LED unit shipments were up 8% sequentially and up 26% compared with the year-ago quarter. Average selling prices (ASPs) and the average production cost per LED both fell by 5% sequentially.
Overall, Cree's revenue was a record $105.6 million from continuing operations (excluding a now-closed part of its microwave business), up 3% sequentially.
"Q2 was another good quarter for Cree, as we delivered total revenue and earnings at the high end of our previously announced targets," stated Chuck Swoboda, Cree Chairman and CEO.
However, investors were unimpressed that Cree posted a 29% decline in earnings as higher operating expenses countered a rise in product revenue. Net income from continuing operations was $20.1 million, or 26 cents per share, compared with $27.1 million, or 35 cents per share, in the year-ago quarter.
For the first quarter in 2006, Cree currently targets revenue from continuing operations in a range of $105 million to $110 million, with earnings of $0.25 to $0.27 per share.
The first quarter of each year is typically difficult for LED makers, following the holiday rush of the previous quarter when customers buy LED-rich products, notably new mobile phone handsets. However, Cree hopes this decline will be offset by demand for its XLamp products, and for LEDs used in Japanese pachinko slot machines.
Commenting on the XLamp product line, Swoboda said, "We are pleased that our XLamp strategy is gaining momentum and that we are winning new business. We are well positioned to grow our LED business, driven by the increasing contribution from XLamp products and our strategy to increase white LED market share for LCD backlights."
In its conference call, Swoboda said that Cree hopes its XLamps will constitute 10% of LED sales by the end of this calendar year. The company refused to give the current percentage figure, but said that increased XLamp sales had been responsible for most of the growth in the company's LED revenue.
However, producing enough XLamps is an issue. "With the growing demand for XLamps we could be capacity-limited in [the first calendar quarter of 2006]," said Swoboda.
To combat this, Cree is in the process of increasing its XLamp manufacturing capacity, as well as qualifying a manufacturing partner.
[Additional reporting from Compound Semiconductor magazine.]
