Cree's CEO says acquiring UltraRF is "one of the most significant strategic moves in Cree's history." The move gives Cree immediate presence and revenue in the wireless infrastructure market while its design and development teams work to produce more powerful and efficient components.
 |
|
|||||||
|
||||||||
|
||||||||
By
Note from Cree (Nasdaq: CREE): It's time to think beyond the LED. Sure, this company cut its teeth on light-emitting diodes, and LEDs will continue to provide the bulk of revenue for the near future. But investors (including this writer) have known for some time that there are other revenue-rich industries out there just waiting for Cree to produce products for them -- products made with silicon carbide-using patented processes. The properties of silicon carbide (SiC) make it an ideal material for use in Radio Frequency (RF) and microwave transistors, for example. Such devices are critical components in power amplifiers for wireless infrastructure, including third-generation broadband wireless. The RF devices amplify high-frequency signals to higher power levels. Until yesterday, Cree was only looking to support a segment of that industry. It's a big deal That move will combine -- take a deep breath -- UltraRF's laterally diffused metal oxide semiconductor (LDMOS) and bipolar transistor devices with Cree's SiC and gallium nitride (GaN) technology. It may be too long to memorize, but all you really have to know is that this means Cree can enter the market immediately and, Hunter believes, one day dominate it. The agreement calls for Cree to purchase UltraRF for about 908,000 shares of common stock and $30 million in cash. Cree has the option to substitute additional shares of stock for the cash. Hunter expects $13 million in additional revenue from the deal in the second half of fiscal 2001, and $17 million in the first half of 2002. The industry In a nod to the influence of George Gilder, Cree's press release pointed out UltraRF's prominent mention in the November 2000 issue of the Huber-Mills Digital Power Report: "The high-power LDMOS market hardly existed four years ago. Today, it accounts for roughly 50 percent of total sales of high-end RF powerchips. At the critical emerging 2 GHz frequency, UltraRF stands essentially alone today as a third player.... The market is still very young -- still wide open for superior designs to emerge and dominate." It's all on Cree
The acquisition of Spectrian's (Nasdaq: SPCT) UltraRF division changes all that. Cree Chairman and CEO Neal Hunter says his company will now be able to support the entire market. Says Hunter, "I believe as the coming quarters play out, you'll see this as one of the most significant strategic moves in Cree's history."
Motorola (NYSE: MOT) is the dominant player in the wireless infrastructure market, and Hunter believes his company can topple the giant in this particular segment. Cree will operate UltraRF as an independent company, making it the only such independent in the market. Original Equipment Manufacturers (OEMs) prefer to buy products from non-competitive suppliers, Hunter says, so this independent arrangement "provides a strong strategic fit to the market."
Hunter very clearly points out what it will take to make this rosy scenario a reality. While customers are "quite thrilled" with the performance they've seen from samples, the onus is on Cree to be able to produce commercially viable chips. The materials in question are extremely hard to work with, and Cree's ability to do so is what makes it stand alone in several of its current and potential markets. The UltraRF deal gives Cree immediate presence and revenue in the market while its design and development teams work to produce more powerful and efficient components.
RSS Headlines
Fool UK
