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No. of Recommendations: 7
jp:

As always, a great post -- and a rec too.

I am afraid you misunderstood my post. I didn't want to suggest the CEO was avoiding hype. In fact, I think this CEO has been different than most development companies in that he keeps the word pictures within the bounds of what the company is doing. One strength of this company is its management.

My concern is that when the CEO has the opportunity to flesh out new opportunities he just uses a word like "staggering."

Regarding Japan's mag-lev, I had not put two and two together regarding Japan versus Germany. You did that. AMSC doesn't have to be in every market but it is nice to see big markets being developed. What this company lacks today is meaningful sales growth -- but that is coming (although the stock, priced at 5.9-times sales, is hardly expensive). My only concern about the Japanese mag-lev is that when the order is made, it will probably be to a Japanese company (seeing that Japan is funding a national superconducting project) -- and there is more on that Japanese national effort later in this post.

I tried to assess the technical threat of Sumitomo. The only roadmap I found is copyrighted 2005:

https://www.sei.co.jp/super/hts_e/generation.html

The only problem is that it says 2G is "in development." Here is a technical paper, dated Jan. 2006, discussing their 2G product being developed:

https://www.sei.co.jp/super/topics_e/index.html
Click on "Development of Second-Generation High-Temperature Superconductor Wire" for the article.

Then there is this press release that defines 2G as "200 A" and announces a product ready to ship that is at "196 A". So, according to Sumitomo, they are shipping an almost-2G product now:

https://www.sei.co.jp/news_e/press/06/06_01.html

It is also worth reading Sumitomo's technical paper about the future of superconducting wire. At 77 Kelvin (well above the 55 Kelvin that AMSC has in its near-term target range) Sumitomo thinks that they can become competitive with copper wire:

https://www.sei.co.jp/super/topics_e/index.html
Click on "Development of Drastically Innovative BSCCO (DI-BSCCO) Wire" for the write-up.

When you consider AMSC was at 30 Kevin two years ago, is at 38 Kelvin now, and thinks 55 Kelvin is well within its technical capability, you know that they are a technology leader and headed, quickly, to very meaningful temperatures and sales.

Back to competition...

Japan's national funding for superconductor research, besides aiding Sumitomo, also helps Fujikura. If anyone questions the funding here is a link that notes this help:

http://www.prweb.com/releases/2006/4/prweb372292.htm

A future 2G competitor is the European High Temperature Superconductor operation. It has 2007 targeted for a commercial product.

Other than that, the other companies listed as competitors in the annual reports do not look to be as far along as AMSC, Sumitomo, and Fujikura.

After looking at this company, I am now interested in buying. Now to find an entry point...

W.D.
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