American Superconductor Corporation (AMSC) Still Faces Big Challenges

American Superconductor hasn’t given up on wind, despite intense competition there. But neither its wind-turbine-related products nor its power-grid-technology segment has managed to produce the growth the company needs in order to survive. Despite a rise in revenue in the grid category over the past year, American Superconductor still needs more time to complete its shift away from the weak wind turbine business, and the company said in April that it doesn’t expect to reach positive cash flow for another couple of years. Meanwhile, 3M Co (NYSE:MMM) has developed a grid-conductor technology that utilities can install on existing transmission lines rather than fully replacing them with American Superconductor’s Amperium superconductor wire.

Moreover, other potential growth opportunities face similar competitive pressures. In the inverter market, Power One Inc (NASDAQ:PWER) represented a formidable opponent even before energy giant ABB Ltd (ADR) (NYSE:ABB) agreed to pay $1 billion to acquire the solar-inverter company. For now, it appears that American Superconductor needs to focus on its grid segment in order to produce the growth it needs to rebound from its Sinovel setback.

In American Superconductor’s quarterly report, watch for a litigation update as well as news about potential customers, especially in its grid business. Without substantial progress, the company’s limited cash balance and continuing losses bode ill for shareholders in the near term.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends 3M.

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