First Solar cuts profit forecast, spending plans

(Reuters) - First Solar Inc slashed its profit forecast on Wednesday and said it would slow spending as the industry struggles to adjust to the steep decline in the price of solar panels.

Shares of the company, however, rose as much as 21 percent, in a rebound from Tuesday's selloff when the company lost about a quarter of its value after it ousted Chief Executive Rob Gillette.

Even with the rebound, those shares have dropped more than 60 percent so far this year.

Solar makers are suffering amid a 40 percent drop in the prices of the panels which has squeezed profit margins across the industry and driven some companies, including U.S.-based Solyndra, into bankruptcy.

First Solar, which also reported third-quarter profits that appeared to lag Wall Street forecasts, is not expected to suffer that fate, according to analysts.

"Am I afraid of First Solar going out of business? No, I'm not," said Avian Securities analyst Mark Bachman.

Still, the company would likely slow its planned production expansion and could delay the start-up of factories planned to come on line in Arizona and Vietnam, he said.

Although the solar panel price drop helps the sector by lowering the cost to install the renewable energy source and reducing its dependency on government subsidies, analysts say the young industry is likely to see a shakeout over the coming months.

Timothy Arcuri, analyst with Citigroup, said First Solar may need to lay off 10 percent of its work force and cut output for the next few quarters.

"Over the longer term, I see value here," he said. "But it's going to be ugly for the next six to nine months."

SALES, PROFIT OUTLOOKS WEAKEN

First Solar cut its full-year sales forecast to between $3.0 billion and $3.3 billion from the $3.6 billion-to-$3.7 billion range it issued in August.

The company said earnings per share would drop to between $6.50 and $7.50, from the $9.00 to $9.50 it had previously expected, as operating income was now forecast to be $650 million to $760 million, from the earlier range of $900 million to $960 million.

The company's third-quarter profit rose to $2.25 per share from $2.04 per share a year ago as sales climbed 26 percent to $1.01 billion.

The earnings per share appeared to fall short of analysts' average forecast for the quarter.

On Tuesday, the board ousted Gillette, replacing him on an interim basis with Chairman Mike Ahearn while the solar panel maker searches for a new leader.

The weak pricing for solar panels has shrunk margins in the solar sector, and First Solar said it would slow its spending.

"In preparation for 2012, the company is reducing capital expenditures and evaluating opportunities to reallocate overhead expenses to fund increased investments in market development, sales, and R&D," it said in a statement.

First Solar will hold a conference call with management to discuss third-quarter earnings on November 3.

First Solar shares were up 13 percent at $48.88 on Wednesday morning, off an earlier high at $52.44

(Reporting by Matt Daily in New York, editing by Maureen Bavdek, Derek Caney and Matthew Lewis)