Energy Conversion Devices (ENER): Good for the Earth
4-22-07: In celebration of Earth Day, it is only appropriate we look at an alternative energy company. Energy Conversion Devices (ENER) engages in the design, development and production processes for the alternative energy generation. Founded in 1960 and headquartered in Rochester Hills, Michigan, ENER has more than 900 patents covering a wide range of potential solutions to help us reduce our dependence on fossil fuels. As with most emerging technology company, profitability is still elusive. Given the renewed focus on “going green”, we believed ENER is in an excellent position to capitalize in the long term. Despite the recent setback, this company holds great potential.
One of the promising aspects of ENER is the company has a stake in a wide range of energy solutions. This includes hydride batteries that can potentially power hybrid cars, ultra-fast energy-saving chips, and techniques for storing hydrogen. We believed these types of technology will likely lead the growth over the next three to five years.
A promising technology from ENER is their thin film solar energy collectors. While thin film collectors are less efficient than silicon, they are much cheaper to produce. As a result, manufacturing efficiencies are likely to bring costs down dramatically, making this the cheapest path to solar electricity. The thin film is more pliable than silicon but larger in area, it's ideally suited to commercial and industrial applications.
The company is involved in a lot more than just solar energy. It has a partnership with Chevron in a venture that manufactures nickel metal hydride batteries. It is important to note, this is the only maker of such batteries in North America, meaning they'll be the batteries of choice in hybrid vehicles manufactured in the U.S. Moreover, because of patent protection, the venture gets licensing fees from most batteries made outside the U.S. The potential is enormous.
Energy Conversion Devices also has an interest in another joint venture, this one to manufacture super-fast memory chips with Intel. Manufacturing of the chips has just started, and the products are being tested. The venture claims that the chips are up to a thousand times faster than current flash memory chips. Applications could range from cell phones to PDAs to any number of other consumer devices. The he potential is vast as the flash memory market is currently $20 billion, and the total memory market tops $200 billion. It is estimated commercial production could begin as early as 2008.
Finally the company is in the early stages of developing hydrogen storage that can be used with fuel cells. The main advantage of Fuel cells is it can be used any device that requires a battery. What makes Fuel cell so exciting is a fuel cell has a constant source of power using hydrogen. If the product works out, Energy Conversion Devices would have access to another multibillion-dollar long-term market.
We have not forgotten the fact that this is a high-risk company that so far has never managed to sustain profitability. The recent quarter (Q3) number was very much a disappointment as the company reported a weaker sales number and anticipated additional cost as part of their restructuring plan. The stock dropped about 8% on this news. Trading at approximately $36 per share, this stock is worth keeping your eyes on. While we believed this stock is very risky, the reward ia enormous if any of the above projects pans out.
