Cree Slides on Outlook

The company sees a 'transition' quarter.
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Cree's

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earnings rose 15% from a year ago as revenue rose and a halving in the company's income tax payment offset accelerating expenses. Shares were hit as the company warned of a "transition quarter."

Cree earned $5.2 million, or 31 cents a share, in the quarter, including a 5-cent tax gain and a stock-options expense of 3 cents a share. A year ago, the semiconductor materials manufacturer earned $20.7 million, or 27 cents a share. Sales rose 12% from a year ago to $107.7 million, moderately beating the Thomson First Call consensus.

The company's overall cost of revenue rose at a faster rate than revenue in the quarter, jumping 32% to $56.4 million. Cree said the third quarter produced "record revenue from continuing operations."

"We are particularly pleased with the success of our XLamp products, which grew nicely in Q3, offsetting the seasonality in LED chip sales," Cree said.

For the fourth quarter, Cree sees revenue of $106 million to $110 million, and earnings of 22 cents to 24 cents a share, including a stock-options expense of 3 cents a share. The quarter will also have a penny-a-share charge for a new factory. Analysts surveyed by Thomson First Call were forecasting sales of $111.6 million in the quarter.

"The fourth quarter will be a transition quarter for Cree as we start production of our high power products in our new Research Triangle Park, North Carolina, fab, which will add some additional operational expenses as well as one-time costs associated with the move. The combination of these investments and those we are making in R&D should put Cree in a strong position to grow our new products businesses."

Cree fell $2.72, or 8%, to $31.37 in after-hours trading.