Employees at Latham-based Plug Power Inc. have had meetings in which they split into groups and chanted, "Costs down! Reliability up!"

The first part of that mantra is still very relevant, Roger Saillant, president and chief executive of the fuel-cell development company said Wednesday. "There's probably nothing that my people would like me to talk less about than cost reduction," he said during a conference call on first-quarter earnings.
  
Plug's hydrogen-fed GenCore generator is priced for how the company is marketing it -- as a backup power source for remote cellular phone towers. But employees are still under relentless pressure to get production costs down, so Plug can achieve double-digit profit margins to get the technology priced low enough for the mass market.

"We have never taken our eye off of where we have to be ultimately," he said.

Plug increased revenue for the first quarter and met several important milestones, executives said during the conference call.

For the quarter ending March 31, revenue rose to $3.3 million, from $3 million in the same period last year. The company had a net loss of $12 million, or 16 cents a share, compared with $13.8 million, or 27 cents a share, for the first quarter of 2003.

Plug distributed 20 GenCore systems to telecommunications customers around the world in the first quarter, bringing the total to 39 since it began shipping the units in December 2003.

Walter Nasdeo, an analyst for the New York City-based investment firm Ardour Capital Partners LLC, said Plug missed his earnings-per-share estimate by a penny. But he isn't concerned, he said, and raised his future price target for Plug shares from $9.25 to $10.50.

"The revenue numbers were right where we expected them to be," Nasdeo said. "A number of good alliances developed in the quarter that are really going to benefit them in terms of building their business."

Plug has signed distribution agreements with three companies, Hidrener Hydrogen Energy Systems Inc. of Turkey, siGEN Ltd. of Scotland and IST Group Ltd. of South Africa.

Investors should look for more distribution agreements this year, Saillant said.

Several other achievements already have been announced. Plug recently signed a deal with Airgas Inc., a leading supplier of industrial, medical and specialty gases, to jointly market hydrogen for Plug's generators. And the company agreed to continue joint development of a system that can power and heat a building while producing hydrogen for a fuel-cell car with Honda R&D Americas Inc.

In response to an analyst question Wednesday, Saillant said many large customers are sampling Plug's product. They have not yet promised to buy more if the generators work well.

"None of them have made the conditional statement that you would like to hear and that we would like to hear," Saillant said. But there have been no negative surprises from customers either, he said.

Shares (Nasdaq: PLUG) closed Wednesday at $8.50, down 40 cents.