‘We are running pretty flat out right now,’ says Cree CEO

Updated Oct. 24, 2009 at 11:04 a.m.

‘We are running pretty flat out right now,’ says Cree CEO

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DURHAM, N.C. – Cree (Nasdaq: CREE) Chairman and Chief Executive Officer Chuck Swoboda had a great deal of positive news to discuss Tuesday after the chip and light emitting diode maker announced strong quarterly earnings and improving revenue projections.

The news sent Cree shares to a 52-week high on Wednesday with a close at $45.89, up $4.73 or 11.5 percent. Shares closed Friday at $44.36, down 9 cents frh Thursday’s close.

In a conference call with analysts, Swoboda talked about Cree’s need to expand due to growing demand – and how many executives have that problem in this economy? Cree just raised $400 million in capital and, as Swoboda noted in the call, the company has been anticipating increasing demand for LED lighting due to its advantages over conventional lighting.

However, expansion takes time, and Swoboda noted that Cree will face short-term challenges to avoid bottlenecks. He stressed the firm will need “execution” to make sure growth doesn’t become a problem.

Excerpts of the conference call are from a transcript provided by SeekingAlpha.

Chuck Swoboda on dealing with bottlenecks created by demand in the chip and LED sectors and the importance of execution:

“ … we probably started investing earlier than most … when we saw the business start to book up. So, we are a little bit ahead of the curve, and we have a little bit control over some of the key operations. So, well we obviously rely on outside vendors. We've become pretty good at adapting existing equipment for our processes. So, it gives us some flexibility because in many cases we are able to use equipment that exists versus necessarily having to go in the marketplace. That doesn't mean we don't buy new equipment, but I think it gives us a little bit more flexibility. That being said, we were pretty much capacity limited in Q1 and we are likely to be that way in Q2. That’s why execution is going to be such a big deal. It’s going to be the key to driving our revenue range for this quarter.”

Swoboda on Cree’s chip (fab) utilization:

“We are running pretty close to 100%. I am sure there is a few low pockets of underutilized capacity, but we are running pretty flat out right now and we did almost all last quarter.”

Swoboda on growing military demand for radio frequency chips and chips for power supplies:

“It's great to see some success there. What we are seeing is on RF I think, we started talking about some success there a couple of quarters ago. That is really driven on the military side of that. The new kind of the positive we are seeing right now is that the Power side is also getting some traction and it's a combination of things. It's more of the server-power supply business and the other thing is we are seeing growth in the solar market, solar inverters. So we are starting to see that pick up and that is really where our focus has been kind of on the higher value type applications.”

Swoboda on adding employees:

“We just announced a couple of weeks ago that we are going to be expanding in Durham over the next few years at 275 this year and then 575 I think in total over the next three years period in North Carolina and then we'll likely have to be expand in Asia as well for the backend type operation. I don't have a specific target for you there, but we should expect there will be growth there as well, but no number for you at this point.”

For the entire transcript of the call, click here.

Tags: Cleantech, Green Energy, Cree

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