More Trouble at American Superconductor, But There's Still Hope (AMSC)

Since last April the news from American Superconductor Corp. (NASDAQ: AMSC) has been uniformly awful. The company’s largest customer refused to pay for shipments received in the second half of 2010 and canceled future orders for wind turbine components. Yesterday brought even more unhappy news from American.

The company plans to lay off 150 workers, about 20% of its workforce, and will not be able to file its first fiscal quarterly report on time. American plans to submit a plan to Nasdaq by next week to bring the company back into compliance with listing requirements. Layoffs could rise to a total of 30% of the company’s workforce.

American also fired two senior executives yesterday, its executive vice-president for operations and grid segment and its senior vice-president for global manufacturing operations. The company also announced that it expects to report a large net loss for the quarter ended June 30th, and expects to report revenues of less than $10 million, down from nearly $100 million in the same period a year ago.

For all the company’s troubles it still has an ace in the hole. American is virtually the only global supplier of high-temperature superconducting wire, an product that is approximately 100 times more efficient as a conductor of electricity than copper. As improvements are made to electrical grids around the world, American is positioned to get a substantial portion of the orders for the new high capacity wire.

Unfortunately, the only large order that American has received for its wire came about a year ago, with the announcement that South Korea had ordered 1,800 miles of the stuff to upgrade its national grid. The executive in charge of the company’s grid segment just paid the price for that failure.

American needs to push this wire and this technology if it is going to stand a chance of surviving. The wind turbine business is essentially lost to low-cost Chinese providers. Perhaps American has been so distracted by the Sinovel mess that it lost its momentum in the superconducting wire business. Whatever happened, the company needs to re-focus on its superior technology and let go of its me-too stuff.

Amazingly shares in American are trading up nearly 2% in the first hour of trading this morning, at $6.34, in a 52-week range of $5.38-$38.88.

Paul Ausick