Battery Maker Seeks Alternative Businesses

BATTERYpack
BATTERYpack

One of the world’s largest lithium-ion battery makers for electric cars, A123 Systems, is now seeking to find other strategic businesses for the company. This announcement from the company’s CEO set off a 5.4 percent increase in its share price value.

A123 Systems, Inc. is the company that develops, designs, manufactures and sells lithium-ion batteries and arrays. It also consults with Government as to research and development. Most of the companies with global automotive manufacturers and Tier 1 suppliers in developing rechargeable batteries and battery systems for hybrids, plug in hybrids and all electric vehicles.

The company’s businesses are divided into heavy-duty battery systems and passenger battery systems. The company offers rechargeable lithium-ion battery systems in many forms and sizes, together with packaged modules and tested systems based on its copyrighted Nanophosphate material.

The Waltham, Mass. based company, as the first step, engaged the services of an outside adviser “to provide financial strategic advisory services in connection with our ongoing strategic efforts and evaluation of strategic alternatives.” This was the announcement made by David P. Vieau, the company’s CEO during a conference call.

In 2011, the company reported a net operating loss resulting in a slide to 87 cents per share. With the announcement, the shares jumped to 96 cents per share. The company expects its sales of 2012 to be between U.S.$145 million to U.S.$175 million, which is definitely lower than the earlier projections of sales between U.S.$230 million to U.S.$300 million.

According to Barclays analyst Amir Rozwadowski, “Saying that they’re willing to look at all options may give investors something different to talk about. The announcement may be shifting the conversation to what is the inherent value of this company’s assets.”

Two of the company’s biggest clients are Fisker Automotive and German giant BMW. The company took a hit in its share price when it had to conduct a recall last March 26 of its batteries to Fisker when the car shut down after undergoing testing by Consumer Reports.

One of the challenges for the company is the development of an emerging product for its clients. Another issue is that most of its purchasers are start up companies, making it difficult for the company to project the market demand and limiting the company’s ability to lower overall costs of production.

According to Mr. Rozwadowski, “When you have a mismatch between demand and capacity, you have challenges.”