LED lighting expert Cree (Nasdaq: CREE) is getting a serious haircut today -- not because last night's earnings report was disappointing, but because the outlook for the next quarter wasn't quite as optimistic as Wall Street had hoped. This, my friends, is not the end of the world for Cree investors. In fact, you can call it good news.

The fourth quarter was a bona fide blockbuster as sales shot up 79% year over year to $265 million while GAAP earnings more than quadrupled to $52.8 million or $0.48 per share. Both of these metrics put an exclamation point at the end of the 2010 fiscal year by outpacing the full-year growth rates. The current trend is, in other words, even more positive than an otherwise not-shabby-at-all year.

The first quarter of 2011 is expected to show higher sales and earnings on top of this quarter's record levels, while running Cree's factories at closer to 90% than this period's breathless near-100% utilization rate. The company is building out its manufacturing capacity in order to keep up with rising demand and to give chief multisegment rival Philips (NYSE: PHG) a run for its money.

And unlike many other sectors of the high-tech world, the LED people are happy to compete on a level playing field. In memory chips, Rambus (Nasdaq: RMBS) has been battling Micron Technology (NYSE: MU) and others in court for years and has made litigation income into a critical part of that company's business plan; cell phone makers like HTC and Apple can hardly sneeze without getting sued and then launching a countersuit for patent infringement. ("I sneezed first!"). But Cree and Philips have signed a wide-ranging cross-license agreement that should keep the total market growing quickly as the two main competitors get down to more business and less infighting. It's a beautiful thing.

So what if Cree's outlook underwhelmed Mr. Market? Long-term investors have only lost about a month's worth of what is still more than a double in 12 months, and the LED lighting market will continue to grow briskly for several more years. Then it comes down to whether Universal Display (Nasdaq: PANL) and company manage to usurp the then-leading lighting solution with their fancy OLED lights. That decision is still more than five years away, though -- plenty of time to make and then take a profit on Cree.

Would you buy Cree on a dip like this? I have staked my All-Star CAPS rating on Cree beating the market over the next few years, and you can do likewise -- or the opposite -- in just a couple of clicks.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Universal Display is a Motley Fool Rule Breakers pick. Apple is a Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.