UPDATE 2-AMSC narrows loss but revenue growth remains a challenge
* Second-quarter adj loss/shr $0.29 vs est loss/shr $0.31
* Second-quarter revenue flat; Costs down 69 pct
* Sees third-quarter adj loss/shr $0.26
* Says has sufficient cash for at last next 12 months
* Shares rise as much as 6 pct
Nov 6 (Reuters) - Power technology company AMSC, struggling to return to a profit after losing its major customer in 2011, posted a smaller-than-expected quarterly loss after a cost-cutting drive.
Shares of the company, which makes electrical components for wind turbines, rose as much as 6 percent, taking the edge off an 85 percent fall since last April.
But analysts said a weakening global economy and industry overcapacity could still derail the company's turnaround plans.
AMSC slashed jobs after the loss of key customer Sinovel Wind Group Co Ltd, which accounted for three-quarters of its revenue.
The company has been seeking new customers but its revenue from the wind turbine business fell more than 10 percent to $12 million, accounting for 57 percent of the company's revenue.
"It is the lower revenue I am concerned about," Ardour Capital Investments analyst Jinming Liu said.
"The Chinese market is facing overcapacity and their former customer, Sinovel, reported a quarterly loss for the first time," he said, adding that the sector faced further pressure as a U.S. tax credit for wind production would expire this year.
Huge overcapacity and weak demand mean Chinese wind turbine makers, among the world's largest, are set for lower revenue and profits for at least the next two years, analysts say.
For the third quarter, AMSC forecast revenue to be above $26 million. Analysts were expecting revenue of $31.2 million.
Litigation expenses have also been a burden for AMSC, which sued Sinovel last November for stealing intellectual property and violating a contract.
AMSC is seeking to recover more than $1.2 billion through civil cases filed in various Chinese courts.
"The vast majority of the expenses related to litigation against Sinovel are already behind us," said Chief Executive Daniel McGahnon, who expects a favorable verdict from China's Supreme Court which is reviewing one of the cases.
He said the company had sufficient cash for at least the next 12 months.
Revenue at the company's smaller power grid business, which makes products such as high-temperature wires and coils, rose 20 percent to $8.87 million.
Shares of the company were up 5 percent at $3.85 in afternoon trade on the Nasdaq.
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