Cree has its name in lights. Its blue, green, and near-ultraviolet light-emitting diodes (LEDs) -- made from silicon carbide (SiC) and gallium nitride (GaN) -- are used in dashboard lights, architectural light fixtures, market tickers, and video screens. Cree also sells SiC wafers, which work better at higher temperatures and voltages than other silicon devices, and SiC and GaN materials. In addition, it offers lighting systems (both LED and traditional), as well as power and radio-frequency (RF) products such as Schottky diodes and transistors. The company makes most of its products at plants in the US (North Carolina, Wisconsin) and China. More than 60% of sales come from outside the US.
LED products (chips, components, and SiC wafers) account for about 65% of Cree's sales, but that's down from more than 80% in previous years. Boosted by the acquisition of Ruud Lighting, the lighting systems segment grew to nearly 30% of sales in fiscal 2012 from single digits in previous years. Power and RF products round out the company's segments.
The US is Cree's largest geographic market and its impact has increased substantially, having grown from less than 20% of sales in fiscal 2010 to nearly 40% in fiscal 2012. China, which has been declining in recent years, contributes more than 30%; all Asian countries together represent about 45% of total revenue.
Sales and Marketing
Some 40% of Cree's sales are made to distributors; in fiscal 2012 Arrow Electronics and World Peace Industrial accounted for 18% and 10% of total sales, respectively.
Cree created the first blue LED, which, when combined with red and yellow LEDs, creates a full spectrum of colors. The technology has become an industry standard and expands the applications of LED lighting. To leverage this core technology, Cree has introduced the XLamp family of high-power packaged LEDs for specialty lighting applications, hoping to stay one step ahead of the competition. Cree's XLamp products have a wide array of residential and commercial uses, including appliance lighting and reading lamps, as well as backlighting for large flat-panel and retail displays.
The trends towards increased energy-efficient and environmental lighting, and the growing number of standard lighting products that use LEDs, have helped Cree weather a challenging economic environment better than many in the electronics industry. The company has combined external acquisitions and internal R&D to broaden its offerings -- and increase its sales and market reach -- into LED lighting fixtures, power switching, and RF products.
Mergers and Acquisitions
On the acquisition side, it bought Ruud Lighting for about $583 million in 2011. The Ruud acquisition, the largest in company history, gives Cree more sales channels and more opportunities for product development. Ruud Lighting makes outdoor LED lighting systems, the logical complement to Cree's focus on indoor LED products. Shortly after the acquisition, the company announced a $25 million expansion of manufacturing facilities at Ruud. The expansion added about 470 jobs.
Revenue for fiscal 2012 (ended June 30) rose 18% to $1.2 billion, driven by 300% higher sales in its lighting systems segment because of the Ruud acquisitions. That offset a 6% decrease in LED product sales and a 25% decrease in power and RF product sales.
Cree's net income fell nearly 70% to $44 million on increased R&D and sales, general, and administrative expenses, as well as costs related to the Ruud acquisition. – less