The company said it expects to save about US$15 million to US$17 million per year, after the restructuring is implemented in the second quarter of 2012. The cutbacks represent a major reversal of fortune for the company. Following more than a year of rapid expansion and aggressive hiringwith headcount at 195 in 2011, up from 35 in 2009Satcon announced last May that it had taken the lead in the 100 kW and above North American PV solar inverter market. However, the business reported disappointing results in the third quarter and anticipated a 13 percent decrease in fourth-quarter revenues.
"The worldwide solar market conditions in 2011 demonstrated the dynamic nature of this maturing industry," commented Satcon president and CEO Steve Rhoades, noting that, "The compounding effects of reduced panel costs and market demand shifts toward North America and Asia have forced the entire industry to adjust, as we enter the next phase of development".
However, Rhoades said there still are reasons for optimism. "Decreasing prices present significant opportunity for Satcon, where the demand for our large-scale inverter solutions nearly doubled in North America and Asia year-over-year. The measures we have announced today will help to ensure that Satcon achieves the financial strength required to profitably maintain our leadership position as the standard for large scale inverter systems as solar power generation becomes a more affordable and stronger investment worldwide".
Under the new plan, in addition to reducing its worldwide workforce by 35 percent, Satcon will:
Focus product development and marketing on turnkey solutions for large-scale commercial and utility solar businesses;
Concentrate on sales in North America, China, India and Thailand; as well as other emerging markets in the Asia-Pacific region;
Close its Canadian manufacturing plant, "due to insufficient market growth to support a dedicated facility," and work with a contractor (to be announced in February) to meet the needs of local customers;
Halt production of its Solstice distributed energy management system, which the company said had been in high-demand and had been a technical success, but could not be marketed cost-competitively; and
Reorganize its office and warehouse infrastructure in Europe, as a result of weaker-than-expected demand for its PV inverters in the EU in 2011.
Laying off staff and closing the Canadian facility will result in charges of approximately US$2.8 million to US$3.0 million. The majority of the charges are expected to occur in the fourth quarter of 2011, with the remainder taking place in the first quarter of 2012.
In addition to the restructuring charges, the company currently is analyzing its inventory and certain non-cancellable supplier-held inventory, and will write down the value or take a charge to reflect current market conditions. This will result in expected charges during the fourth quarter of 2011 of approximately US$20 million to US$26 million, with the majority of the charges comprised of non-cash items. These charges were not anticipated when the company provided its fourth quarter 2011 guidance.
"Our commitment to achieving profitability, combined with the dynamic PV environment of 2011, have led us to adjust our cost structure to ensure that we are able to successfully deliver the industrys most advanced and cost-effective solutions profitably," said Satcon chief financial officer Aaron Gomolak. "These spending reductions, coupled with our accelerated cost reduction programs, significantly lower our break-even level during the first half of 2012".