When LED lighting specialist 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%. 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." But I think we've seen this movie before, only with different actors. 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
This is what happened to memory chip producer Micron Technology
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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