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So how do you miss earnings estimates by 36 cents a share, reporting as Maxwell Technologies (MXL) did on February 18 after the stock market closed a loss of 39 cents a share for the fourth quarter, and yet miss revenue projections of $28.8 million by just $800,000? (Revenue actually grew by 22.3% from the fourth quarter of 2008.)

Part of the reason is that Maxwell had a large number of non-cash losses (including a big set-aside against the results of an investigation into a former sales agent in China) and gains this quarter. Using GAAP accounting (Generally Accepted Accounting Principles) the company lost 39 cents a share in the period. Excluding those non-cash gains and losses, the company broke even for the quarter. Wall Street had projected a loss of 3 cents a share.

But more importantly for long-term investors, the quarter’s results reflect that Maxwell is still essentially two companies.

There’s the brand new business, ultracapacitors, an energy storage technology with applications from hybrid cars, trucks and busses to wind turbines. And there’s the old business in high tension and microelectronic devices.

The new business—the reason I own the company in Jubak’s Picks–grew by 66% in the quarter from the fourth quarter of 2008. Momentum is building in this business with repeat orders from China’s bus market and with Maxwell Technologies’ increasing penetration of the market for electronic power systems for cars, trucks, and wind turbines. But while revenue momentum is building fast in this business, the company is still spending a lot as a percentage of revenue on product development, proto-typing, and design. Gross margins in this business were just 15%, Needham & Co. estimates in the fourth quarter. Part of the problem with margins is that the company signed some unprofitable contracts in an effort to establish this technology. The last remaining unprofitable contract is set to expire in mid-2010. The ultracapacitor business accounted for $14.9 million in sales in the quarter.

The old business carries much heftier profit margins—the company’s overall gross margin was 33.6% for the quarter—but revenue in this segment isn’t growing very fast. In fact in the fourth quarter revenue for the old business fell by 9.7% from the fourth quarter of 2008 to just $13.1 million.

In 2010 the company’s total revenue will climb by 26% from 2009, Needham & Co. projects and ultracapacitor revenue will grow by 47%. (That leaves the old business growing at just 9% in 2010.) Revenue could grow even faster if the auto industry ramps up its use of ultracapacitors in electronic systems faster than expected.

One new growth area for the company is the PC-10 ultracapacitor for use as backup power in enterprise-scale computer storage and smart utility meters. (I know all this talk of new products (and the company’s name) can make you think of Maxwell Technologies as a technology company but the company’s end markets give it characteristics of an industrial. For why that’s a good thing at this point in the economic cycle see my post )

As of February 23 I’m leaving my target price at $25 a share but stretching out my July 2010 schedule to September 2010.

 Full disclosure: I own shares of Maxwell Technologies in my personal portfolio.