MEMC Warning Hits Home

MEMC Electronic Materials, Inc. (NYSE: WFR) is joining with more pain for its solar (and semiconductor) materials peers.  Shares are getting hit this morning on news that it is cutting its global workforce, cutting its production capacity, and that it is planning to accelerate reductions in operating costs.

The company is blaming current conditions, and more importantly “expected market conditions,” in the solar and chip segments.  The goal is to increase the operating cash flows in all segments.  It seems that the goal remains an elusive one.

Investors have now been told to expect a charge of $700 million in the fourth quarter.  The only good news is that some $520 million is expected to be a non-cash charge.  Of the $180 million, about half of the charge is actually not expected to take place until after 2012.  It also projects that the annualized cash flow gain to be over $200 million by the end of next year.

An additional non-cash charge on goodwill impairments was put in a range of $200 million to $400 million, with deferred tax asset charges of $225 million to $275 million.

The question is “How low can it go?”… Shares have already fallen to $4.21 and the 52-week range is $3.92 to $15.04.  Shares are indicated down 7.6% at $3.89.  If this holds, the stock will be at another 52-week low.  Make that a multi-year low and far worse than at the depths of the market panic of late-2008 and early-2009.

JON C. OGG