Advanced battery maker A123 announced more than its quarterly earnings yesterday. In addition to posting a lackluster $22.6 million in revenue, the company spun off a new energy storage startup called 24M Technologies to work on more unorthodox lithium-ion architectures.

The company also tempered the good news, noting it has lost its contract to supply batteries to electric Fiat/Chrysler vehicles to a lower bidder. This is a big hit for the company, which is trying to compete in a big pond with few high-level deals of its own. While it has plans to deliver batteries for Fisker Automotive’s plug-in luxury Karma (it took a stake in the company), it lost its bid to build battery packs for General Motors’ Chevrolet Volt, which would have established it as a formidable presence in the industry.

That said, the dissolution of the deal seems to say more about Chrysler than A123. The automaker has been struggling with its green agenda for a while now, scrapping its line of ENVI plug-in vehicles in favor of an all-electric version of its Fiat 500 minicar. But little progress has been made, and few cars are slated to be produced.

A123 is famous for breaking the seal on cleantech IPOs last September, when it saw its share price skyrocket nearly 50 percent on its first day. Since then, public sales in the sector have been middling at best — with the exception of Tesla Motors’ $226 million IPO at the end of June. Since its debut at $13.50, A123’s stock has been on the decline, closing 18.3 percent down today at $8.53.

It’s facing some tough competition from giants like LG Chem, which scored deals to supply batteries to both General Motors and Ford, and Panasonic, which is serving up batteries to Tesla and its partnering manufacturer Toyota. The big guys have the advantage of achieving scale for cheap — something A123 will need to do in order to survive.

The decision to spin off 24M Technologies suggests that the company will also be exploring new battery structures in order to give it an edge. In particular, the new entity will be working on lower-cost flow batteries, large cells that circulate electrolytes through various tanks to store power. So far, they are best suited to grid-scale storage, and could potentially help store energy generated by solar and wind installations, making them more reliable for everyday use.

A123 says it decided to create 24M as its own company so that it could get the attention and funding it needs to accelerate flow battery development. A123 will hold stock in the company and control one board member, hoping to see it through to commercialization. As a result, A123 says it will focus less on the grid, and anticipates that transportation batteries will make up as much at 70 percent of its business.

In addition to Fisker, the battery maker — which also competes with Johnson Controls and venture-backed Valence Technology — has a contract to supply batteries for hybrid-electric trucks made by the Eaton Corporation.

This story, written by Camille Ricketts, was originally posted on VentureBeat's GreenBeat, an editorial partner of AllCarsElectric.