April 28, 2011 JOE MAXA • (612) 376-4156 • jmaxa@doughertymarkets.

com

SATCON TECHNOLOGY CORP. (SATC) BUY - $3.19

PLEASE REFER TO DISCLOSURES ON PAGES 6-7 FOR IMPORTANT INFORMATION
SATC: Q1 In-Line with Pre-Announcement, but Bookings, Backog and Guidance Below Expectations.
Reducing Estimates and Price Target to $4.00 from $4.50. Buy on Weakness. We Believe Sales and
Earnings will Bottom in 2Q. SATC Remains Well Positioned in N.A. and China.
Changes: 2Q11 to $56.0 million and ($0.06) from $62.0 million and ($0.02).
FY11 to $275.0 million and ($0.01) from $285.0 million and $0.01.
FY12 to $350.0 million and $0.17 from $360.0 million and $0.18.
Financial Summary:

GAAP EPS 2009 2010 2011E 2012E Price $3.19

Mar ($0.23) ($0.10) ($0.02)A 52-Week Range $2.22 - $5.51
Jun ($0.13) ($0.12) ($0.06) 12 Month Price Target $4.00
Sep ($0.12) ($0.02) $0.01 Basic Shares O/S (Mil) 118.9
Dec ($0.11) ($0.03) $0.05 Market Cap ($Mil) $379.3
FY ($0.57) ($0.25) ($0.01) $0.17 Avg. Daily Vol 3,600,000
P/E nm 19.0x Float (Mil) 91.2
Short Interest - (Mil) 21.4
% Short 23%
Revs ($Mil) 2009 2010 2011E 2012E Inst. Ownership 42%
Mar $13.4 $14.7 $62.0A Insider Ownership 5%
Jun $7.6 $27.6 $56.0 Net Cash/Dil Share ($0.06)
Sep $10.0 $58.4 $72.0 Debt/Total Cap 22%
Dec $21.5 $72.6 $85.0 3-5 Yr EPS Growth nm
FY $52.5 $173.3 $275.0 $350.0 Enterprise Value $387.0
EV/Sales 1.4x 1.1x
Key Points
 We are maintaining our Buy rating, but reduce our price target to $4.00 from $4.50, based on 1.5x FY12 EV/S.
 We recommend investors buy SATC shares on weakness in the near-term. Bookings ($35.5 million), backlog
($72.2 million), and 2Q guidance were significantly below expectations, but we believe 2Q will prove to be a
trough in sales and earnings, and anticipate potential upside in 2H as the company remains well positioned in
the growing North American and Asian PV markets.
 SATC commented its NA pipeline remains robust and it continues to anticipate a strong 2H. The company
stated it is on or ahead of its FY11 sales plan in NA and is on plan in Asia. However, the main PV markets in
Europe basically screeched to a halt in 1Q due to seasonality (weather) and uncertainty in government FiT
policies, as evident by SATC’s 1Q European sales (2%) and bookings (3%). We note clarity in Europe
regarding FiT policies in the coming weeks should benefit the company. Europe accounted for 36% of SATC’s
revenue in 2010 ($62 million) and was initially expected to account for 20% of sales in 2011 (similar revenue).
 2Q guidance calls for revenue totaling $50 - $60 million and for gross margin to be in the 17% - 20% range.
Included in the gross margin guidance is a revaluation of existing inventory (see below) which will negatively
impact gross margin by 400 – 500 basis points, but benefit gross margin in future quarters. We had anticipated
2Q revenue totaling $62 million with a gross margin of 25% and a loss per share of $0.02. Street consensus for
2Q was $74.3 million and $0.02.

