Optical components

Sour Taste for Emcore

2:55 PM -- Citron Research , a.k.a. blogger Andrew Left, did a number on Emcore Corp. (Nasdaq: EMKR)'s solar business yesterday, claiming it's "built on a foundation of illusions."

That's trouble if it's true, because it's the solar business -- not optical components, sorry! -- that's driving Emcore's valuation... which fell to about $386 million yesterday: Shares were down $2.05 (23%) to $6.78 (and are down another 8 percent today).

Apparently people noticed the report. (I got clued in by Andrew Schmitt at Nyquist Capital -- whose blog makes for an informative reading list, by the way.)

Left points out Emcore's continued losses and its relatively small cash pool, but the bulk of the analysis goes to taking apart Emcore's customer announcements. Many are with small solar companies that Left considers suspect.

Emcore countered the arguments late last night, with CEO Reuben Richards saying in a press release that a certain blog's postings (presumably Left's) "are materially inaccurate and seriously misleading." (See Emcore Defends Itself.)

In the same way optical networking bubbled up and burst, so will parts of the green industry. I'm not saying Emcore is doomed specifically, but consider: Last month, Harper's ran a compelling article saying that the next bubble is inevitable and that alternative fuels and solar power are looking like ripe candidates. Meaning some companies, good and bad, will get overinflated and will crash hard.

Won't George Gilder be pleased.

— Craig Matsumoto, West Coast Editor, Light Reading

Mark Sebastyn 12/5/2012 | 3:45:20 PM
re: Sour Taste for Emcore Craig:

Thanks for the rec.

Seems to me that the solar business is just like the memory business, where 95% of the volume is capital intensive commodity manufacturing. In the meantime people are excited about the various technologies. But the endgame is unchanged.

When Oil goes back to $50 a barrel, no one is going to care, just like in the 70's. I lived in a house once that was built with electric heating coils in the floor and ceiling - that's because nuclear power would make electricity so cheap it was the most economical solution. Or so they thought.

The one thing the Emcore event illustrates is how totally clueless investors in solar stocks are. They have no idea what they own and why they own it, let alone what it is worth. When someone gathers relatively public info and posts it - people freak out. It is a sign that investors lack conviction. Sound familiar?

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