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Reviewing my notes from AMSC's July 25 Fiscal 2002 First Quarter Conference Call, I found statements that needed to be clarified in light of the recent Pirelli announcement. In my Personal Investment Guidelines, stated in "Neither "Foolish" nor foolish (Part 2)"
(, I said,

*5* When you see warning signs, don't ignore them. Seek answers whenever a company action defies logic, appears suspect or requires clarification.

There were differing opinions on this board concerning the effect of Pirelli's news on American Superconductor. So I decided to contact the person who should be in the best position to know--John Howe, Vice President of Electric Industry Affairs, particularly since he was present for the Conference Call and made some of the statements that involve Pirelli as a strategic partner.

Following are excerpts from my inquiry to Mr. Howe and the reply I received from him yesterday, August 7.

Dear Mr. Howe,

For over a year, I have researched and examined every aspect of American
Superconductor. Having a large percentage of our discretionary income
invested in AMSC since 1998, my husband, an electrical engineer, and I
have closely followed the company's progress....

I listened to the recent Conference Call several times...I hope you
can give me some insight into what impact Pirelli's announcement that
they will no longer be in the power cable business will have on the
projections given in that report.

Greg Yurek said that there were truly commercial opportunities for HTS
cables in the next couple of years, first in the US, then in Europe and
Japan. Pirelli was and is involved in the ongoing Detroit Project and
the announced projects on the East Coast as well as in Milan and Paris
using AMS wire. Pirelli has been an integral part of American
Superconductor's "distinctly higher profiles" regarding HTS cables
within the last few months.

1. Do you know if there is currently a buyer for Pirelli's cable

2. Was AMS aware of Pirelli's plans before the conference call?

3. How will Pirelli's decision impact the projected timeline for
announced HTS cable projects?

4. Will Pirelli honor existing contracts and agreements with AMS?

5. Will AMS be set back by Pirelli's exit, particularly with regard
to competitive bidding?

There has been real concern voiced by several investors based primarily
on conjecture and analysts' downgrades "due to uncertainty associated
with HTS cable partner Pirelli's indication to exit the energy cable
(and tire) business over the next 18 months.' Your answers to these
questions and any other relevant information you can give will be much
appreciated and will be shared with other investors and prospective

Here is the reply I received in its entirety:

From: Howe, John
Sent: 8/7/01 7:26PM
Subject: RE: Impact of Pirelli's Announcement

Ms. _________:

Thanks for your note inquiring about American Superconductor and our
relationship with Pirelli SpA. Pirelli's recent announcement that it
intends to sell its energy cables and truck tire businesses is the result of
a strategic restructuring of the company to focus on telecommunications.
Pirelli has stated that it hopes to find a suitable buyer for its energy
cables business within 18 months. At the present time no potential buyer
has been publicly identified by Pirelli.

American Superconductor and Pirelli have formed a strategic business
partnership over the last decade to develop and commercialize superconductor
power cables. American Superconductor has several projects currently
underway with Pirelli, including the first installation of superconductor
cables in the U.S. utility grid, and we look forward to continuing to work
with Pirelli on these and other cable installations.

Pirelli has done a great job building its energy cables division into a
valuable and profitable business. Last year the company reported $2.77
billion in revenues from its energy cables division as reported in a recent
Wall Street Journal article (July 31, 2001). Pirelli's decision to sell the
energy cables division is not expected to impede our plans to commercialize
our HTS wire and related products. The Detroit cable project is moving
along according to plan, and American Superconductor expects to announce
another HTS cable project by the end of its fiscal year.

American Superconductor expects to continue its strategic relationship with
Pirelli pending Pirelli's sale of its energy cables business, and we expect
to continue a strategic alliance with a new partner once the sale of
Pirelli's energy cable business is completed. While American Superconductor
cannot assess with certainty the impact of Pirelli's sale of this business
until a buyer is identified and we are able to discuss our future
relationship with that buyer, we believe this planned sale will have little
if any short-term impact on the company, and we are optimistic that it will
have no long-term adverse impact on us.

Thanks for your inquiry and, also, thanks for the high level of interest you
and your husband have shown in this company. Also, those boards really
benefit from contributions by people who really understand the story. As I
am sure you've picked up from your research supporting your investments over
time, we believe we're well positioned to benefit from several major and
long-lived business opportunities made possible by HTS and power electronics
technology advances.


John Howe
American Superconductor

This reply tells me more than just the answers to my questions. If I had received no response, that would have given me insight into the attitude and priorities of American Superconductor's management with regard to shareholders and accountability. In an earlier post, "Evaluating the CEO" (, I listed my criteria for measuring the effectiveness of the CEO of a company, reiterated here. Most of these criteria involve and apply to the entire management team. The response I received from Mr. Howe gives me a better idea of how this company measures up to several of those specific criteria, bolded below.

10 Criteria for Evaluating CEO's Effectiveness

1. Has a clear vision incorporating specific goals for the company and is willing "to take the road less traveled" to reach them
2. Has performance credibility, keeps on track and doesn't lose sight of his/her vision for the company/product

3. Interacts directly with consumers and employees on the front line
4. Appraises progress realistically, deals openly with good and bad news, doesn't hide his head in the sand (denial), and takes competitors seriously
5. Is truly in charge of strategy and managing operations, but works with and is evaluated regularly by a competent board of experts
6. Has assembled an effective management team and holds them accountable
7. Inspires confidence in the company
8. Is willing to make decisions and does not tolerate gridlock
9. Communicates effectively to shareholders, the public and the media
10. Welcomes mutually beneficial strategic alliances

This is the first time I have contacted someone on the American Superconductor management team directly, but I doubt it will be the last. I'm pleased that I wasn't just sent a form letter or canned material. Each of my questions was addressed directly. This tells me that at least management is listening and willing to communicate with investors other than major stockholders. And it helps make me more confident in my investment.


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