Itron Sees 1Q Revenues Shrink

Itron Inc. (NSDQ: ITRI) reported Wednesday that its first-quarter 2009 revenues fell amid a shrinking 12-month pipeline for new smart meter contracts — a sign that $4.5 billion in smart grid stimulus funding isn't enough on its own to counteract the ongoing recession and utilities' conservative spending plans.

The Liberty Lake, Wash.-based company reported first-quarter revenues of $388.5 million, below analysts projections and down 19 percent from revenues of $478 million in the same quarter in 2008.

And while Itron's long-term backlog for smart meter contracts rose to a record $1.5 billion — up from $683 million in the same quarter last year — its shorter-term, 12-month backlog fell to $471 million in the quarter, down from $552 million in the same quarter last year.

That was due to the wrapping up of a number of contracts in 2008, as well as "the expected timing of future AMI shipments," Itron told investors Wednesday.

And therein lies the rub. Itron is a market leader in two different kinds of advanced meters — the older, automatic meter reading (AMR) kind that send but do not receive data, and newer "smart" meters with two-way communication capabilities to link utilities with their customers.

But those newer AMI (advanced meter infrastructure) deployments aren't happening as fast as previously predicted. San Diego Gas & Electric, which has a $260 million contract with Itron, has scaled back its deployment plans for this year (see Security Concerns Behind Slowdown in Itron Rollout?).

Another big Itron customer, Southern California Edison, is also expected to deploy fewer smart meters this year than previously planned (see SCE Preps $1.63B Smart-Meter Program). Itron has two other large-scale AMI contracts with Texas utility CenterPoint Energy and Michigan utility DTE Energy.

Analysts have been concerned about utility spending on smart meters for some time (see Itron Reports Strong Third Quarter). Utilities can be slow to adopt new technologies and must get regulator approval for big projects like building smart meter networks.

"We see Itron's results as not much of a surprise given the weak macro-economic backdrop," analysts with Thomas Weisel Partners said in a research note.

The ongoing recession has utilities postponing decisions on how fast they will deploy smart meters, Itron told investors. That has led the company to withdraw any earnings guidance for 2009, beyond predicting that annual revenues will be about the same or slightly lower than those in 2008.

And the much-vaunted $4.5 billion in smart grid stimulus funding might not be such a big help for smart meter makers as previously predicted, observers have noted.

That's because the Department of Energy has put a tentative $20 million cap on individual grants for commercial-ready projects, while many of the larger-scale smart meter deployments run into the billions of dollars (see Smart Grid Stimulus: What to Expect).

Under pressure from utilities, DOE might decide to lift that cap for certain projects, the Washington Post noted last week.