MEMC Meets Friday the 13th, Literally (WFR)

MEMC Electronic Materials Inc. (NYSE: WFR) is a company that just can’t seem to get its act together.  The stock is being crushed after its earnings report.  It appears that the company "encountered unanticipated events towards the tail end of the quarter."

The silicon wafer leader for semiconductors (and a solar silicon supplier too) posted  $0.92 EPS on a 6% rise in revenues to $531.4 million versus $1.00 EPS and $557.9 million estimates from First Call.

The wafer maker sees Q3 revenues at $560 to $620 million versusestimates of $616.34 million.  It will give a quarterly update onSeptember 2, 2008.  As far as 2008 guidance the company sees $4.00 to4.30 EPS (20% to 25% growth from 2007) on $2.25 to $2.35 Billion inrevenues (23% to 33% growth from 2007), which compares to $4.30 EPS and$2.36 Billion revenues in the consensus estimates.

To offset the weak earnings report the company said it has alsoapproved an increase of some $500 million to its share repurchaseprogram.  The company said its quarter end cash and equivalents were ata balance of about $1.5 Billion.

Here is the explanation, some of which we already knew: The prematurefailure of a heat exchanger at the Merano, Italy facility in June cutpolysilicon output by just under 5%.  The output from the Pasadena,Texas facility during the month of May and early part of June was goingto be caught up but a loose pipe fitting caused a fire at the company’sPasadena facility that required a shut down of half of someproduction starting on Friday June 13 and lasting a week.

Some of this data was known, but the severity and follow on issues werenot.  It also addressed some order cuts from a key customer that willallow it to allocate materials to other customers elsewhere.  Iftraders bidding the stock up 4% to $53.80 today thought they had a beadon the bullseye, they are wishing that they never played it.  Sharesare down at a new 52-week low of $38.50 or so in after-hours as one ofthe NYSE most actives in after-hours after some 3.92 million shareshave traded since the close.  Its 52-week trading range was $48.50 to$96.08.

This move just single-handedly erased all of the more than 100% gains from mid-2006 to late 2007.

Jon C. Ogg
July 23, 2008