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11 December 2006


Cree cuts revenue forecast on lower LED chip sales

Due to lower-than-expected orders for LED chips used in mobile phones, Cree Inc of Durham, NC, USA has cut its revenue forecast for fiscal second-quarter 2007 (to 24 December) from its mid-October forecast of $105-109m to just $90-92m (down from $103.91m last quarter and $105.6m a year ago).

Cree also forecasts gross margin of 34-35% (down from 41% last quarter and 49% a year ago). This is mainly due to lower factory utilization associated with the decline in LED chip orders, increased pricing pressure for LED chips, and higher start-up costs related to new product lines. Cree continues to expect operating expenses of about $28m.

“The LED chip market remains challenging, particularly for our mid-brightness products in mobile applications,” said chairman and CEO Chuck Swoboda. “Despite the slowdown in the LED chip business, we are pleased with the growth in new product sales from our recently introduced lighting-class XLamp power LEDs [designed for use in outdoor lighting, industrial lighting, and emergency vehicles] and our ability to attract a global distributor such as Arrow Electronics,” he adds. “These are important steps in our long-term strategy of growing the company through increased sales of higher-value components.”  

Based on its preliminary outlook for its third quarter, Cree says its LED chip business will be in a similar range to Q2, with incremental growth coming from new product lines.

Cree will release its final Q2 financial results on 18 January 2007.