San Diego Business Journal

MAXWELL TECHNOLOGIES INC.

CEO: David Schramm.

Revenue: $35.3 million in first quarter 2011; $26.6 million in 2010 first quarter.

Net income: $196,000 in first quarter 2011; $1.2 million in 2010 first quarter.

No. of local employees: 180.

Headquarters: Kearny Mesa.

Year founded: 1965.

Stock symbol and exchange: MXWL, Nasdaq.

Company description: Designer and maker of energy storage and power delivery products.

Increased sales to companies making wind turbines and hybrid buses in China helped boost the fortunes at Maxwell Technologies Inc. in its first quarter.

The San Diego maker of industrial energy storage devices called ultracapacitors reported net income of $196,000 on revenue of $35.3 million for the first quarter, compared with a net profit of $1.2 million on revenue of $26.6 million in the like quarter of 2010.

Chief Executive Officer David Schramm said while the global adoption of wind turbines may have slowed, Maxwell sales into the sector has continued to gain in the past several quarters. He estimated Maxwell’s products are in some 15,000 turbines operating around the world. “A significant portion of wind-related sales continue to go into China, some directly to Chinese wind turbine OEMs (original equipment manufacturers) and some through European pitch system integrators serving the customer in China,” Schramm told stock analysts April 28.

Maxwell is also selling lots of ultracapacitors to Chinese bus makers.

“There are now more than 3,000 hybrid buses powered by Maxwell ultracapacitors in daily service around the world and here again we are gaining share in China and elsewhere, so that number should grow even faster this year and beyond,” Schramm said.

Ultracapacitors are energy storage devices that release power in sudden bursts, making them ideal for auto hybrid drive systems, and systems that operate in extreme climates.

Promising Uses for Ultracapacitors

Once a government defense contractor, Maxwell abandoned that model around 2001 and placed its bet on the continued refining of the ultracapacitor. Although the technology has been around for decades, it’s being adopted more in certain industries, particularly automotive, renewable energy, and wireless communication.

Last year, Maxwell said sales of ultracapacitors made up more than half of total revenue for the first time. In the first quarter, sales of the devices were 61 percent of its total revenue, up from the prior year first quarter when the devices were 55 percent of all sales.

The remainder of Maxwell’s sales comes from microelectronic products used in space satellites, and high-voltage capacitors used in electric utility infrastructure projects.

As Maxwell’s production has ramped up, it’s needed more space, and did some recent moving. It moved its administrative functions from a Balboa Avenue address to another building in Kearny Mesa, and a technology center to a larger space in the same area. The company now has 92,000 square feet in three buildings, said spokesman Michael Sund.

In the past year, the company has hired several engineers and technicians, and has a total staff of 360, about half of which work locally, Sund said.

The company reported two federal grants that could lead to more business: a one-year, $1.7 million grant from the Department of Defense to create a lighter and longer lasting energy source for field radios; and a second grant for $2.8 million from the Department of Energy to develop an advanced energy storage system for hybrid electric vehicles, Schramm said.

Fines for Misdeeds

Maxwell settled an unpleasant piece of business with the feds earlier this year involving bribery by a contracted worker who was doing business in China.

As a result of the misdeeds, which occurred over a seven-year time frame to 2009, Maxwell agreed to pay a total of $13.6 million in fines to the Department of Justice and the Securities and Exchange Commission.

The company had characterized some of the expenses from the sales of its products into China as commissions when in fact these were bribes, according to DOJ documents.

The good thing about the mess is that as soon as Maxwell found out about the arrangement, which was through its Swiss subsidiary, it notified the government, which mitigated sanctions on the firm, Sund said.

Michael Lew, an analyst with Needham & Co., said Maxwell did better than he anticipated in the first quarter, and seems poised to benefit from higher demand for its products across various markets.

He noted the company’s recent contract wins in both Japan and Russia involving ultracapacitors will boost top line growth. Maxwell’s continued investment into research and development may dampen profits, which he forecast at 10 cents per share. Lew has a buy on the stock and a price target of $20 in the next 12 months.