The "SunPower" Also Rises For Cypress


Have you been following the action in SunPower these last couple of years and the company it spun out from, chipmaker Cypress Semiconductor?

SunPoweris in the news today because of the monumental deal it signed with Pacific Gas & Electric,where California's top utility will buy a total of 800 megawatts of renewable energy from both OptiSolar and SunPower.

That news was good enough for a 17 percent pop in SunPower's shares, and the deal represents the largest single photovoltaic commitment from an electric utility anywhere in the world, according to the Solar Electric Power Association. OptiSolar is still privately held, and won't deliver its power on this deal until 2011. SunPower, meantime, will account for 250 megawatts of the project, and should deliver beginning in 2010.

SunPower has been on quite the ride since going public about 21 months ago. It rode the big solar energy fever in 2007, jumping from $26 to about $150 from Oct. 2006 to Nov. 2007, which was about the time the entire market was peaking. And then, along with the broader market, SunPower suddenly returned back to Earth. And since then, shares have been all over the map. Yet over the last month, these shares have been spiking again, from $61 and change on July 9 to $93 today. A current P/E of about 145 sounds, well, a little stratospheric, but its forward P/E of 26 becomes far more palatable when you consider the kind of deal it just signed with PG&E. Investors looking for a company in a (pun intended) hot market, with the chops to perform, ought to be looking carefully at this company.

I say that because of where SunPower came from: Cypress Semiconductor has itself enjoyed and suffered a colorful history. A stock that's suffered a wrenching rollercoaster ride at one point, stabilizing to a healthy performer at another, and drifting with the fortunes of commoditized and specialty memory microprocessors along the way. TJ Rodgers, the company's CEO, is a guy I've followed for the better part of 18 years.

Easily one of the straightest shooting, hard-charging, tough, results-oriented executives I've ever known, he's a pit bull, a street fighter, carved in the image of Advanced Micro Devices founder Jerry Sanders, who Rodgers worked with very early in his career. Both, by the way, have a taste for the finer things. He's a task master, a disciplinarian, a die-hard Packers fan, and probably exactly the kind of advisor a fast-growing, mega-momentum company like SunPower needs.

Two years ago, it was an internal Cypress project to develop solar cells to change sunlight into electricity that really began to catch on. So much so that as Cypress' chip business began to sag, Rodgers got the idea to ride the solar power momentum and spin out SunPower into its own company. At the time, Rodgers wasn't sure what the financial benefits would or could be by such a move, but it seemed like the right move at the right time.

Ya think? Stroke of genius. Today, Cypress owns about 53 percent of SunPower, or 44.5 million shares, worth about $4.13 billion today, which is just shy of Cypress' own, entire market cap of $4.66 billion. In fact, as far as SunPower's market cap is concerned, which sits at a frothy $7.81 billion, this company did in two years what it took Cypress 14 years to do.

So here we are with SunPower soaring, and taking Cypress along with it. And now investors have two ways to win, and maybe win big.

Questions? Comments?