Cree Needs to Drop the Rose-Tinted Goggles
As it turns out, that rosy view of the LED-lit future may have been a bit too optimistic.
First quarter sales landed at $268 million, a smidgen below that seemingly pessimistic next-quarter outlook but technically an improvement on the order of 1.5%.Decorating and creativity go hand in hand and energy saving light are often used by homeowners to create interesting spaces. Earnings more than doubled from the year-ago quarter to $0.53 per share, which sounds impressive until you remember that the previous quarter saw quadrupled earnings year over year.
Cree is executing to plan, spending two-thirds of its operating cash flow on capital improvements such as a new manufacturing facility in Research Triangle, N.C. CEO Chuck Swoboda claims that demand for LED lighting "continues to gain momentum" and that slow sales was caused by "a decline in LED chips.Larger kitchens may require one or more ceiling fixtures positioned in the center of the room. Additional perimeter led tube squares or rectangles of lights placed near the walls should be installed for added illumination. These can be in the form of recessed downlight or track lighting. On the other hand, small kitchens may require only either two or three ceiling mounted fixtures or downlight placed near the walls." But I think we've seen this movie before, only with different actors.To begin with, they will make an impact in the decor of the room. Plus, this lighting is fantastic, lending more natural Projector Lamp which is always welcomed in any home. The happy ending could be years away.
A veritable Greek chorus of analysts lowered their ratings on Cree after this report, and they all seem to agree that we're looking at an oversupply situation that puts pressure on selling prices, margins, and total sales. It's a little tricky to get a real read on this market because Cree's biggest competitors are multinational conglomerates Philips (NYSE: PHG), General Electric (NYSE: GE), and Siemens (NYSE: SI), none of which are likely to break out the business impact of LED lighting in their financial reports.To make a kitchen more inviting, it needs not just good quality cabinets, adequate working area, highly functional accessories Led down light and appliances but also a well designed lighting scheme. The market just ain't big enough for anybody to care much about it. But for Cree, LED lights are everything. When the other players build out their LED manufacturing lines, this is the stock that suffers from the resulting price wars.
This is what happened to memory chip producer Micron Technology (NYSE: MU) a couple of years ago when that entire industry launched new factories far above what the market really needed, thus triggering a brutal price war. Toshiba and Samsung would always be OK regardless, as their other operations could absorb the damage from a crummy memory market. Micron's stock,For businesses who have a large electric bill, switching to LEDs could cut your energy bill in half, while still keeping all of the brightness, and no fluorescent flickering! Even with the most advanced state of the art CFLs, fluorescent lighting accounts for a high percentage in existing lighting all over the world, switching from fluorescent lighting into led light can greatly reduce the global lighting power consumption and greenhouse gas emissions. on the other hand, was taken behind the woodshed for a thorough beating that it took years to recover from. Many smaller memory specialists with less impressive balance sheets went under altogether or were swept up by a wave of industry-wide consolidation.
Did Cree, Philips, and the other LED guys pay attention to that debacle? If they did, we should see product prices stabilize and capital investments in lighting factories subsume over the next couple of quarters. If not, things could get really ugly for Cree.
As it turns out, that rosy view of the LED-lit future may have been a bit too optimistic.
First quarter sales landed at $268 million, a smidgen below that seemingly pessimistic next-quarter outlook but technically an improvement on the order of 1.5%.Decorating and creativity go hand in hand and energy saving light are often used by homeowners to create interesting spaces. Earnings more than doubled from the year-ago quarter to $0.53 per share, which sounds impressive until you remember that the previous quarter saw quadrupled earnings year over year.
Cree is executing to plan, spending two-thirds of its operating cash flow on capital improvements such as a new manufacturing facility in Research Triangle, N.C. CEO Chuck Swoboda claims that demand for LED lighting "continues to gain momentum" and that slow sales was caused by "a decline in LED chips.Larger kitchens may require one or more ceiling fixtures positioned in the center of the room. Additional perimeter led tube squares or rectangles of lights placed near the walls should be installed for added illumination. These can be in the form of recessed downlight or track lighting. On the other hand, small kitchens may require only either two or three ceiling mounted fixtures or downlight placed near the walls." But I think we've seen this movie before, only with different actors.To begin with, they will make an impact in the decor of the room. Plus, this lighting is fantastic, lending more natural Projector Lamp which is always welcomed in any home. The happy ending could be years away.
A veritable Greek chorus of analysts lowered their ratings on Cree after this report, and they all seem to agree that we're looking at an oversupply situation that puts pressure on selling prices, margins, and total sales. It's a little tricky to get a real read on this market because Cree's biggest competitors are multinational conglomerates Philips (NYSE: PHG), General Electric (NYSE: GE), and Siemens (NYSE: SI), none of which are likely to break out the business impact of LED lighting in their financial reports.To make a kitchen more inviting, it needs not just good quality cabinets, adequate working area, highly functional accessories Led down light and appliances but also a well designed lighting scheme. The market just ain't big enough for anybody to care much about it. But for Cree, LED lights are everything. When the other players build out their LED manufacturing lines, this is the stock that suffers from the resulting price wars.
This is what happened to memory chip producer Micron Technology (NYSE: MU) a couple of years ago when that entire industry launched new factories far above what the market really needed, thus triggering a brutal price war. Toshiba and Samsung would always be OK regardless, as their other operations could absorb the damage from a crummy memory market. Micron's stock,For businesses who have a large electric bill, switching to LEDs could cut your energy bill in half, while still keeping all of the brightness, and no fluorescent flickering! Even with the most advanced state of the art CFLs, fluorescent lighting accounts for a high percentage in existing lighting all over the world, switching from fluorescent lighting into led light can greatly reduce the global lighting power consumption and greenhouse gas emissions. on the other hand, was taken behind the woodshed for a thorough beating that it took years to recover from. Many smaller memory specialists with less impressive balance sheets went under altogether or were swept up by a wave of industry-wide consolidation.
Did Cree, Philips, and the other LED guys pay attention to that debacle? If they did, we should see product prices stabilize and capital investments in lighting factories subsume over the next couple of quarters. If not, things could get really ugly for Cree.
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