Shares of Cree, Inc. (Nasdaq: CREE), a market leader in light-emitting diode (LED) lighting, tumbled 14.5 percent Wednesday (and declined another three percent by mid-day today) losing more than $1 billion of market value after announcing Q2 2011 revenue and earnings that were below analysts’ expectations. The company also provided a weak third quarter outlook, with both earnings and revenues forecast to come in under analysts’ models.
Cree Chairman and CEO Chuck Swoboda said revenue and earnings were lower than the company’s targets due primarily to lower sales of LED component distributors in Asia. “We are managing through an inventory correction in Asia in the near term, but the opportunity in LED lighting has not changed. Quarterly revenue increased 29% year-over-year and based on the market trends we are seeing, and the success of our own LED lighting business, we are more confident that we will see continued adoption of LED lighting over the next several years.
Cree reported Q2 (ended December 26, 2010) net income of $49.8 million on revenue of $257 million, compared with net income of $33.8 million on revenue of $199.5 for the same period of fiscal 2010. At December 26, 2010, the company had cash and short-term investments of $1.11 billion, compared with $1.07 billion at June 27, 2010, the end of fiscal 2010.
Analyst Theodore O’Neill of Wunderlich Securities said the Cree share price drop was a “buying opportunity” for investors. "While disappointing, we view the delay in the start of the Chinese street light project as a speed bump on a very fast road to adoption of solid-state lights. The underlying economics of the conversion are exceptional. This event simply pushed demand into future quarters."
Cree is a market-leading innovator of lighting-class LEDs, LED lighting, and semiconductor solutions for wireless and power applications. Cree’s product families include LED fixtures and bulbs, blue and green LED chips, high-brightness LEDs, power-switching devices and radio- frequency/wireless devices. Cree solutions are driving improvements in applications such as general illumination, electronic signs and signals, variable-speed motors and wireless systems.
On January 17, Cree announced it had introduced the industry’s first fully qualified commercial silicon carbide power MOSFET (metal-oxide-semiconductor field-effect transistor), a device used for amplying or switching electronic signals. The company says this establishes a new benchmark for energy-efficient power switches and can enable design engineers to develop high-voltage circuits with extremely fast switching speeds and ultralow switching losses.
Photo credit: Cree, Inc.
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