Leadership Profile: Tom Werner (Part 10)

The core of SunPower’s success has been its dominance of the high efficiency solar cell. Tom breaks down the marketplace by product type, and explains where SunPower fits into the picture.

SM: Is your technology the most efficient on the market today? TW: We are the highest efficiency in the world, although Sanyo is close. The rest of the market can be classified as medium efficiency. There is also a new technology emerging called thin films, which uses a thin film on a substrate to convert sunlight into energy. You can segment the market into high efficiency which is really SunPower and to a degree Sanyo, then your medium efficiency products, and finally the thin film products. >>>

Leadership Profile: Tom Werner (Part 9)

After discussing German and Japanese markets, Tom visits the North American markets with a particular emphasis on California. Of particular interest is the amount of growth which is expected, spurred in part by governmental policy and incentive programs. We use that discussion as a catalyst to have some quick discussions on the current and projected marketplace.

SM: Is California the only state in the US with a strong Solar policy? TW: Interestingly there are states in the north east – New Jersey, Connecticut, New York, and over the course of the last year or so, Arizona. Texas is potentially looming on the horizon. >>>

Leadership Profile: Tom Werner (Part 8)

Germany has a political environment, influenced by voters, which is very supportive and progressive about solar energy. This has resulted in creating a very large and solid marketplace which SunPower has been able to capitalize on.

SM: What has been driving Germany’s big focus on solar? Is that part of their energy policy? TW: When you begin discussing energy production today, you encounter people’s concern with global warming and their concern with energy security and the cost of fossil fuels. The combination of those factors eventually cause the people in government, as well as the people in utilities, to take notice and create policy to reflect people’s opinions. >>>

Leadership Profile: Tom Werner (Part 7)

SunPower went public in 2005, which is a monumental moment for most firms. It is always interesting to take note of firms who do not press the IPO, rather they wait for banks to begin courting them. Tom revisits that timeframe and explains SunPower’s progression during that period in thehistory of the company.

SM: You went public towards the end of 2005. What followed? TW: TJ Rogers is a Libertarian, and a big believer in Capitalism. The deal I had with TJ was that if we were successful we would take the company public. Sometime during 2005 a banker took notice of us growing. Our first quarter of 2005 was almost the same amount of revenue as our entire year of 2004. So the growth rate was beginning to catch attention, which brought banks circling.

In the summer of 2005, we did a bake-off of banks, and we went public in November 2005 which by most measures was a successful public offering. We were wildly oversubscribed and virtually everybody we met bought in.

SM: The stock was scheduled to start the day at $18. Well, when the stock started trading it opened up at over $27. >>>

Leadership Profile: Tom Werner (Part 6)

The later half of 2004 marked the beginning of production operations. SunPower began producing solar cells, a result of $150M of capital investments. On the books, this timeframe represents the greatest period of loss in the company’s history, due largely to the development of the new production lines. It was, of course, necessary.

SM: What did the P&L look like at Q1 2004? TW: In 2003 we finished the year with $4M in revenues, and had significant losses due to our investment in research. In 2004 revenues were $11M, and again significant losses. In 2005 we did $79M, it was the year we switched gears and began growing as fast as we could. It was Q4 2005 that we were able to break even. We hit the deep point in terms of profits and losses in Q4, 2004. That is when we were ramping the facility. You can plot the profit before tax and see a valley between Q4 2004 and Q1 of 2005, and we have since built our way out of that valley. Our peak loss was $7M or $8M loss in a single quarter. >>>

Leadership Profile: Tom Werner (Part 5)

Tom joined SunPower in 2003, and the IPO occurred in 2005. Here we review the steps the company took in that timeframe which led to not only a successful IPO, but also laid the foundation for its current success.

SM: Between the time you showed up and the IPO, what was happening to the business in terms of scaling? TW: That is a fascinating story in and of itself. In April 2003 the technical team made their first cell that was 20% efficient in production size and format. They did that in a Cypress fabrication site in Texas. At the time we had five people in the Philippines who were essentially the core crew that was going to set up our manufacturing operations.

When I showed up full time in June, we called a summit and polled the team in the Philippines, the team in Texas and the team here to find out exactly where we were. We learned that we were not as organized as we could have been but we had the existence proof that a high efficiency solar cell could be fabricated in the right form factor. >>>

Leadership Profile: Tom Werner (Part 4)

During its early phases SunPower was, out of necessity, not as focused of a company as it is now. It engaged in several other business areas to ensure positive cashflow, yet such activities detracted from the development of high efficiency solar cells which became one of its core competencies.

SM: Did SunPower engage in any other markets during the early years?
The company, while it was working on its concentrator technology, did other things for revenue as well. Among the things it did was make high-efficiency solar cells for race cars, high efficiency solar cells for the Helios Aircraft, which flew to the highest altitudes of any aircraft ever.

They also realized that if they could turn light into electrons, so they could use that technology to make sensors. You are probably aware that many electronic devices such as laptops and cell phones have infrared sensors in them. SunPower realized they could make the sensor end of that, and became a significant player in that market. The unfortunate thing is that the market, in terms of revenue, is not that big. >>>

Leadership Profile: Tom Werner (Part 3)

In this next segment of the interview, Tom takes us through the history of SunPower. From the inception, it was a company driven by innovation, yet faced the common business challenges which have been the demise of numerous other hi-tech startups.

SM: Can you briefly tell us about the history of SunPower? TW: SunPower is, in a lot of ways, a classic Silicon Valley startup. You have a professor from Stanford who is brilliant, Dick Swanson, and like a lot of professors he saw the solution to a problem and knew he could turn it into a great business but probably did not appreciate, at least as much, all of the other aspects of the business such as getting the right customers, getting margins, and all of those things.

SM: Building businesses are for lesser mortals like us! TW: Sure! We are kidding around a bit, but it takes complementary skills. Dick had these great ideas; among them was his realization that silicon costs a lot of money, so he built a high efficiency solar cell and used concentrators or mirrors to shine a lot of light on that cell.

Doing so allows you to divide the cost of silicon by a lot of power. A lot of light is shone on this silicon solar cell, and more of that light is converted to energy with higher efficiency. It was VC funded, and during early 1985 to 1989 it became a real corporation. From 1989 through the better part of the decade, Dick and his founding team pursued the dream of concentrator solar power.

It turned out that all of the mechanics and balance system costs, everything except for the silicon, were also very expensive. Also, when you concentrate the sun you also want to track the sun, and the cost of doing so was quite high. Dick and his team spent the better part of a decade figuring out better ways to track the sun and get things out of it.

Meanwhile what is known as the One Sun, or non-concentrated market, which was the mainstream photovoltaic market, was chugging along averaging 20% growth.

(to be continued)
(Part 2)
(Part 1)