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MEMC Guides Soft 1Q, Upbeat on 2013

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At its analyst day held last week, semiconductor and solar technology provider MEMC Electronic Materials Inc. provided its financial outlook for first quarter of 2013 and fiscal 2013. The company also announced its plans to change its name to ‘SunEdison’, subject to shareholder approval. MEMC believes that the new name would better represent both the businesses under a global brand name.

MEMC expects the first half of 2013 to remain sluggish. The second half is expected to gain momentum based on industry recovery. MEMC expects Semiconductor revenues in the range of $228.0–$235.0 million for the first quarter and $940.0–$990.0 million for fiscal 2013. The company expects to sell 10–38 solar energy systems in the first quarter of 2013 and 420–490 in fiscal 2013. The guidance came below the Street’s expectations mainly due to muted project development spending in 2012 and and expectations of a soft first half of 2013.

MEMC also intends to stabilize the sequential volatility in megawatt (MW) installations by expanding its service offerings (for residential and small commercial projects) as well as focusing on distributed generation. Management is keen to bring down the cost per 400 watt project to $0.40 per watt from the current cost of $0.65 per watt for a 330 watt project. However, the company may face some challenges as the benefit of growing volumes and lower cost of production will be offset by lower pricing (from $3.79 per watt in 2012 to $3.10–$3.40 per watt).

The guidance was at par with management’s announcement made during the fourth quarter 2012 results. During the earnings call, MEMC refrained from providing any quantitative revenue and EPS guidance for the upcoming quarter and fiscal year to reflect the ongoing uncertainty in the semiconductor and solar markets. But management did mention that it is optimistic about gaining operating leverage from ongoing cost reduction measures and reduction in solar materials pricing, which in turn, would help MEMC to deliver stronger results in 2013.

MEMC’s semiconductor business has been hit hard by oversupply issues and the dwindling PC market. Also, declining prices in the solar industry have capped MEMC’s growth in its solar business. But the guidance, though not very strong, projects better visibility in 2013.

Currently, MEMC has a Zacks Rank #3 (Hold). Investors may also consider other technology stocks that are performing well. Rambus Inc. (RMBS - Free Report) , Semiconductor Manufacturing International Corp. (SMI - Free Report) and PLX Technology Inc. all have a Zacks Rank #1 (Strong Buy) and are worth buying.

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