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But analysts and experts aren't sure if firm will survive crisis

source: Steven Church Delaware Online 2003.06.01

When solar energy pioneer Allen M. Barnett was dubbed the entrepreneurial success story of 2002, it was based on his track
record as founder and president of AstroPower Inc., one of Delaware's highest flying technology companies.

Ten days after the award was announced by the U.S. Small Business Administration in mid-April, however, news of financial
problems drove the company's stock price to $1.84 per share, a 95 percent decline from its peak of $40 in 2000. Today,
Barnett is out of a job, having resigned his post as chief executive and president of the company, which employs 570 people at
its Glasgow headquarters.

Wall Street analysts, solar energy advocates and local admirers of the company were surprised by the financial crisis that has
dulled AstroPower's shine. The company has failed to release current earnings reports on time. AstroPower officials have said
earnings reports for the past two years may have been inaccurate and they expect to restate them. Because of the delay,
Nasdaq officials have threatened to delist the company.

Some analysts questioned whether AstroPower's past successes were an accounting fiction and whether the company can survive
in a world of tougher accounting rules and increased competition. Others said AstroPower's history of innovation is one good
reason to believe the company could have a bright future, so long as any financial irregularities are minor.

Acting Chief Executive George W. Roland said the company will survive. When earnings are released, he predicted that
investors will again believe in the company.

Company officials have said Barnett resigned because of the financial difficulties. The chief financial officer, Thomas J.

Steiner, and sales chief Peter Aschenbrenner also resigned. None of the men could be reached for comment.

Michael Markowski, an analyst with StockDiagnostics.com of Sarasota, Fla., is pessimistic about the company's survival.
Markowski compared the company to the energy giant Enron Corp., which went bankrupt following disclosures that much of its
business was fraudulent.

Roland said that, unlike Enron, no AstroPower officials have enriched themselves at the expense of the company or its
shareholders.

"That absolutely isn't the situation here," Roland said.

Competition grew

AstroPower produces solar cells for homes and businesses, from a line of electricity-producing products sold at Home Depot to
the mini-cells used in calculators. Last year it unveiled a line of solar cells that can be embedded in the roofs of new homes.

From the time the company went public in 1998, its stock rose 1,000 percent to a high of $40. AstroPower's troubles began last
summer when it announced disappointing earnings at the end of July.

On Aug. 2, the day after officials said second-quarter earnings had fallen almost 78 percent, the company's stock price dropped
47 percent. When third-quarter earnings were announced in November, showing an additional 44 percent decline over 2001
figures, the stock price fell 17 percent to $6.71 a share. On Friday, the stock closed at $2.42.

One reason for the drop in profits was increased competition.

The market for solar power products has been expanding for a decade, said Paul Maycock, a solar power market consultant who
runs the Web site pvenergy.com. In the past three years, Japanese companies have more than tripled their production capacity
and now dominate the market, he said.

Worldwide production of solar cells - Astropower's core business - last year jumped to about 560 megawatts, enough to power
560,000 homes, Maycock said. Astropower had 29.5 megawatts of that production capacity, which made it the number six
manufacturer, behind two U.S.-based companies and the Japanese electronic giants Sharp, Kyocera and Sanyo, he said.

Analysts said AstroPower remains one of the lowest cost producers of solar cells. It buys rejected silicon wafers that have minor
flaws preventing them from being used in computer circuit boards and other electronic products. Those wafers are still of high
enough quality to be used for solar cells because of the company's manufacturing technology, they said.

Despite that advantage, the competition drove down prices, squeezing AstroPower's profits, Maycock said.

Accounting questioned

Roland said "internal factors" also hurt the company's earnings, but he would not elaborate. Roland said details of the
company's performance in 2002 will be released with the company's annual financial report.

Roland would not say when the report will be issued but said, "We have every intention of filing."

That report, called a Form 10K, was due to the U.S. Securities and Exchange Commission at the end of March, but the company
failed to turn it in. In a two-sentence written announcement in March, the company said it would be late because the company
was waiting for confirmation of two government contracts. Later, the company expanded its explanation, saying it must gather
more information about its 2002 revenue, which probably would cause officials to restate the amount of money it earned.

Because the report was late, Nasdaq officials ruled that the company was out of compliance with the stock market's rules and
threatened to delist AstroPower. The company is awaiting a final ruling from the technology-heavy exchange.

If it is removed from the Nasdaq listing, experts said the company's value would plunge dramatically. Some of the institutional
investors that own millions of shares of the company would dump their shares because of policies that bar them from owning
stocks that are not listed on one the major exchanges.

Getting kicked off Nasdaq also would make it nearly impossible to raise cash by issuing new stock, which the company did in
1999, bringing in $25.5 million, and again in 2001, raising $56.7 million.

Still a growth industry

AstroPower's admirers in Delaware are wondering about the future of the company. Many based their positive opinions on its
reputation for steady growth.

Barnett, AstroPower's former CEO, was nominated for the Entrepreneurial Success award by Barry Williams, director of
technology development for the Small Business Development Center at the University of Delaware.

Williams said he sent Barnett's name to the local office of the U.S. Small Business Administration and the Delaware Economic
Development Office because AstroPower had won 87 highly competitive federal grants worth a total of $15 million between 1984
and 2001.

"What we were honoring was what happened back in the first years of its existence," Williams said.

Until the company said it wasn't going to release its annual financial report on time, Terry Collison, a partner in the
technology-investment fund Blue Rock Capital said he thought AstroPower was doing well.

"What caused me to continue to pay attention was the fact that there was apparently not a good publically disclosed answer as
to the nature of the delay," Collison said.

Collison's venture capital fund invests in companies which, like AstroPower in the years before it went public, are developing new
technologies. Scientists like Barnett often start companies, but rarely stay on as top managers for more than a few years,
Collison said.

"Most savvy founders will, in fact, plan for that succession," Collison said. "Allen Barnett is an example of a founder that stayed
for an extremely long time."

The company intends to emphasize management experience over scientific expertise in choosing a new chief executive,
AstroPower board chairman Gilbert Steinberg said when Barnett's resignation was announced.

Some observers now are wondering whether AstroPower's early years of growth will turn out to have been an accounting
overstatement.

Stock analyst Jarrett Carson said investors are worried that the company's 2002 revenue claims may be even less accurate than
the company has hinted.

"There is little doubt around whether that practice occurred," said Carson, who is with the investment banking firm RBC Capital
Markets. "The doubt is still around how large of an issue that might be."

AstroPower's advantages in production costs should allow the company to overcome its current troubles, despite the doubts
about the company's finances, Roland said.

"This is still a good industry to be in," he said.