* Evergreen loss before items falls short of estimates
* Revenue falls short of company and analysts' forecasts
* Company sees weak solar demand in first half of '09
* In talks to subcontract manufacturing, cut capital costs
* Shares fall 10 percent after-hours (Adds details throughout, CEO comments from conference call, byline, updates share activity)
By Nichola Groom
LOS ANGELES, Feb 5 (Reuters) - Evergreen Solar Inc ESLR.O on Thursday reported quarterly results that fell short of expectations as prices on solar panels fell and it recorded high costs for ramping up a new manufacturing facility, sending shares down 10 percent in extended trade.
Evergreen also warned that a global economic downturn and weak credit markets would hurt demand for solar products in the first half of this year and said it was seriously considering subcontracting some manufacturing to save on capital costs.
"We have a fair amount of confidence that we will come up with something that makes a lot of sense, but we don't have a deal yet," Chief Executive Richard Feldt said on a conference call with analysts. "This is not a way of cheapening anything, it's just a way of reducing costs."
Subcontracting manufacturing of solar cells and panels would reduce the company's capital needs for its next factory, planned for Asia, by about 75 percent, Evergreen said.
"They are trying to make some hard calls here, in terms of scaling the business, that are a little bit more reflective of reality," Wedbush Morgan analyst Al Kaschalk said. "But let's face it, though. The credibility is still not there that there is a legitimate business model that is going to ultimately work as a stand-alone company."
Evergreen, based in Marlboro, Massachusetts, makes photovoltaic solar equipment that turns sunlight into electricity. The company expects to sell about 130 megawatts of solar products this year, it said.
Strong demand for clean solar power was a bright spot in an otherwise dour U.S. economy for much of last year. At the end of 2008, however, frozen credit markets stalled financing for solar projects, causing shares of solar companies to plummet and raising worries that the industry's annual growth rate of 50 percent would falter this year.
A pullback in government solar subsidies in Germany and Spain and a strengthening U.S. dollar against the euro has also caused prices on solar panels to fall faster than expected, crimping profit margins for many manufacturers.
Evergreen forecast its average selling prices would be down between 10 percent and 15 percent for the year; government economic stimulus measures and a credit market recovery would underpin U.S. demand for solar in the second half of the year.
Evergreen's fourth-quarter net loss was $52.1 million, or 32 cents per share, compared with a profit of $788,000, or a penny per share, a year ago.
Results included charges of $23.1 million related to the closure of Evergreen's pilot plant, $8 million for the write-down of certain equipment and $9.7 million in costs for starting up facilities in Massachusetts and Michigan.
Excluding the pilot plant charge and equipment write-down, Evergreen posted a loss of 13 cents a share, according to Reuters Estimates. On that basis, analysts had been expecting a loss of 11 cents a share.
Earlier this month, Evergreen said it had closed its Marlboro, Massachusetts, pilot plant to cut costs while it ramped up its new Devens, Massachusetts facility.
Fourth-quarter revenue nearly doubled to $44.2 million, but fell short of analysts' average estimate of $46.6 million, according to Reuters Estimates.
In October, Evergreen forecast fourth-quarter revenue of $45 million to $55 million and gross margin of 5 to 10 percent.
Fourth-quarter gross margin was 4.6 percent, the company said, blaming lower selling prices on solar panels and higher costs related to manufacturing efficiencies during the start-up of its Devens plant.
Evergreen shares fell to $1.99 in after-hours trade after closing at $2.22 on the Nasdaq. (Reporting by Nichola Groom, editing by Matthew Lewis)