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Layoffs at SunEdison as Investors Question the Renewable Energy Developer’s Strategy
SunEdison will hold an investor call on Wednesday at 8 am to detail the company's new strategy.
In mid-September, SunEdison rented out the House of Blues in Disneyland and held a private party for hundreds of solar professionals at the industry's biggest U.S. conference, Solar Power International.
It started off as a normal gathering. People mingled at multiple bars. A house band played on a small stage upstairs. Waiters handed out meat on sticks.
Suddenly, all the televisions throughout the bar displayed a mysterious countdown clock. When it hit zero, the party transformed. In a blur of multi-colored lights and electronic music, go-go dancers, and men in yellow body suits carrying giant glow sticks filled a multi-level stage in the back of the building. Balloons rained down on the dancing crowd. People sported body paint, fake mustaches and oversized sunglasses.
It was a celebration that a company at the top of its game would throw. Except SunEdison was not at the top of its game.
At the time of the party, the company’s stock had tumbled from a 52-week high of $33.45 down to $11.50. And the stock price of its YieldCo, TerraForm Power, had fallen from $42.15 to $21.61 over the summer. In July, SunEdison had a market cap of more than $9 billion. Today, its market cap is $2.6 billion.
In retrospect, the countdown clock could be interpreted as an ominous sign.
Investor confidence had been wavering for some time. Many were having a hard time understanding SunEdison's acquisition spree -- specifically, the $2.2 billion purchase of the residential installation company Vivint Solar in July.
Executives called the Vivint acquisition a big step toward creating the first renewable energy supermajor. The street wasn't fully convinced of the plan.
With its stock still under pressure, SunEdison is now culling its workforce. According to a company-wide memo from CEO Ahmad Chatila released on September 30, SunEdison will be laying off around 10 percent of its 7,300 employees. Many employees received notices on Friday.
"Overall, the proposed changes result in an overall reduction of about 30%, 20% being from non-labor expenses and about 10% from headcount reduction. And this process will take some time to complete. Most of the changes will be announced during the fourth quarter with some final steps expected in the first quarter of 2016," reads the memo.
The staff reduction will come through integrating acquired companies and "eliminating redundancy." It will also come from simplifying management structures in different areas of the business, and focusing on a smaller range of geographic regions.
The cuts have reached all the way to the VP level, but not the executive level. Sources within the company expressed worry and surprise that the cuts didn't impact the architects of the Vivint acquisition.
When asked for comment, SunEdison would not address the cuts specifically.
We are proposing to take several actions around the world to optimize our business, align with current and expected market opportunities and position ourselves for long-term growth. In October we plan to provide investors with a more comprehensive view of our business structure and go-forward strategic growth plan in a conference call," wrote spokesperson Gordon Handelsman in an email.
The company is expected to inform investors of its new strategy sometime this week.
"Now it is time to take the next step in optimizing our business. Over the next six months, we are going to optimize our platform to take advantage of efficiencies, enhance cost savings, increase gross margins, and target investment areas with the greatest opportunity," wrote Chatila in the memo.
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