SunPower Buys PowerLight as Alternative-Energy Market Revs Up

SunPower Buys PowerLight as Alternative-Energy Market Revs Up
The Wall Street Journal
Thursday Nov. 16, 2006
By Jim Carlton

In a deal that shows how the market for alternative energy has grown, SunPower Corp., a maker of silicon chips for solar power, said it has agreed to acquire PowerLight Corp., a seller of solar-energy systems, for $332.5 million in cash and stock.

SunPower’s focus on solar power has made the San Jose, Calif., company one of the fastest expanding firms in Silicon Valley. Two years ago, the company, which is majority owned by Cypress Semiconductor Corp., reported sales of $11 million. This year, analysts project sales will reach $235 million, amid increased demand for solar power that has been fueled by rising prices of conventional energy and expansion of government subsidies for solar power in places such as California. SunPower also does much of its business overseas, including Europe and Asia.

PowerLight, a closely held firm in Berkeley, Calif., which also operates extensively outside the U.S., doesn’t publicly report its sales. Analysts say it probably rivals SunPower in size, since SunPower officials estimated in a conference call yesterday their combined company would post sales of $600 million next year following the merger.

The deal is expected to be finalized in 2007’s first quarter.

Industry experts said deals such as this will help drive down the cost of solar power, which is about twice that of conventional electricity prices per kilowatt when subsidies aren’t included.

“At the end of the day, the larger SunPower gets, the cheaper it can make its solar panels,” said Jigar Shah, chief executive officer of SunEdison LLC, a large installer of solar systems in Baltimore, MD.

Demand for solar power is running so strong that SunPower and other makers of solar-energy panels order backlogs that can stretch for months. The backlogs are expected to ease next year as more supply of silicon to make the solar panels comes into the market.

SunPower and PowerLight have collaborated on a roofing-tile product, called SunTile, which is less bulky than standard solar panels. By acquiring PowerLight, SunPower officials say they will be able to collaborate even more closely on designs of solar products to bring down their overall costs. “Solar power needs to become more economical, and the way you do that is you integrate operations more like this,” said Tom Werner, SunPower’s chief executive.