Trina Solar (TSL) continues to post negative "1x" hits that continue to cloud operational strength. We'll get into operations next, but let's start with the 1x hits. First is their venture into changing from Chinese RMB to USD as their functional currency. This came unannounced (i.e. "surprise!) last quarter and ruined to the tune of $4M what was an otherwise exceptional earnings report. (Jun 6: Stellar Trina Solar Earnings Masked by Currency Adjustment) So $0.67 EPS turned into $0.51 EPS (vs analysts $0.48)

Now here is the kicker, they reported very late in the earnings season and they were in the 10th week of a 13 week quarter ... so if their internal controls had any... well let me refrain from speaking my mind. Let's just say 10 weeks into the quarter you should have a pretty darn good idea of how your quarter will end up. Trina guided to a $3M forex loss in this quarter. What did they end up with? Double - $6M. How you miss by a magnitude of 100% that late into a quarter is beyond my comprehension.

So that has wiped out $0.24 of EPS. On top of that a polysilicon plant project, which I just shook my head when announced (again as a surprise in 2007) and then was cancelled within 2 quarters, was another $0.08 EPS hit this quarter for charges related to cancellation. While that is over and above my expectation I at least know that is a 1x hit. The forex issues are beyond me at this point and the "management credibility" multiple persists.

With all that said, despite a sagging gross margins, which we expected for this quarter - their operations were excellent and they increased future guidance. I am hoping this offsets the sting of the 1x hits and while the magnitude of the forex hit was huge, at least we knew "some bad news" was coming this time around, as opposed to last quarter when they sprung the change out of the blue. I'll be blunt, if this stock was not so cheap I'd be out of this name - this company reminds me of Zoltek (ZOLT) management who is a "sexy" wind power play but in the years I've followed it the management constantly springs surprises on investors and also has a major credibility gap. And a stock price to show for it. I don't know what to say anymore about this company or its internal controls and decision making. At least the operations guys seem to do their thing... one can only hope the earnings prowess in 2009 (low share count) will finally push Trina to an area in stock price it should be, but we might have another long detour. Again, the operations continue to accelerate and with the low share share, earnings PER share should explode in 09. I am just hoping the market gives this management team a PE multiple somewhere higher than the current 50% discount to peers. But let's just say management has "earned" their multiple with the constant blindsiding of analysts and investors with new and innovative surprises the past 5 quarters.

On the positive side, the expectations of this company are extremely low and instead of trading in the low $50s as it did heading into last quarter, its trading in the low $30s. At some point the earnings power for 09 (ex forex machinations) has to drive the stock up. Consensus analysts estimates of $198M revenue and $0.81 EPS.

• Trina Solar's net revenues in the second quarter of 2008 were $204.2 million, an increase of 69.2% sequentially and 171.1% year-over-year.