Shaken or stirred? The weak euro and credit crunch cocktail has been a deadly poison for thesolarworld.

Suntech Power Holdings (NYSE: STP) reported a 20 percent drop in its margins for the third quarter and cut its 2008 forecast Thursday, reiterating challenges already voiced by other solar companies in recent weeks.

"The problem here is the banks. The customer wants more modules, but they have to have liquidity," Chairman and CEO Zhengrong Shi said during a conference call with analysts (via Reuters). "We have to separate the market demand and the financial [situation]."

The sharp surge in the U.S. dollar against the euro also was to blame, Suntech said.

The company said the average exchange rate during the third quarter was $1.50 to €1, and it's anticipating a potential 15 percent decline for the euro in the fourth quarter. That would lead to a roughly $45 million decrease for the fourth-quarter gross profit and a drop of about 12 percentage points on the gross margin, the company said.

The Chinese solar cell and panel maker now expects to generate $1.85 billion to $1.87 billion in revenue for 2008, instead of the previously projected $2.05 billion to $2.15 billion. Suntech anticipates finishing the year with a total shipment of 490 megawatts instead of 550 megawatts.

Suntech expects the average selling price for its panels to drop 17 percent in the fourth quarter. Customers have deferred some of their orders in this quarter, but the company said many also plan to increase their purchases in 2009. Suntech expects to ship more than 800 megawatts worth of panels in 2009.

The company's shares fell nearly 28 percent to reach $6.46 per share in recent trading. The stock's value has fallen more than 92 percent to date so far this year.

The strengthened U.S. dollar against the euro has caused no small amount of headaches for American and Asian companies. Europe is the largest solar market, and a weak dollar previously made solar energy equipment cheaper and attractive to European customers. The Chinese currency, the reminbi (RMB), also has surged against the euros.

The unfavorable exchange rate also has prompted San Jose, Calif.-based SunPower Corp., a solar panel maker, to lower its earnings forecast for the fourth quarter and next year (see Stocks Stumble After SunPower Lowers Forecast). JA Solar, a Chinese solar cell maker, did the same (see JA Solar Poses Losses, Blames Lehman).

"We believe the current supply disruption in Asia is a function of the falling euro relative to the dollar/RMB as the Asia solar supply chain must absorb ~30% price declines (2/3 currency related) over the next ~2 quarters," wrote Jesse Pichel, an equity analyst at Piper Jaffray, in a research note this week.

Pichel noted that the German companies that serve as bellwethers for the industry –including Q-Cells, SolarWorld, Phoenix Solar and Conergy – have a sunnier outlook than some of the Asian firms.

Makers of silicon wafers, the key material for making the most popular type of solar panels, also have reported seeing weaker demands (see ReneSola's Profit Up 153.5%, Stock Tumbles on Weak Outlook).

Suntech posted $594.4 million in revenue for the third quarter, a 53.7 percent increase from $386.7 million. Net income reached $55.9 million, or 33 cents per share, from $53.3 million, or 32 cents per share. Each American depositary share equals one ordinary share.

Shi said Suntech plans to spend less cash, renegotiate short-term silicon contracts and improve its management of currency fluctuation to weather the downturn. The company expects to improve its profit as it begins to receive long-term contracts for cheaper silicon next year.