NEW YORK (Thomson Financial) - The Wal-Mart order is significant to Plug
Power, according to the company's Chief Financial Officer Gerry Anderson,
because it shows that a leader in distribution facilities has put its confidence
in Plug Power to outfit one of its centers.
The developmental-stage hydrogen-powered fuel cell company seized the
opportunity, which it secured via "different" pricing it negotiated with the
retail behemoth, and is aiming to become a long-term Wal-Mart Stores Inc.
supplier.
"We have to execute and deliver. It's good news and it's telling that you
have large organizations like Wal-Mart looking at the value proposition ... and
environmentally-friendly aspects of (fuel cell power)," Anderson said in an
interview following the company's third-quarter conference call.
In order to turn Wal-Mart into a bigger customer, Plug Power needs to
broaden its platform and make available products that Wal-Mart deploys today. It
also needs to be successful in the initial deployment of its order and "we are
pretty confident we will be able to do that," Anderson said.
Plug Power offered special pricing to Wal-Mart but Anderson noted that Plug
Power is pricing a lot of deals individually based on customer needs. "As our
product offerings mature and stabilize, pricing will eventually get narrowed
within a certain range," he said.
Because of Plug Power's development-stage status and the unknown reliability
of its product, GAAP accounting rules require it to spread revenue recognition
over the service period of each sold system, which in this case is a
"considerable" amount of time, according to Anderson.
On Wednesday, Plug Power posted a loss of 17 cents a share for the third
quarter. Thomson Financial's mean estimate was for a loss of 15 cents a share.
Anderson said 11.5 cents of the loss came from its existing Latham, N.Y.-based
business, and 5 cents a share was from the recently-purchased Cellex and General
Hydrogen operations. He noted, however, that the relevant number, and what Wall
Street is looking at, is the 17 cent-a-share loss figure.
One area where Plug Power anticipates significant growth is in the wireless
market. The company is working with several key carriers, Anderson said, and is
setting up system packages to meet their needs. "We are continuing to see
progress on that, and we see order flow picking up."
New FCC rules require local exchange carriers to have 24 hours of emergency
backup power sources for their central offices and eight hours of backup for
cell sites. Anderson and CEO Roger Saillant mentioned the FCC mandate during the
conference call, saying it will drive huge growth for Plug Power.
Regarding potential order cancelations, Anderson said that the company is
renegotiating its agreement with Tyco Electronics whose contract term recently
ended. Tyco's business isn't counted among the potential order cancelations
counted in the 213 GenCore systems that were removed from Plug Power's order
backlog, which was 294 systems at the end of September. Most of the orders were
lost when Smart Link, its Kuwait distribution partner, decided to exit the
fuel-cell distribution business.
Michelle Rama
mr/jw
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