Cree shares plummet after profit warning
Cree is blaming lower profits on a less favorable sales mix within its LED product line and higher manufacturing costs associated with new products.
When its financial results are announced on August 10, Cree expects its revenue to be $106.7 million, with earnings less than the previously announced target of 22-24 cents per share.
The financial update sent the company’s shares tumbling by 25% in after hours trading to $17, well below this summer’s high point of $35.30.
The company blames its low revenue on a shortfall in LED sales resulting primarily from production challenges that limited the company’s ability to meet customer orders for the quarter.
Profit was also impacted by a gross margin of 42 percent, versus a target of 46-47%. The company said that gross margin was down due to a fall in the proportion of revenue generated from LED sales, a less favorable sales mix within the LED product line, and incrementally higher manufacturing costs associated with new products.
“Although we knew this was going to be a transition quarter, it proved to be more challenging than we expected,” admitted Cree CEO Chuck Swoboda.
Cree expects LED chip sales for the September 2006 quarter to be slightly down on the June quarter due to a recent slowdown in demand for mobile products. However, it believes that this decline will be offset by increased sales of XLamp LEDs and other products.