Dollar's strength hurts SunPower

San Jose, Calif.-based SunPower (Nasdaq: SPWR) has reduced its earnings projections for the rest of 2008 and 2009.

SunPower attributed the adjustment to the company's recent decision to change the currency of subsidiaries to the euro, "resulting in greater exposure to changes in the value of the euro," the company said in a release.

The U.S. dollar has substantially appreciated against the Euro in recent weeks. In the last 120 days, the euro hits its lowest point of €0.63 to the dollar in July and a high of €0.80 on Oct. 27. The dollar has been buoyed by projections that the economic recovery of Europe will lag that of the U.S.

SunPower said the currency fluctuations were the only reason for the adjustment.

But SunPower isn't alone in feeling the pinch from currency fluctuations, said analyst Jeff Osborne of Thomas Weisel Partners.

"We expect FX [foreign exchange] headwinds to impact the rest of the solar complex, and note that only SunPower and First Solar so far have quantified the impact of this issue," he wrote. "We see FX, oversupply and the credit crunch's impact on project finance as lingering issues impacting multiple expansion in the solar space."

SunPower expects the exchange rates to reduce revenue projections by $17 million in the fourth quarter and $0.15 on non-GAAP net income per share. For fiscal 2009, SunPower expects the impact to be $50 million in revenue and $0.50 on non-GAAP net income per share.

The company now projects fourth quarter total revenue of $388 million to $418 million, non-GAAP gross margin of 25 percent to 26 percent and non-GAAP diluted net income per share of $0.58 to $0.65. For 2009, the company expects total revenue of $2 billion to $2.1 billion and non-GAAP diluted net income per share of at least $3.

SunPower, a majority-owned subsidiary of Cypress Semiconductor (NYSE: CY), decided to change the functional currency of some subsidiaries in connection with its global tax planning. SunPower said it has adjusted its hedging positions to limit its net income exposure to currency fluctuations.

SunPower now thinks it will be hedged for 80 percent to 90 percent of euro-denominated net income in the fourth quarter of 2008 and more than 50 percent for the first three quarters of 2009.