American Superconductor's (AMSC -1.41%) slow and painful recovery from the Sinovel debacle took a small step forward yesterday. Management said its fiscal fourth quarter, which ended on March 31, was slightly better than expected and the stock is moving higher today.

Revenue is expected to be $19 million-$20 million, which is better than the $18 million minimum set earlier this year. That's up from $17.4 million in the fiscal third quarter, solid progress for the company.  

Maybe more important is that management expects to have cash between $49 million and $50 million at the end of the quarter, which is above a previous $48 million estimate. The real fear for investors is that the company will run out of cash because of mounting losses, so this is progress on that front.  

What is less encouraging is management's projection that it will be cash flow positive by the end of fiscal 2014, two years from now. Revenue of at least $180 million is needed to achieve that goal -- the company has a long way to go to get there.

What to watch for
American Superconductor separates its business into the wind and grid categories and I'll be watching closely how grid performed during the fourth quarter. This business grew 58% in the first three quarters; for the long term, I think it's a better business than wind, so we need to see more progress in the fourth quarter.

The challenge is that American Superconductor is going up against fierce competition that has a better balance sheet. Power-One (NASDAQ: PWER) is one of the biggest players in the solar inverter market -- it's where AMSC would like to be -- and it has the product depth and the balance sheet to hold the company off. Right now, Power-One is definitely the better investment, but if American Superconductor can survive until it reaches positive cash flow then patient investors could be rewarded.