* High LED inventories and falling prices
* Cree Q3 EPS after items $0.27 vs $0.29 Wall St view
* Revenue $219.2 mln vs $217.43 mln Wall St estimate
* Q4 EPS view $0.25-$0.31 vs $0.36 Street view
* Cree shares fall 5.7 percent in extended trading
(Adds CEO comments from conference call, edits)
By Nichola Groom
LOS ANGELES, April 19 LED maker Cree Inc
(CREE.O) reported a profit on Tuesday that missed Wall Street
estimates and forecast lower-than-expected earnings in the
current quarter due to high inventories and falling prices,
sending its shares lower in after-hours trade.
Demand for light emitting diodes, which are used in
products like televisions and mobile phones, has exploded in
recent years as screens appear in more devices.
That booming demand turned Cree into a Wall Street darling
that defied the market's downward spiral of two years ago. In
recent quarters, however, Cree has struggled with stiff
competition that has hurt pricing and kept inventories high.
The company's shares are down 50 percent in the last 12
Cree, based in Durham, North Carolina, is expected to be
among the big beneficiaries of a global shift to energy
efficient LED lighting. But Canaccord Genuity analyst Jed
Dorsheimer said he expected to see further declines in both
Cree's gross margins and share price before prices on LEDs come
down enough for LED lighting to go mainstream.
"The question is how long will you have to wait before you
start to see margin and revenue upside," Dorsheimer said.
On a conference call with analysts, Chief Executive Chuck
Swoboda said the company's current difficulties would not lead
to major changes in its business strategy.
"I don't see us changing the long-term model at this
point," he said.
"If you look at what drives our business it's going to be
if you drive LED lighting adoption then the market gets a lot
bigger, and if we drive it with innovative products we can get
paid for that...," said Swoboda. "We believe that the basic
fundamentals of the business will really come back in line."
At the same time, Swoboda said the near-term demand outlook
was still uncertain as customers keep their inventories lean.
Net income for the fiscal third quarter ended March 27 fell
58 percent to $18.9 million, or 17 cents per share, compared
with $44.6 million, or 41 cents per share, in the same period a
Excluding items, Cree earned 27 cents a share below
analysts' average estimate of 29 cents per share, according to
Thomson Reuters I/B/E/S.
Revenue fell 6 percent to $219.2 million. Analysts had been
expecting revenue of $217.43 million.
Last month, Cree lowered its revenue forecast for the
quarter to a range of $215 million to $220 million due to high
customer inventories and lower selling prices. It also dropped
its gross margin forecast to 43 percent.
Gross margins for the third quarter came in at 42.4 percent
and are projected to slip to about 40 percent in the current
"At some point in time they are going to have to pay the
piper for the inventory they have built," said Canaccord's
For the fourth quarter, Cree forecast revenue of $225
million to $245 million. Analysts, on average, are expecting
revenue of $243.78 million, according to Thomson Reuters
Earnings per share, excluding items, are expected to be
between 25 cents and 31 cents. On that basis, analysts were
expecting earnings of 36 cents a share.
Cree shares fell 5.7 percent to $38.50 in extended trade on
Tuesday after closing at $40.81 in regular trading on Nasdaq.
(Reporting by Nichola Groom; Editing by Tim Dobbyn)