Cree's revenue just below the $100 million mark (update)

US chip manufacturer Cree has announced revenue of $96.71 million for the third quarter of fiscal 2005 which ended on March 27, 2005. This represented a 25 percent increase over the company’s comparable year ago period revenue of $77.22 million. On a sequential basis, revenue was down very slightly compared with $97.45 million in the last quarter of calendar 2004.

LED revenue was $80.63 million, up 2% sequentially, although unit shipments decreased by 4%. The average selling price (ASP) of LEDs increased 6% sequentially, as a consequence of Cree's shift to high-brightness products, which accounted for 66% of sales in the quarter. Compared with the year-ago quarter, ASPs were down by 15%, and unit shipments were up by 53%.

The first quarter after the holiday season is usually slow for sales of mobile phones, and Cree's chips are used extensively to backlight keypads in these products. However, Cree received a boost when its products started appearing in pachinko machines, an amusement game similar to pinball. "It was a nice benefit to have that business ramping up when we had the mobile phone market slowing down," said Chuck Swoboda, Cree's president and CEO.

Net income for the third quarter increased 37 percent to $20.68 million ($0.27 per share), compared to $15.09 million ($0.20 per share) for the year-ago period. In the last quarter of calendar 2004, the company's income was $25 million.

Gross margin for the third quarter of fiscal 2005 was 53 percent of revenue and compares to 49 percent in the prior year period and 50 percent in the second quarter of fiscal 2005. According to Cree CEO Chuck Swoboda, gross margin improved through strong growth in high-brightness LED sales that offset softness in the company’s mid-brightness category and shifted the product mix towards the higher end.

Cree has also increased the proportion of material produced on 3-inch substrates to one-third; the majority of LEDs are still produced on smaller wafers, which is less cost-effective.

Cree said revenue in the next quarter would be up slightly at $98 million - $102 million, with the increase driven by growth in cell phone applications. Profit for the quarter is expected to be in the range of $19 million to $21 million.

“The fact that our LED business grew sequentially in what is normally a seasonally down quarter for the industry is a testament to the strength of our product offering,” said Swoboda. “As we enter the final quarter of our fiscal year, I believe that we are in a favorable competitive position. Based on current orders and customer forecasts, we are optimistic that our revenue should grow sequentially in the fourth quarter.”

For the nine-month period ended March 27, 2005, Cree reported revenue of $290.18 million, an increase of 34 percent over the $216.5 million for the year-ago period. Net income for the nine-month period rose 90 percent to $70.13 million, or $0.91 per share, compared to $36.98 million ($0.49 per share) in the year ago period.

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