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1Q Results
 SATC’s 1Q11 results of $62.0 million and ($0.02) were in-line with our estimates and the company’s pre-
announced revenue and gross margin guidance (see our noted dated 4/8/11 for more information). Street
consensus was $61.8 million and ($0.01).
 The shortfall in the quarter came from order delays in North America and seasonal weakness in Europe
compounded by FiT uncertainties in key markets (such as Italy). SATC’s European order intake has not
improved so far in 2Q, but clarity in FiT rates is expected in Italy in the coming weeks.
 SATC shipped ~277 MW during the quarter, representing a $22/Watt. This rate declined from $0.24/Watt in
4Q10 due to a greater percentage of product shipping to Asia, which has lower average selling prices. SATC has
a production capacity totaling 2.5GW (most with contract manufacturers).
 1Q bookings totaled $35.5 million and backlog at quarter end was $72.2 million. This compared to bookings of
$89.1 million in 4Q10 and a FY10 ending backlog of $102.8 million. We note 1Q is a historically weak bookings
quarter and we anticipate bookings to roughly double in 2Q and accelerate in 2H11.
 79% of the company’s backlog is from North America, 15% is from APAC, and 7% is from Europe.
 Inventory levels increased significantly to $72.9 million from $40.5 million in anticipation of higher sales and to
increase supplies of components facing shortages. SATC will be taking an inventory revaluation charge in 2Q11
which will negatively impact gross margin 400 – 500 basis points, but benefit 2H11 gross margin.
 SATC increased its line-of-credit to $30 million during the quarter and subsequently increased it to $35 million
with a potential to increase it to $50 million. Net debt at the end of 1Q11 was $8 million as compared to $4
million in cash at the end of 4Q10. The company utilized $11.5 million in cash from operations in the quarter.
 Fully diluted shares (based on the treasury method) approximate 134 million.

Outlook
 SATC does not provide revenue guidance beyond one quarter ($50 - $60 million for 2Q11), but did indicate its
gross margin will improve dramatically in 2H11 due to the inventory revaluation and its transition of
manufacturing of subassemblies for its new platform offerings to China by the end of 3Q11. Gross margin in
3Q is expected to be in the mid-upper 20’s and gross margin in 4Q is expected to reach at least 30%.
 We reduced our estimates as noted above the table on page 1. Below we compare our estimate to the street
consensus. We believe SATC’s 2Q guidance will result in the street sharply reducing estimates.
 2Q11 Estimates: D&Co new - $56M/($0.06); D&Co old - $62M/($0.02); Street - $74M/$0.02.
 FY11 Estimates: D&Co new - $275M/($0.01); D&Co old - $285M/$0.01; Street - $316M/$0.13.
 FY12 Estimates: D&Co new - $350M/$0.17; D&Co old - $360M/$0.18; Street - $412M/$0.37.

Company Profile
Satcon is a leading provider of large commercial and utility scale power solutions for the renewable energy market.
Building on its history as a developer of sophisticated and precise power management and control equipment,
Satcon develops innovative products that address the rapidly growing demand for reliable, affordable and clean
solutions for large commercial and utility scale applications. Satcon’s inverters are grid-tied and line interactive,
enabling them to convert direct current (DC) power from solar arrays to alternating current (AC) power that is
compatible with the utility voltage for export to the grid.

Satcon was founded in 1985 and introduced its first solar inverter (PowerGate Plus 100kW) in 2003. Today, the
company is focused on the commercial and utility-grade solar PV market, offering a range of inverters from 30kW
to 1MW. Satcon also sells a line of fuel cell inverters for systems ranging from 25kW to 2.4MW. Headquartered in
Boston, Massachusetts, Satcon has manufacturing operations in Ontario, Canada and Shenzhen, China, with
additional sales offices in California, South Korea, the Czech Republic, and Greece.

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Key Risks

The company’s growth is dependent upon availability of third-party financing arrangements for its
customers, and is affected by general economic conditions. The current recessionary condition of the general
economy and limited availability of credit and liquidity could materially and adversely affect Satcon’s business. Some
customers may be unable or unwilling to finance the cost to purchase Satcon’s products or may be forced to cancel
previously submitted orders or delay taking shipment until suitable credit is available. Collecting payment from
customers facing liquidity challenges may be difficult.

Satcon faces significant competition. Many of Satcon’s competitors and potential competitors are well
established and have substantially greater financial, research and development, technical, manufacturing and
marketing resources than it does. Some competitors and potential competitors are much larger than Satcon. There
can also be no assurance that current and future competitors will not develop new or enhanced technologies
perceived to be superior to those sold or developed by Satcon.

The company is establishing a contract manufacturing relationship with a Chinese supplier for certain
inverter products. The Chinese partner, (working closely with Satcon), will develop a common Asian supply chain
for the components incorporated into Satcon’s inverters. There could be short-term quality and delivery scheduling
issues as the new supply chain is developed.

