Cost cutting helped Capstone Turbine Corp. narrow its losses by nearly 14% in the third quarter but the company said Thursday that market conditions are so bleak that it has suspended offering forecasts for the fourth quarter and beyond.
Chatsworth-based Capstone, which makes small turbine-driven power generators, said it has been hurt by a dramatic downturn in business investment and capital spending as well as a decline in energy prices, which has diminished the attractiveness of its refrigerator-sized machines.
"The uncertain market conditions, the lengthy sales cycle for our microturbines, and our limited visibility to orders prevent us from being able to accurately project near-term sales levels," said Ake Almgren, Capstone's president and chief executive, who announced his retirement this week. The company has begun a search for a new CEO. Board member Eliot Protsch has assumed chairman duties.
Additionally, companies are nervous about adopting a new technology such as Capstone's microturbines, creating sales difficulties, Almgren said during a conference call Thursday.
Capstone posted a net loss of $10.8 million, or 14 cents per share, in the third quarter ended Sept. 30. That compared with a net loss of $12.5 million, or 16 cents per share, a year earlier. Revenue rose 18% to $3.9 million from $3.3 million.
Capstone made its announcement at the end of a trading day that saw its shares fall 7% to close at 95 cents on Nasdaq. Capstone traded at nearly $100 a share two years ago, when investors believed that high electricity prices and the California energy crisis would fuel demand for its generators.
The company burned through $10.8 million in cash in the third quarter, but that was down significantly from the $18.7 million used in the same period a year earlier. Capstone has $144 million in cash and no long-term debt, except for leases.
Capstone also disclosed more details about an agreement announced this week with industrial giant United Technologies Corp. United Technologies purchased 4.9% of Capstone's stock, or 3.9 million shares, for $1 a share, Almgren said Thursday.
The two companies have signed a 10-year agreement to incorporate Capstone's generators into the line of power products the Hartford, Conn.-based United Technologies markets to operators of commercial buildings. The contract should "provide a significant backbone to our sales and distribution channels," Almgren said.
Analysts say Capstone will probably gain customer credibility through its partnership with United Technologies, a well-regarded industrial concern.