Cree reports revenue growth

Apr. 23, 2013 @ 06:40 PM

Durham-based Cree Inc. reported revenue growth of 23 percent in the third quarter as it saw increased sales of commercial indoor lighting fixtures and with the release of its new, consumer-targeted LED light bulb.

The LED lighting maker reported net income of $22.2 million in the quarter on revenues of $348.9 million. Its revenue total beat analyst estimates and was on the higher end of the company’s targeted revenue range.

In a conference call Tuesday, company CEO Chuck Swoboda said the company’s new consumer LED bulb, priced at less than $10, represents a small piece of the company’s financial results, but is “strategic” in helping the company market its products and the company name.

“It’s really a relatively small piece of the total revenue for the company,” he said, adding that the company plans to make a significant marketing investment in the upcoming fourth quarter to drive bulb sales.

The company announced the LED bulb, designed to replace a home 40-watt traditional incandescent bulb, in March. The day of the announcement, the company’s stock price was $51.16, up 14 percent compared to the prior days’ close.

The company is selling the bulb for $9.97 at Home Depot stores, along with 60-watt replacements for $12.97 and $13.97. The bulbs were Cree’s first LED replacements for incandescent bulbs it is designing and manufacturing.

Carr Lanphier, an analyst who tracks Cree for Morningstar, said many people have been tossing around the idea that once LEDs dropped below $10, they would start to be adopted in homes.

While Lanphier said he believes Cree’s release was a step in the right direction to get LED consumer bulbs to a competitive price point, he also said he doesn’t think it was the pinnacle.

“I don’t think this is necessarily the cross at which everything starts to fall into place,” he said.

He said it’s been reported that Philips was planning to release an LED bulb priced at $10 this year to replace the 60-watt incandescent. The company already has a less than $15 LED bulb to replace the 60-watt incandescent on the market.

Lanphier noted that Cree’s bulb below $10 was a 40-watt bulb, and he said a replacement for a 60-watt bulb is “kind of on the lower end of what most people would use around their homes.”

During Tuesday’s conference call, an analyst asked Swoboda if Cree were planning to develop an LED replacement for a 60-watt incandescent priced below $10. Swoboda said there is “lots of innovation left in the LED consumer bulb category.”

“I’m not going to pre-announce what we may do later in the year,” he said. “(We’re) at the beginning, not the end, of what I think is possible.”

Lanphier said he was also more cautious than other investors about what the release of Cree’s LED consumer bulb would do for the company’s full-year financials.

 “Again, we’re very close to reaching that point, (but) I don’t necessarily think that the announcement that Cree made earlier in the quarter was going to have as significant of an impact in its full-year sales as other investors,” he said prior to Tuesday’s earnings release.

In after-hours trading on Tuesday, Cree’s stock price was down more than 7 percent to $53.44.