A123 Systems Inc. (AONE), a U.S. maker of lithium-ion batteries for electric cars, surged the most in a month after winning a contract to supply a 2-megawatt system to China’s Ray Power Systems Co. to help regulate grid frequency. [...]First, it's interesting that you would have a "hold" on the stock in a company with bonds trading at 24 to yield over 50 percent.
"This is an application A123 has been chasing for some time and it’s good to see they’re making progress," said Michael Lew, a senior analyst at Needham & Co. in New York who has a hold on the stock.
Second, 2 MW is a puny order. I think it may only be a couple million in total revenue, with the profit margin naturally not being discussed. In the past they were putting out press releases for sales of 44 MW of grid stabilization. This reminds me of when the bulls on PV solar firm ENER were talking about that product being used for "solar powered Kindle covers" - which really meant that it had been sold as scrap.
Third, why does China place a teeny tiny order for 2 MW? Less than the output of one wind turbine? Starting with a small trial order, or planning to examine and knock off the technology?
Fourth, AONE increasingly shifts its attention to "ancillary" uses of batteries like grid stabilization. That might be a sign of defeat in the electric vehicle market.