Cree's LED sales push revenue to new record levels

US LED manufacturer Cree recorded sales of LED products approaching $80 million for the third quarter of 2004.

Driven by continuing growth in LED sales, Cree reported net income of $24.4 million or $0.32 per share for the quarter ended September 26, 2004 (the first quarter of the company's fiscal 2005). In the same period one year ago, Cree's income was $8.88 million.

The company's revenue for the quarter was $95.9 million, a record for the third straight quarter, 82% of which ($78.9 million) came from sales of LED products.

The overall revenue figure was up 45% compared with the same period one year ago, and up 5.5% sequentially. Gross margin for the first quarter of fiscal 2005 increased to 56 percent of revenue, a new record for the company.

LED sales drive growth

Cree's LED revenue increased 56% from the comparable year-ago period and 9% from the previous quarter. LED unit shipments were up 10% sequentially and up 51% from the year-ago period.

The profitability of Cree's LED business also increased compared with the previous quarter - the company said that its average LED cost declined 11% while the average selling price declined 1%. The mix of different LED product types was 6% standard brightness, 39% mid-brightness, 55% high-brightness. The latter category has shown steady percentage growth, up from 46% in the year-ago quarter.

Commenting on Cree's results, Earl Lum of CIBC World Markets said, "We believe Cree continues to gain market share against its competitors as evidenced by its 9% LED sales growth compared with a combined 9% decline in September-quarter revenues from Taiwanese suppliers. We also believe Cree will continue to capture market share in Taiwan during 2Q05.

Lum added that less than 10% of Cree's LED manufacturing technology is converted to 3-inch wafers, so the outlook was for "continued aggressive pricing and market share gains".

Chuck Swoboda, Cree's president and CEO, agreed that the company has yet to see the benefit of the 3-inch conversion. "We expect the 3-inch migration to be a more important cost driver over the next several quarters that should enable us to continue to aggressively pursue new business," he said.

Swoboda added that Cree is "well positioned for another solid quarter", with the company setting its revenue target in the range of $98 to $100 million ($0.30 to $0.32 per diluted share) for the current second quarter of fiscal 2005.

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