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Superconductor Supernova
Shares orbiting commercial space
By Richard Bruner -- Electronic News, 3/13/2000
Add the shares of another high-tech sector to your list of supernova stocks defying all laws of economic gravity.
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Three superconductor companies--Superconductor Technologies, Conductus, and Illinois Superconductor--have pierced the stock market stratosphere in what one analyst described as "obscene gains." Superconductor Technologies (SCON) of Santa Barbara, Calif., climbed to a high of $115 from a low of less than $2.5 in the space of a year. Conductus (CDTS) of Sunnyvale, Calif., shot up from a low of 5 cents to a high of nearly $93 in the same period. And Illinois Superconductor (ISCO) of Mt. Prospect, Ill., soared from 33 cents to $39 in one year.
Investors sound positively giddy when talking about the three stocks.
"SCON, CDTS, and ISCO are the players and it is amazing what they've done," one investor was quoted as saying. "We are just at the beginning. The technology these guys are implementing will help the 'wireless revolution' occur and we will be rewarded handsomely for it."
Not everyone is bullish, of course. One analyst said about Superconductor Technologies, "Way, way overvalued! A good indication of pump and dump. Now the pump part is very well done, and it's now the job of the dump part."
A spokesman for Superconductor Technologies admits to being somewhat baffled by the stock market's seemingly manic obsession with these stocks.
"Superconducting technology is this magic thing that is supposed to be able to do all these incredible things for you. It's been a formidable technological challenge that has always stayed in the labs. Getting it to commercial reality has been one devilishly difficult progression. All these companies have spent 10 years doing R&D Now they're getting to a point where they are starting to come up with commercially viable products," he said.
When they needed it, Superconductor Technologies and Conductus got a little help from their friends. Last August, for example, Superconductor Technologies signed a five-year agreement with U. S. Cellular, providing a warrant for the purchase of as many as one million shares of common Superconductor Technologies stock at $4 a share.
Under the agreement's terms, U. S. Cellular was able to buy a share of stock at that price for every $25 worth of SuperFilter system purchases. In turn, it provided that U. S. Cellular would buy at least 100 SuperFilter systems over the next year.
Although Conductus had no such deal, it sold 500,000 shares to Hewlett-Packard Co. in the early 1990s, according to Ron Wilderink, chief financial officer. No doubt both U. S. Cellular and HP would seem to have profited handsomely from the stock market performance of their share purchases.
So far, though, shareholder enthusiasm for all three companies is based on expectations of future performance, rather than sales to date, which have been relatively modest. Peter Thomas, chief executive officer of Superconductor Technologies, told Electronic News the company has sold "a little over 200 units" so far.
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An Illinois Superconductor spokeswoman told Electronic News that her company has installed more than 300 superconductor filters in base stations across the country. "Two of our largest customers are Bell South and Alcel."
And, although Wilderink has not revealed actual sales of Conductus' superconducting wireless system, ClearSite, he admitted that, because "we came to the market a little late," the sales volume has been fairly small. The company began selling the systems late in 1997. There is no precise estimate of the market's size for superconducting filters. Wilderink told Electronic News his company has targeted what it believes will be "a potentially explosive market" in the convergence of the Internet and wireless communications. Thomas agrees that wireless communications provide a big potential future for superconducting filters.
"There is a high probability that a substantial amount of connection will be through wireless," he said. "A lot of people think a high degree of connectivity to the Internet will come from people who want to use handheld devices or laptops." The race is on.
