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SunEdison, Soitec Ink Patent Deal

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SunEdison, Inc.’s shares gained 1.01% on Wednesday, Nov 27, buoyed by the announcement of a patent cross-license agreement with Soitec. Sentiment turned bullish as the agreement ends all pending legal issues between these two companies. The companies will also have exclusive rights to use each other’s patent related to silicon-on-insulator (SOI) wafer products. SOI is a technique by which bulk silicon wafers are substituted with wafers consisting of three layers in a chipmaking process.

Soitec is a manufacturer of semiconductor materials for electronic and energy industries. The company’s products are essential for producing semiconductor devices, which are used in computers, cellular phones and other mobile electronic devices, automobiles, as well as other consumer and industrial products.

Soitec’s portfolio of patents will strengthen SunEdison’s SOI product competencies, which in turn will increase its overall market growth going forward.

UK-based technology research firm Technavio projects that the global demand for silicon wafers will grow at a 5-year compound annual growth rate of 5.23% from 2011 to 2015. The demand will mostly be influenced by capacity expansion of semiconductor manufacturers. We believe that the current agreement is a positive move for SunEdison and is in sync with the company’s strategy.

SunEdison is expected to benefit from the rise in demand for solar energy, and the divestment of its semiconductor business would further enable it to concentrate on its core competencies.

Though the Solar segment has not performed well in the last two quarters, we believe there is still immense potential due to its improving backlog and project pipeline. We also consider SunEdison’s recent tie-up with Brazil’s Petrobras, to build one of the largest solar photovoltaic power plants as a positive. This venture will help SunEdison to tap the Brazilian solar market and expand geographically.

Currently, SunEdison has a Zacks Rank #3 (Hold). Better-ranked stocks in the technology sector include SanDisk Corp. , Microchip Technology Inc. (MCHP - Free Report) and First Solar Inc. (FSLR - Free Report) . While SanDisk sports a Zacks Rank #1 (Strong Buy), Microchip and First Solar carry a Zacks Rank #2 (Buy).

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