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Today, Chuck Swoboda, our Chairman and CEO; and John Kurtzweil, Cree's CFO, will report on our results for the second quarter of fiscal year 2011. Please note that we will be presenting both GAAP and non-GAAP financial results in our remarks during today's call, which are reconciled in our press release and financial metrics posted in the Investor Relations section of our website at www.cree.com under Quarterly Results in the Financial Information tab.Today's presentations include forward-looking statements about our business outlook, and we may make other forward-looking statements during the call. These may include comments concerning trends in revenue, gross margin and earnings, plans for new products and other forward-looking statements indicated by words like anticipate, expect, target and estimate. Such forward-looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filings noted in the release, mention important factors that could cause actual results to differ materially. Also, we'd like to note that we will be limiting our comments regarding Cree's second quarter for fiscal year 2011 to a discussion of the information included in our earnings release and the metrics posted on our website. We will not be able to answer any questions that would involve providing additional financial information about the quarter beyond the comments made in the prepared remarks. This call is being recorded on behalf of the company. The presentations and the recording of this call are copyrighted property of the company, and no other recording, reproduction or transcription is permitted unless authorized by the company in writing. Consistent with our previous conference call, we are requesting that only sell-side analysts ask questions during the Q&A session. Also, since we plan to complete the call in the allotted time of one hour, we ask that analysts limit themselves to one question and one follow-up. We recognize that other investors may have additional questions, and we welcome you to contact us after the call by email or phone at (919) 287-7895. We're also webcasting our conference call, and a replay will be available on our website through February 1, 2011.
Now I'd like to turn the call over to Chuck.Charles Swoboda Thank you, Raiford. Fiscal Q2 results reflected continued growth in our LED Lighting product line, but revenue and earnings were lower than our targets for the quarter. This was primarily due to lower sales for LED component distributors in Asia, due to an inventory correction at their customers. The inventory correction has been caused by a pause in the China LED streetlight demand and lower-than-expected growth in LED bulb applications. Revenue was $257 million or 5% below our target range, which resulted in non-GAAP earnings per share of $0.55, which was $0.01 below our targeted range. Despite the lower revenue, many of our key LED product areas grew in Q2, and we continue to execute well with gross margins of 48%, which were in line with our targets for the quarter. As I said during last quarter's earnings call, disrupting markets can be messy. The opportunity in LED lighting has not changed and if anything, we are more confident we will see continued adoption over the next several years. We remain well positioned to lead this market and drive the adoption of LED lighting, which, in the end, is what puts us in a position to build a much larger company and create a sustainable brand for Cree in the market. Revenue declined 4% from Q1 to $257 million, as growth in our LED lighting, power and our Direct LED Components business was offset by 30% decline in sales to our LED component distributors. The LED Lighting Product business grew double digits again and exceeded our plans for the quarter on the strength of sales to Home Depot, Zumtobel and continued growth in our commercial downlight products. Power product sales and LED chips were in line with our targets. LED component sales to direct customers grew double digits, driven by new design wins and increased demand in Asia, while LED component sales to distribution declined in Asia, primarily due to an inventory correction at LED streetlight and bulb customers.
The China streetlight slowdown is related to a pause in the market as new specifications were being developed by the government. The specifications were published last quarter, and a number of companies were recently approved under the new guidelines. We have design wins at the majority of these companies and expect new projects to start being awarded after the Chinese New Year.The LED bulb slowdown is related to our customers working off inventory that was bought in Q1 ahead of end customer demand. The application is growing, but not as fast as our customers had anticipated, which has resulted in the short-term inventory correction. Net income was below our target range for the quarter, due to lower revenue and higher operating expenses. R&D expenses were higher than our target as we released a large number of new products and increased spending for 150-millimeter LED wafer development during the quarter. We believe its near-term increase will pay for itself in fiscal '12, with new design wins and lower LED costs. Read the rest of this transcript for free on seekingalpha.com