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No. of Recommendations: 9
Foxhedge wrote:
I think a good opportunity also exists in the application of HTS in wireless base stations. The companies there are SCON and CDTS, though they are smaller AND much less well-funded than AMSC. With the coming of wireless data, however, improved capacity and reliability of cell stations is, in my view, imperative, and I don't think any other technology exists to deal with these issues at a reasonable cost. With more than 1 million base stations expected by 2003, the addressable market for HTS wireless filters, at $20,000 a pop, is reasonably large, provided these companies can generate the manufacturing capacity.


Fox, I also think there is a huge untapped market for HTS filters in wireless base stations. There are (I'm told) about 250,000 base stations worldwide now, with fourfold growth expected over the next 3-4 years. One of the problems with this market, however, is that power amplifiers currently on the market are a competing technology. I don't believe they have all of the desirable qualities of HTS filters, but they are a known (cheaper) technology, and the companies producing them are sound (note: ISCO (Illinois Superconductors), one of the competitors to SCON and CDTS, is at risk of financial collapse, according to their auditors).

Another problem I see with the wireless base station market for HTS filters is competition: everybody knows about the expected fourfold growth in base stations, so there is fierce competition among those companies noted above, as well as a number of others, I'm sure. However, if those companies experience a shakeout and one or two become dominant in the industry, with the proper financing, management, and production, there will be mucho dinero on the table.

The installation of superconducting filters is inevitable, and there is a lot of money to be made. But I think that money will be spread around quite a bit until the wireless filter business consolidates. On the other hand, AMSC seems to have chosen a market (the power grid and major industrial customers) which is less hotly contested. I think that gives them a much greater likelihood for success. The demand for their products will grow like wildfire as the prices drop and the requirements of absolutely clean and reliable power are acknowledged by the marketplace. And requirement is the key word; I do not know how major metro areas can upgrade their grids with as little disruption and expense as with AMSC products, but upgrade they will, sooner or later.

I love hearing that AMSC is increasing the production of HTS wire 20-fold! This story sounds a lot like CREE, another of my favorite stocks. Their growth is constrained by their production limits, and they are furiously trying to increase production. Sounds like Yurek recognizes the enormous demand just over the horizon and is, like CREE or a duck, paddling like crazy just under the surface.

Fox, thanks for your excellent analysis of the conference call.

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