Last night, Superconductor Technologies
STI's flame-out actually began back in Feb. 2000 at $115 a share. That's right, the stock is down 98% in four years! Yet, the company's products are "proven to increase capacity utilization, lower dropped or blocked calls, extend coverage, and enable higher wireless transmission data rates." That sounds good ("Can you hear me now?"), and it was good enough to generate a quarterly profit.
What has investors running scared is management's forecast of lower sales in the first quarter, and a warning in the annual report from its independent auditors regarding the company's ability to continue as a going concern. That doesn't sound good, and it's not -- although to be fair, PricewaterhouseCoopers issued a similar warning last year.
Perhaps the biggest concern is that wireless has fewer and fewer big players now. AT&T Wireless
STI will outline its financing plans by mid-March. With just $11.1 million in cash, the company does not have the capital to see it through 2004; however, with less than $1 million in long-term debt and a viable product, it should be able to finance its near-term needs. The pressing issue is whether this will entail the sale of equity below market and, therefore, dilute current shareholders.
In STI, we have all the risks associated with investing in small, narrowly focused companies. Just when it looked like it was turning the corner, changes of plans by two customers disrupted operations. STI is struggling and in severe need of a cash infusion. Is it a total flame-out? Without that cash, you never know. It's no gem, that's for sure.
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Fool contributor W.D. Crotty owns stock in SBC and Verizon.