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Subject:  PWER - Q3 2012 - my thoughts Date:  10/26/2012  6:18 PM
Author:  TMFGebinr Number:  820 of 1280

Hi everyone,


EPS: Expectation of $0.15, reported $0.13 GAAP and $0.16 after adjustment for forex, which analysts usually don't include in estimates.
Revenue: Expectation of $269.76 MM, reported $283.65 MM.

Cash & equiv & ST investments: $287.4 MM, up from $204.9 MM at the beginning of the year.
SE: $870.1 MM, up from $743.5 MM at beginning of the year.

Gross margin: 28.9%, up from 28.1% YoY, down from 30.3% QoQ.
Operating margin: 15.3%, up from 13.9% YoY, down from 18.6% QoQ.

Despite what I viewed as a relatively solid performance in Q3, shares took a hit today of about 5%. (But given the volatility of the share price, 5% might not be considered out of the realm of "normal.") This is probably because of two things: 1) The company guided Q4 revenue ($210 MM to $230 MM) below analyst expectations ($256.5 MM consensus) and, 2) that inverter demand in Germany and Italy, which combined still account for 67% of the company's revenue, is expected to decline significantly.

There are several points I wish to point out from the call:
• There was higher demand than probably expected in Europe, despite fears that Germany, Italy, and others are in decline. Part of this is from improvements in products, part is in shifting of products away from utilities and toward commercial and residential rooftop.

• Southern Italy has reached grid parity for solar, thanks to both more expensive electricity and high amounts of sunshine. The company is already bidding on unsubsidized projects and it expects that market to expand.

• The company is gaining market share, currently estimated at 13% worldwide, up from 11% a year ago. In specific markets, it has even higher share (California = 22% and Australia = 20%, for example). It is targeting 20% share in all of North America by end of 2013.

• The Phoenix manufacturing plant is well on the road to recovery. Shipments are up, deliveries are timely, and customer satisfaction is higher. This will help it continue to grow in North America.

• Even though Germany and Italy markets are expected to decline, o