to my sell point to lighten up. I'm pllaning on selling one-third of my CY when it hits $25/share. I agree with what you say about SPWR's dependence on subsidies, but Tom Werner has estimated that they'll be competetive with conventional without sibsidies by 2010. Moore's Law you know. My SPWR and the other 2/3 of my CY are long-term core holdings for me.
Like you I saw SunPower and PSOC coming in 2004 and loaded up on CY then. As a very long-time investor in CY I'm still excited about core CY. I think the "no more Moore" iniative will continue to have positive impact as the year goes on.
>> surprisingly, they didn't spend a penny on buyback yet due to some lock-up arrangement
Not clear what you're saying. As far as the $600M bond issue, they've used most of it - only $3-$5M shares left to go. Price already locked in, per conference call. I assume that the related hedging transactions account for 42M shares traded on March 8.
As for the original buyback announcement, that was never in the cards without borrowing since they needed $180M to retire the previous convertible. And at this point they're supposed to be accumulating cash to pay off new convertible in 2009. So I'd guess that the buyback stops with the projected 28 - 30M shares.
BTW, the cc confirmed my understanding of the new convertible. The debt is convertible in the sense that the amount due the bondholders will depend on the price of CY. However, the first $600M gets paid in cash, no matter what the price of CY. It's only the amount over $600M (conversion price of $23.90) that may be paid partly in stock. Also, they are hedged up to a stock price of $27 according to the conference call. Dilution, whatever it turns out to be, starts at a stock price of $27.
Another BTW. According to the cc, CY has the ability to distribute SPWR shares today, based on a complex deal described in the January call. Neither the new bond issue nor the purchase of PowerLight would prevent that from happening. CY has indicated no plans to do that soon, nor have they ruled it out. But TJ pretty much said that they would split off SPWR by some time in 2009 - at which point they won't have to get fancy to do it.
Less than $1 away from my first sale of CY - 1/12 of my holdings at $24. Looking good! Of course, now I've jinxed it.
One more thing - Do you think T. J. wants SPWR divested?
1) It is so easy for CY management doing nothing and still able to collect on option excercise. SPWR contributed the majority of CY's EPS. SPWR's artificial stock price will keep CY stock price from falling under. The management is happy, so are employees, shareholders, why divest?
2) After divesture, everyone get one-time payment, then T. J. will start to face the serious challenge on CY core. If anything mis-stepped, he might fall back to 90s' misery memory again, why not be a lay-back manager doing nothing at all? I am not saying CY core degrading; EPS is always mediocre, that's for sure.
Yeah! That was a mistake. I post while I was still reading. I was referring to the original buyback plan. For $600 millions convertible, they pretty much purchased 28-30 millons shares. But note on Merrill's (?) questioned about the final shares count 163 millions, it seems 8-10 millions short, which was vested (stolen?) by CY management options.
I didn't look into SPWR's divesture thing in details, but it looks like that they won't do it till Nov. 09. I know that we may maintain different opinions on SPWR. Except Powerlight's suntile, I don't really see they have a big differentiation from the peers. For 80 millions fully-diluted shares, only around 9 millions floating (8 millions short) after IPO for 2 years (?). That's a joke. The stock price is totally untested. To claim a real valuation, least 40% needs to be floated. For the welfare to CY shareholder, we may not want more floating SPWR shares or we don't want to see SPWR divesture.
On the other hand, core CY value is getting better. Except margin a bit going down, memory not doing so well, there are quite a few positives:
1) sequential up 3-6% after divesture.
2) PSOC is still up, almost 1/3 of CCD.
3) Antioch really work well in DCD, plus westridge, now CY core has three good products now.
I still own CY but not major holding. So I spent less time in research. Anything I stated wrong, please let me know.