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Integrated Company Analysis SunPower Corporation

Integrated Company Analysis SunPower Corporation. Mike Ebeling Ted Farwell Abhishek Gupta Chang-Keun Lee Emily Spaulding. Executive Summary. Solar Industry Growing demand for solar energy Reduced subsidies SunPower Corp Global Vertically integrated Technologically advanced

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Integrated Company Analysis SunPower Corporation

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  1. Integrated Company AnalysisSunPower Corporation Mike Ebeling Ted Farwell Abhishek Gupta Chang-Keun Lee Emily Spaulding

  2. Executive Summary • Solar Industry • Growing demand for solar energy • Reduced subsidies • SunPower Corp • Global • Vertically integrated • Technologically advanced • Follows subsidies

  3. Executive Summary • Recommendations • Continue branding effort • Maintain technological superiority • Concentrate on large scale system projects

  4. Revenues • Total revenues over 1.4 billion in 2008 Source: SunPower Company Filings-10K

  5. Competitive Analysis • Strengths • Technology • Aesthetics • Experience • Weaknesses • High price • Opportunities • Rapidly growing industry • Potential for increased subsidies • Threats • Competitive technological breakthroughs • Polysiliconprice volatility • Potential reduction of subsidies

  6. Competitive Analysis

  7. Product • Residential • Financial benefit • Clean & renewable • Aesthetically pleasing

  8. Product • Commercial • Financial benefit • Experience • Green image • Utility • Financial benefit • Best technology

  9. Distribution • Residential • Authorized Dealers (200 US, 600 worldwide)

  10. Distribution • Commercial and Utility • Inside sales representatives • SunPower technical support team

  11. Distribution • High Involvement Product • High technical competence • Customer service • Ownership of selling process • Possible Future Ventures • Mass merchandisers

  12. Promotion • Branding • Standing apart from other solar energy companies • Recent campaign • Increased awareness • Justifies premium price

  13. Price • Up to 50% price premium • Brand + Efficiency + Aesthetics • Cost Drivers • Subsidies • Geography • Size of system • Depreciation tax shield

  14. Price • Residential • Cost to user $15,000-$30,000 at installation • System NPV range $30,000-$55,000 • Commercial Utility • $3 million to $250 million or more

  15. Financials • Accounting Overview • Inventory Valuation • FIFO and Lower of Cost or Market • Revenue Recognition • Systems product – percentage of completion • Components product – recognized when earned less estimated sales return in same period

  16. Financials • Unsubstantiated accounting errors in COGS relating to operations in the Philippines • Q1 ‘09 COGS overstated by $1 million • Q2 and Q3 of ’09 COGS understated by $14 million and $2 million, respectively

  17. Financials • Impact on Income Statement and Statement of Retained Earnings COGS GM NI RE COGS GM NI RE

  18. Financials • Impact on Balance Sheet COGS INV. SE Q1 2009 COGS INV. SE Q2, Q3 2009

  19. Financials • Net Adjustment of Income Statement COGS GM NI RE 2009

  20. Financials • Net Adjustment of Balance Sheet COGS INV. SE 2009

  21. Financials • Net affect understated COGS of $15 million • Findings of accounting investigation released December 16th

  22. Assumptions - Beta

  23. Assumptions - WACC

  24. Assumptions - Cap Ex • Estimated future expenditures of 18% of revenue • Maintain current manufacturing facilities • Increase current production capacity • Fab-3 plant

  25. Valuation - Current Market Price • Stock Price $22.95, as of 12/11/09 Source: FactSet

  26. Valuation - DCF

  27. Valuation - Ratios/Multiples

  28. Valuation - Target Price

  29. Summary • Future of the Solar Industry • Subsidies • Increased government mandates • Decreasing supply costs • Increasing technology • Increased competition

  30. Summary • Recommendations • Continue branding effort • Maintain technological superiority • Concentrate on large scale system projects

  31. Questions and Comments

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