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Blog: Cree Testing New Channels, New Products for LED Adoption

Cree, a leading manufacturer of LED products, reported a strong increase in lighting products and growth of LED fixtures in the first quarter but also indicated that LED sales will grow even faster in the second quarter.

The company says it intends on increasing its business by taking share of market from traditional lighting technology providers, driving brand recognition, new “channels,” new products and driving additional sales through LED adoption by consumers as well as commercial markets.

For the first quarter of fiscal 2014, revenue increased 4% sequentially to a record $391 million, which was in line with the company’s $380 million to $400 million target range driven by strong sales of its lighting products, Charles M. Swoboda, chairman, CEO, and president of Cree, said in a conference call with analysts.

Cree expects Q2 revenue to be in a range of $400 million to $420 million, which is comprised of strong growth in lighting driven by LED fixtures and LED bulbs and slightly higher LED products and Power and RF sales.

One of the company’s priorities, Swoboda said, is to focus on select market segments where the company can upgrade existing lighting and drive adoption. “We are currently working on both new product offerings and testing some new channel approaches to support this activity over the next several quarters,” Swoboda said according to a transcript of the call as provided by www.seekingalpha.com.

Another priority for the company is to focus on select market segments where Cree can upgrade existing lighting and drive adoption. The company says it is working on both new product offerings and testing some new channel approaches to support this activity over the next several quarters.

Based on a recent Department of Energy report LED lighting currently represents less than 1% of all U.S. sockets.

“LED lighting remains a largely untapped opportunity, and we plan to continue to make significant investments in new products, new channels and building the Cree brand as we remain focused on driving mass adoption and our long-term customer goal of 100% upgrade to LED lighting,” Swoboda said.

The largest market for LED lighting is commercial.

“It’s just the biggest market for lighting. Seventy-five to 80 percent of all lighting is in a commercial, industrial, municipal-type application,” Swoboda said, according to the transcript. “The consumer is a much smaller segment of the market. As far as our change, we’ve been talking since we launched the bulb, one of the things we said is the bulb is a means not only to sell to consumers but also to build a brand.”

Swoboda said that sales of its LED bulbs (sold primarily through Home Depot) has allowed consumers to become more knowledgeable and aware about LED lighting and getting people to think about “why do you still use that old energy wasting, frankly, money wasting technology?” The bulb, he said, has become both an incremental revenue and profit opportunity.

Equally important, he noted during the conference call, is that the bulb has become a way to drive the conversation about LED lighting and its adoption by consumers and business.

Cree is now battling Wal-Mart in a battle over LED bulb prices. Wal-Mart recently announced that it is now selling a new line of LED bulbs priced at $8.88 for a 60-watt equivalent and $8.48 for a 40-watt equivalent.

Other electrical manufacturers are also seeing increased sales of LEDs.

Acuity Brands, for example, recently reported that for the tenth quarter in a row it has more than doubled the sales of its LED luminaires compared with the year-ago periods, which it claims is outpacing the growth rates of its largest competitors for these types of products.

And Alexander “Sandy” Cutler, chairman and CEO of Eaton, noted in a conference call with analysts that his company is particularly pleased that 30 percent of its sales volume in its lighting business in areas such as residential are moving to LED products and “we are really leading the industry in that very important technology change.”

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