Friday, August 01, 2008

Changing Light Bulbs

How many stockbrokers does it take to change a light bulb?
Oh, no! The bulb’s out? Sell my GE stock NOW!

Light Bulb Jokes

In the June 17th post, “Bright Lights,” Orion Energy Systems (OESX: Nasdaq) was featured for its lighting products that create energy efficiency for commercial and industrial customers. Readers of the post might have wondered why we did not mention the major lighting players such as General Electric (GE: NYSE) or Philips (PHG: NYSE).
Large companies like these typically have the financial resources not to mention deep benches of engineers and scientists to bring new lighting products to the market. So they have.

Philips touts its new Performer EII ballast for fluorescent lamps that meets the EU directive for ballasts. The company also offers the PrimaVision for high intensity discharge (HID) lamps.

GE was a small cap back in the days when it offered the first incandescent light bulb to consumers. Now GE claims it is in the hunt again with new fluorescent lights and light-emitting diode technology of its own. After all GE’s moniker is “imagination at work.” GE says its Energy Smart Light Bulbs use up to 75% less energy than its old incandescent bulbs.

The lighting market is getting quite a bit of attention since the U.S. Congress passed its last energy bill in December 2007. The bill bans the incandescent light bulb by 2014. Yes, for all its iconic grace and elegance, that rounded sphere of glass with the internal filament will soon be gone. The phase-out of the incandescent bulb is to begin with the 100-watt bulb in 2012 and end in 2014 with the 40-watt bulb. By 2020, all light products must be 70% more efficient than they are today.

It is not surprising that a few small fry have decided to challenge GE and Philips. PureSpectrum (PSPM: PK) has developed technology for a fluorescent ballast that it claims has fewer components that ultimately lead to lower cost. PureSpectrum also claims its ballast is 30% more energy efficient than other products on the market. What might be a better claim to fame is PureSpectrum’s dimming technology that makes it possible to dim the new compact fluorescent lights (CFLs) as well as the linear fluorescent ballasts.

It seems all those new age light bulbs with the funny spiral shape refuse to truly dim down. PureSpectrum recently tested their dimmable CFL against those of MaxLite and GE. At a 5% dimmer switch setting the PureSpectrum CFL dimmed right down to about 5% perceived light output while the GE CFL only dimmed to 30%. The MaxLite bulb was still burning at about 60% output. No romantic evenings at homes with MaxLite's screwed into the sockets!

Dallas-based Lighting Science Group Corp. (LSCG: OTC/BB) is focused on light emitting diode lighting solutions. The Company is using acquisitions to assemble a strong portfolio of products. In April 2008, it acquired Lighting Partner BV, which manufactures LED and HID lighting solutions for residential and commercial applications. Just this week the Company announced a second deal for Lamina Lighting, Inc., a developer of LED light engines and modules. Lamina recorded $2.1 million in sales in the first half of 2008, which should bring Lighting Sciences run rate up to about $7.0 million a year.

Thus investors have a full array of possibilities to make a play on the lighting sector from a developmental stage technology company in PSPM to the fully diversified conglomerate in GE. Lighting Science has recorded sales of its products but must ramp to much higher revenue levels to breakeven. PureSpectrum is just beginning to commercialize its technology and has yet to record sales. The Company is working on its first audit in anticipation of qualifying to list its shares on the Over-the-Counter Bulletin Board. On the other hand GE and Philips are well established and profitable. Yet they are hardly pure plays on the lighting market as both have numerous divisions and are involved in a variety of industries. Investors in GE get a dose of potentially toxic financing portfolios. Valuations turn on factors unrelated to energy opportunities.

How many investments does it take to get a return on the light bulb market? Maybe several.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. OESX was mentioned with generally favorable commentary in the Small Cap SEARCH newsletter published by Crystal Equity Research.

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