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SATCON TECHNOLOGY CORP Fiscal 2009 by Quarter Fiscal 2010 by Quarter Fiscal 2011 by Quarter Fiscal Year Ending December
Income Statement ($ million) Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
Q109 Q209 Q309 Q409 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11E 3Q11E 4Q11E 2009 2010 2011E 2012E
Product revenue $13.4 $7.6 $10.0 $21.5 $14.7 $27.6 $58.4 $72.6 $62.0 $56.0 $72.0 $85.0 $52.5 $173.3 $275.0 $350.0
Cost of product revenue 12.3 7.9 10.5 18.6 12.7 21.9 42.7 52.1 47.1 45.4 52.9 59.5 49.3 129.4 204.9 241.5
Gross profit 1.1 (0.3) (0.4) 2.8 2.0 5.7 15.7 20.5 14.9 10.6 19.1 25.5 3.2 43.9 70.1 108.5
Research and development 1.9 2.2 2.2 2.1 2.7 2.7 4.3 5.9 6.1 6.4 6.7 7.0 8.4 15.7 26.2 31.0
Selling, general & administrative 4.3 4.4 4.6 4.8 5.6 8.3 9.7 11.0 10.2 10.4 10.7 11.5 18.2 34.6 42.8 52.0
Restructuring costs 0.0 0.0 0.2 0.0 0.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3 0.8 0.0 0.0
Total operating expenses from cont ops 6.2 6.7 7.0 6.9 9.1 11.0 14.0 16.9 16.4 16.8 17.4 18.5 26.8 51.0 69.1 83.0
Operating income (5.1) (7.0) (7.4) (4.1) (7.1) (5.3) 1.7 3.6 (1.5) (6.2) 1.7 7.0 (23.6) (7.1) 1.0 25.5

Change in fair value of notes and warrants (5.4) 1.8 (0.3) (1.8) 1.1 (0.9) (1.3) (2.1) 0.1 0.0 0.0 0.0 (5.7) (3.2) 0.1 0.0
Other (loss) income (0.1) (0.5) 0.4 (0.0) (0.1) (0.3) 0.3 (0.7) (0.2) 0.0 0.0 0.0 (0.3) (0.7) (0.2) 0.0
Interest income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest expense (0.1) (0.1) (0.0) (0.1) (0.1) (0.2) (0.6) (0.6) (0.6) (0.7) (0.7) (0.7) (0.3) (1.5) (2.7) (2.0)
Net income (loss) from continuing operations (10.7) (5.8) (7.4) (6.0) (6.1) (6.6) 0.1 0.2 (2.1) (6.9) 1.0 6.3 (30.0) (12.3) (1.7) 23.5
Income from discontinued operations, net (0.0) (0.0) 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0
Gain on sale of discontinued operations, net 0.0 0.0 0.0 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.0 0.0
Payment to entice preferred holders to convert 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deemed dividend and accretion on preferred stock (0.8) (0.9) (1.0) (1.1) (1.3) (1.5) (1.4) (3.3) 0.0 0.0 0.0 0.0 (3.8) (7.6) 0.0 0.0
Dividend on preferred stock (0.3) (0.4) (0.3) (0.4) (0.4) (0.4) (0.4) (0.1) 0.0 0.0 0.0 0.0 (1.4) (1.0) 0.0 0.0
Net loss attributable to common shareholders (11.9) (7.1) (8.6) (7.5) (7.2) (8.5) (1.6) (3.2) (2.1) (6.9) 1.0 6.3 (35.0) (20.5) (1.7) 23.5
EPS (GAAP) ($0.23) ($0.13) ($0.12) ($0.11) ($0.10) ($0.12) ($0.02) ($0.03) ($0.02) ($0.06) $0.01 $0.05 ($0.57) ($0.25) ($0.01) $0.17
Basic shares 51.5 54.7 70.2 70.4 70.9 71.5 75.5 110.9 118.7 120.0 121.0 122.0 61.7 82.2 120.4 130.0
Diluted shares 51.5 54.7 70.2 70.4 70.9 71.5 78.5 110.9 118.7 120.0 136.0 138.0 61.7 82.2 120.4 140.0
Gross margin 8.2% -4.0% -4.2% 13.2% 13.8% 20.8% 26.9% 28.2% 24.0% 19.0% 26.5% 30.0% 6.1% 25.4% 25.5% 31.0%
Research and Development 14.0% 29.4% 21.8% 9.8% 18.5% 9.8% 7.4% 8.1% 9.9% 11.4% 9.3% 8.2% 16.0% 9.0% 9.5% 8.9%
Selling, general & administrative 32.5% 57.9% 45.9% 22.3% 37.9% 30.0% 16.6% 15.2% 16.5% 18.6% 14.9% 13.5% 34.6% 19.9% 15.6% 14.9%
Operating margin -38.3% -91.4% -74.1% -19.1% -47.9% -19.0% 2.9% 4.9% -2.4% -11.0% 2.3% 8.2% -45.0% -4.1% 0.4% 7.3%
Net margin -80.1% -76.3% -73.6% -28.1% -41.4% -23.9% 0.3% 0.3% -3.4% -12.3% 1.4% 7.4% -57.0% -7.1% -0.6% 6.7%

