Net income for the first quarter was $21.72 million, or $0.28 per diluted share, compared with $24.43 million, or $0.32 per diluted share, for the year-ago quarter. Net income included a $0.03 per share benefit related to Cree's investment in Color Kinetics.
The company's LED sales grew by only 1% sequentially to $84.6 million. In the year-ago period, LED revenue was $78.9 million, so the latest figures represent year-on-year growth of 7%.
Of course, LED shipment volumes have grown much more rapidly; shipments were up by 10% on a sequential basis and up 42% on a year-on-year basis.
Offsetting this trend is the blended average selling price (ASP) of Cree's chips, which has decreased by 8% since the previous quarter and by 24% since the same period last year. One reason for this decline has been the strong shift to mid-brightness UT 230 chips for blue keypad designs; these chips are sold at a low ASP.
Cree said it was making "excellent progress on the conversion from 2-inch to 3-inch wafers during the quarter", with over 60% of chips now produced on 3-inch wafers. However, the benefit of this migration has been offset by lower yields for products with higher performance specifications.
For this reason, the production cost per LED chip has stayed the same for the last three quarters, although this figure is 8% lower than in the year-ago quarter.
High-brightness LEDs make up 68% of the total revenue for the quarter, with mid-brightness at 28% and standard brightness at 4% (the brightness definitions are Cree's own).
In its conference call, Cree said that over 50% of its chips went into mobile phone applications. The strongest area of growth was in chips for white LED cell-phone backlight applications, in line with the company’s previously announced strategy to win market share in this segment.
"We are pleased that Cree achieved record revenue and exceeded our EPS targets for the first quarter of fiscal 2006," stated Chuck Swoboda, Cree Chairman and CEO. "These results are a testament to Cree's strong position in what has become an increasingly competitive environment."
"With global trends helping to drive demand for Cree's energy-efficient solutions, we remain optimistic about the tremendous growth opportunities for our products in lighting, power and communications," continued Swoboda.
Cree has set a revenue target in the range of $106 million to $109 million for the last quarter of 2005, with earnings of $0.24 to $0.27 per share.
During fiscal 2006, Cree says that it will attempt to increase the brightness of its LED products in order to gain market share in the LCD backlight and camera flash markets for mobile products.
Illegal workers
The US Immigration and Customs Enforcement (ICE) reported earlier this week that it had apprehended 36 foreign nationals during a shift change at Cree. The illegal workers included 8 Cree employees with the rest working for Cree's subcontractors. A statement from ICE said that Cree was "not a subject of the investigation", and that the Cree management have been "more than cooperative".
