You want to examine the financial ratios for Dell Computer corportion. Go to www

Question

You want to examine the financial ratios for Dell Computer corportion. Go to www. reuters.com and type into the search window the ticker symbol for the company (DELL). When the financial summary for Dell has loaded, scroll down to the ratios. You should find financial ratios for Dell and comparative ratios for the industry, sector, and S&P 500 averages. (a) What do TTM and MRQ mean? (b) How do Dell's recent profitability ratios compare to their values over the past five years? To the industry averages? To the sector averages? To the S&P 500 averages? Which is the better comparison group for Dell: the industry, sector, or S&P averages? Why? (c) In what areas does Dell seem to outperform its competitors based on the financial ratios? Where does Dell seem to lag behind its competitiors? (d) Dell's inventory turnover ratio is much larger than that for all comparison groups. Why do think this is?

Explanation / Answer

Two years ago, it seemed like First Solar (NASD:FSLR) could do no wrong. The company could manufacture it’s thin film Cd-Te photovoltaic (PV) cells at a fraction of the price of traditional crystalline silicon (c-Si) cells. First Solar was the first company to break the $1/W barrier for manufacturing cost. That was then. Now, a supply glut caused by overbuilding and reduced subsidies has dramatically slashed the price of c-Si cells. Bloomberg New Energy Finance (BNEF) forecasts that demand will not catch up with supply until 2014, even in their most optimistic scenario. In May, the spot price for a Chinese c-Si module was only $0.85 per watt, quite close to the $0.75 per watt manufacturing cost claimed by First Solar. Since Cd-Te cells are less efficient than c-Si cells (currently 14.4% of First Solar cells, compared to the high teens to low 20% range for typical c-Si cells), First Solar’s modules need to be larger to produce the same power rating, which leads to higher costs at the module and solar installation level. This leaves very little room for profit, from a company that once seemed to be an endless money-printing machine. Like many other Solar companies, First Solar has diversified into project development, and set its sights on places where the high price of power means that its solar modules can be profitable without uncertain subsidies. The idea is to compete with diesel, rather than with other solar industry players. Yet markets with high electricity costs have those high costs for good reasons. These reasons can include bureaucratic red tape, poor infrastructure, corruption, and a poorly educated local workforce. Such markets take considerable time and effort to develop the infrastructure for the rapid deployment of PV, meaning that, even there, solar manufacturers are jostling for a limited (if rapidly growing) market. Betting on Intermolecular With demand unable to grow fast enough to absorb all available supply, all solar manufacturers must also work to improve the cost effectiveness of their modules. For First Solar, part of that effort is embodied in a new licensing agreement with Intermolecular, Inc. (NASD:IMI). First Solar will license Intermolecular’s High Productivity Combinatorial (HPC) platform to advance its manufacturing technology and the efficiency of its CdTe solar cells. According to the press release, the program will focus on “new opportunities in certain critical materials and processes that may significantly influence the conversion efficiency of CdTe technology.” The work will be performed jointly at Intermolecular’s San Jose, Calif., facility and in First Solar’s research and development labs. The licensing agreement was announced after First Solar had the opportunity to evaluate the HPC platform in a trial collaboration. My instinct is that this is much bigger news for the $277 million market cap IMI than it is for the $1.1 Billion First Solar. First Solar always works to improve efficiency, and has been proven to be quite capable of doing so in the past. The fact that FSLR so the big news is that they have chosen to outsource part of this process to IMI is a resounding endorsement of the company’s technology. It will also bring IMI to the attention of a large number of clean energy investors who had never before heard of it. The First Solar agreement will also make other solar manufacturers look at Intermolecular’s technology more seriously, which will be important to IMI’s long term growth. Craig Hunter, Intermolecular’s senior vice president of Global Sales & Marketing, was quoted as saying, “Leveraging our HPC platform to accelerate the PV roadmap is central to our mission.”

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