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SATCON TECHNOLOGY CORPORATION
Balance Sheet ($ million)
ASSETS Q408 Q409 1Q10 2Q10 3Q10 4Q10 1Q11
Current assets:
  Cash and cash equivalents 10.0 13.4 11.7 14.4 11.3 30.1 33.6
  Accounts receivable, net 11.5 17.6 13.3 28.5 55.2 73.7 69.4
  Unbilled contract costs and fees 0.4 0.2 0.2 0.2 0.2 0.2 0.2
  Inventory 11.5 11.9 15.8 18.7 28.4 40.5 72.9
Prepaid and other current assets 1.0 0.8 1.1 2.2 3.1 4.3 4.9
  Total current assets 34.4 43.8 42.1 64.0 98.3 148.8 181.0
Property and equipment, net 1.8 4.6 4.8 4.9 5.0 7.3 8.6
Other long-term assets 0.6 0.2 0.0 0.0 0.0 0.0 0.2
Total assets 36.9 48.7 46.9 68.9 103.2 156.1 189.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit 3.0 3.0 8.6 9.4 15.0 15.0 30.0
Notes payable, current portion 0.0 0.0 0.0 0.6 1.6 2.1 3.1
  Accounts payable 8.6 20.8 14.6 20.2 40.2 45.1 56.5
  Accrued payroll and related expenses 2.0 2.2 2.9 2.7 3.5 4.5 4.0
  Other accrued expenses 2.8 2.7 3.1 3.8 6.6 6.8 7.6
Accrued contract losses 1.1 0.0 0.0 0.0 0.0 0.0 0.0
  Accrued restructuring costs 0.6 0.0 0.6 0.4 0.2 0.0 0.0
Deferred revenue 4.2 0.5 1.5 7.1 6.3 8.1 10.0
Other current liabilities 0.1 0.1 0.0 0.0 0.0 0.0 0.0
Total current liabilities 22.4 29.3 31.3 44.1 73.4 81.6 111.2

Long-term warrant liability, net 2.4 5.0 3.7 4.4 5.4 5.5 2.5
Notes payable, net of current portion 0.0 0.0 0.0 10.3 9.5 9.1 8.1
Deferred revenue, net 2.5 5.5 6.4 7.4 8.9 11.6 15.6
Convertible preferred stock 1.5 0.4 0.4 0.4 0.4 0.0 0.0
Other long-term liabilities 0.1 0.3 0.3 0.2 0.2 0.3 0.3
Total liabilities 28.8 40.5 42.0 66.9 97.8 108.1 137.8

Convertible preferred stock (C) 17.2 22.3 23.5 24.8 26.5 0.0 0.0
Common stock; $0.01 par value 0.5 0.7 0.7 0.7 0.8 1.2 1.2
Additional paid-in capital 182.2 218.6 219.3 221.8 223.2 291.7 297.9
Accumulated deficit (190.0) (231.7) (237.2) (243.8) (243.7) (243.5) (245.6)
Other comprehensive income (loss) (2.0) (1.7) (1.4) (1.4) (1.4) (1.4) (1.4)
Total stockholders' equity (deficit) (9.2) (14.0) (18.7) (22.8) (21.1) 48.0 52.1
Total liabilities and stockholders' equity (deficit) 36.9 48.7 46.9 68.9 103.2 156.1 189.9

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 Percent of research companies within each of the three rating categories
(Buy, Neutral, Sell) for which Dougherty & Company LLC has provided
investment banking services within the last 12 months: Buy = 9%;
Neutral = 3%; Sell = 0%.

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IMPORTANT DISCLOSURES
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Sell: Expected to materially underperform the broader market and/or its sector over the next six to twelve months.

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 Equity Capital Markets Directory
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