A few days ago, Energy Conversion Devices (ENER – Last trade $36.19) announced that they will have a "corporate update conference call." This was seen as a notable development, given that the company has never released its results until mid-May. Option traders got excited and on April 18 over 11,500 calls were traded. The stock price moved up 4% in a single day to $39.40 (staircase up). During today's call, ENER reported preliminary revenues of nearly $27 million for the third quarter of fiscal 2007, below the Thomson estimate of $32.6 million. The company's solar PV segment, their only profitable unit, is expected to report 3Q07 revenues of $24 million, below analyst estimates of $30 million. At the time of writing this, ENER is down by almost 7% in after hours trade (elevator down).

Photo: benefit of hindsight , Creative Commons, Flickr

Every cloud has a silver lining, and positive changes are finally being made at the company. ENER announced a restructuring plan that centers on reducing Research and Development costs, and I think this is a major development for the company.

ENER management’s credibility had recently been questioned after the announcement that sustained profitability was pushed out beyond the original target. The company was initially planning to become profitable by the end of fiscal 2007 (the company has operated 40+ years without sustainable profitability). Management cited funding delays within the hydrogen division, a division that has recently taken "center stage" in their strategy. As we pointed out before, management's new focus on the hydrogen division does not make sense, given that the hydrogen business is still in its infancy and may take several years to reach commercial volumes.

Now that they are cutting R&D expenditure for management's money-wasting pet projects, I am willing to take a new look at ENER. There could be some upside in the share price now that the company is focusing on opportunities to commercialize its existing technologies. If you'd like to go for a short-term trade (a few days), jumping on board now could work nicely.

Markets are likely to shift focus from short-term negative factors (lower revenue guidance for the upcoming earnings release) to more positive fundamental, long-term factors (more productive management focus, restructuring). For long-term investors, I'd wait for ENER's earnings release on May 8 to see just how bad their solar PV unit looks.

_{Disclaimer: I do not own any stocks mentioned above. I do not give investment advice. Do your own research. Do not rely on anything in this blog to make investment decisions. Consult an investment professional familiar with your specific financial situation before buying or selling any security}