More Job Cuts at AMSC - Analyst Blog

Wind turbine technology company, American Superconductor Corporation (AMSC) with a view to returning to profitability has reduced its workforce by more than 20% in order to lower the company’s cash usage. The reductions have been made across all of American Superconductor’s major geographic locations and functions. The company now has a global workforce of over 400 employees.

In August 2011, American Superconductor announced that ever since March 31, 2011, it had cut 150 jobs or 30% of its global workforce to better align costs with its revenue expectations. Per American Superconductor’s estimates job cuts since March 31, 2011, will reduce its annualized expenditures by more than $50 million.

American Superconductor expects the job cuts to aid in achieving its revenue and adjusted net income forecasts for the final two quarters of fiscal year 2011 ending on March 31, 2012.

Earlier, on November 9, 2011, American Superconductor announced that for the third quarter ending December 31, 2011, it expects net loss to be less than $30 million or $0.59 per share. The company also projected that for the aforementioned period its revenues would exceed $15 million. For the fourth quarter ending March 31, 2012, the company expects revenues to be approximately $30 million with a sharp recovery in its quantum of net loss.

Devens, Massachusetts-based American Superconductor offers an array of proprietary technologies and solutions spanning the electric power infrastructure, including generation to delivery to end-use. The company is a lead player in megawatt-scale wind turbine designs and electrical control systems.

American Superconductor’s performance was affected by business and contractual issues with its largest customer in China -- Sinovel Wind Group Co. Ltd. Earlier, American Superconductor’s revenue growth largely depended on its customer Sinovel, China's largest and the world's third largest wind turbine manufacturer.

Since April 2011, Sinovel bogged down by high inventory levels refused to accept further shipments from the company. Sinovel also was unable to pay for past shipments worth $56 million.

American Superconductor is currently suing Sinovel for payments for past shipments, and compensation for infringement of intellectual property rights. American Superconductor alleges that Sinovel illegally obtained and used its proprietary technology to upgrade its 1.5 megawatt wind turbines to meet proposed Chinese grid codes.

Given the current impasse and the tight corner that the company finds itself in, we advise investors not to take any new position over the Neutral-rated American Superconductor stock. In the near term, its Zacks #5 Rank (Strong Sell) clearly suggests an exit strategy. On the contrary, American Superconductor’s Zacks #1 Rank (Strong Buy) peers, like CalAmp Corp. (CAMP) and AAC Technologies Holdings Inc. (AACAY) look attractive.

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