UPDATE 2-Akeena Solar loss widens, warns of weakening demand

(Adds background, analyst's comments, updates share movement)

By Nachiket Kelkar

BANGALORE, May 8 (Reuters) - Solar power systems maker Akeena Solar Inc (AKNS.O) reported a wider-than-expected quarterly loss due to higher operating costs and it warned of a weaker demand for the rest of the year, sending its shares down as much as 19 percent.

Akeena's Chief Executive Barry Cinnamon said installations and customer inquiries were high, but bookings did not keep pace,

"Since the beginning of the second quarter we have seen signs that a looming recession and tightening credit are weighing on consumers decisions to invest in residential solar installations -- even with the price of energy skyrocketing," Cinnamon added.

Analyst Adam Krop of Ardour Capital Partners said by phone that the company was realizing the difficulty to compete in a recession, especially when credit is in short supply, as most of the residential solar systems are installed using a home mortgage loan.

"It is going to be three to four quarters of really difficult time for them," Krop added.

For the first quarter, Akeena posted a net loss of $4.6 million, or 16 cents a share, compared with a net loss of $933,000, or 6 cents a share, a year earlier.

Net sales nearly doubled to $12.2 million mainly due to higher volume of residential and commercial installations, which touched about 1,587 kilowatts.

However, operating expenses also more than tripled to $7.1 million due to higher compensation expense and increase in the number of offices.

Analysts were expecting a loss of 13 cents a share, excluding special items, on revenue of $12.2 million, according to Reuters Estimates.

Akeena forecast 2008 revenue to grow by 40 percent to 50 percent over $32.2 million reported last year.

But Analyst Krop said, "We should continue to see a sequential decline in revenue throughout the rest of the year."

BANKING ON TAX CREDITS

Last month, the U.S. Senate Finance Committee introduced a bill to extend tax credits beyond 2008 for producing electricity from renewable sources and for buying solar energy equipment.

Under the bill, businesses and homeowners would be able to claim 30 percent tax credit for investments in solar equipment and fuel cells.

Krop pointed out that Akeena is completely exposed to the U.S. market and that is why the tax credits are so important to the company.

He said if the tax credits were renewed, then one could at least expect a rebound in the company's revenue growth by the second quarter of 2009.

Akeena's shares were trading down $1.12 at $5.22 in the afternoon trade on Nasdaq. (Editing by Jarshad Kakkrakandy and Anil D'Silva)