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Just when things were starting to look really good, then this:

http://biz.yahoo.com/rf/010731/n7v160955_2.html

Merrill Lynch on Tuesday cut its mid-term rating on high-temperature conductor wiremaker American Superconductor Corp. to ``accumulate' from 'buy.'

Merrill analyst Christine Farkas said in a research note that the downgrade was ``due to uncertainty associated with HTS cable partner Pirelli's indication to exit the energy cable (and tire) business over the next 18 months.'

American Superconductor and Pirelli have been developing HTS power cables under an alliance since 1990, Farkas said. She said Pirelli had provided more than $16 million in development funding to American Superconductor through 1999.

``While we do not expect superconductivity research to halt or necessarily even slow, this move by Pirelli adds uncertainty to American Superconductor's near-term plans for HTS power cable demo's, schedules, or partner/outside funding,' Farkas said in the note.


Pirelli has been a great partner. Hopefully they will be releasing AMSC from any long-term contractual obligations. The questions are 1) will they be able to sell their energy operations quickly, 2) will the new owner be as interested in superconductors as Pirelli, and 3) can AMSC shop for a new vendor or do they have an exclusive arrangement with Pirelli?

Uncertanty hurts stocks. AMSC has been sagging along with the rest of the alternate energy stocks. Unless AMSC makes an announcement in the next few days I guess we will have to wait for the next conference call before we can find out if this news announcement is going to slow down what looked like fast-moving progress.

For the Fools with a LTBH outlook, it looks like a buying opportunity is coming.
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Pirelli has been a great partner. Hopefully they will be releasing AMSC from any long-term contractual obligations. The questions are 1) will they be able to sell their energy operations quickly, 2) will the new owner be as interested in superconductors as Pirelli, and 3) can AMSC shop for a new vendor or do they have an exclusive arrangement with Pirelli?

As I have said at http://boards.fool.com/Message.asp?mid=15418996 , I think this is, well, bad. To be totally dependent on one other company to manufacture your product leaves you very vulnerable. IMO, another vender can't just go into production on HTS wire at this point. It takes time to set up and then ramp up and then produce consistant quality. Hopefuly, from the shop floor, this will just look like a change in management at Pirelli. If AMSC has to really shop it around... well...

I'm sick of buying opportunities.
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Hey dduct:

So let's see if I have this straight: Right now Pirelli fabs both the HTS wire and the cable. The AMSC Devans plant is to make the wire only, so AMSC will still need a Pirelli to fab the cable, right?

Any idea why was there nothing about this on the cc (which I listened to)? Very odd.

Curious,

Fool on!
Tom9
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P.S.

Just got off the phone with Jeff Nestle-Patt, VP of Corp Communications. More or less what he said:

Pirelli announced the day after the cc that it would probably sell assets as part of its shifting corp strategy to focus on telecom. Pirelli has a 27% stake in Olivetti, and owns 55% of Italia Telecom, Italy's largest telecom. Said it was looking to sell truck tire business, energy cables business -- world's largest cables for all types, energy cables and telecom, building (Home Depot)

Not clear what they'll be selling, mention PR energy cables. Not a sky falling scenario at all.

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That makes sense to me. Still a risk that a buyer might have different plans for the business, but presumably if Pirelli thinks its an asset that will bring $$$, that's good.

Wait and see?

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I also realized after my last post that the company sends wire to Pirelli, but has it fabbed elsewhere, not with Pirelli. Sorry.

Fool on!
Tom9
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I'm sick of buying opportunities.

LOL!!! The quote of the year!!!!

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Here's another quote for ya.
"Patience is a virtue"

Fool ya later
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