Citing slow sales for a variety of light-emitting diode products, Cree (Nasdaq: CREE) slashes its quarterly revenue forecast by some 15 percent Wednesday morning.

The news sent Cree shares down 7 percent, or $3.61, to $45.39 in pre-market trading. By 10:30 a.m., shares were down $5.04 or 10.3 percent. Trading was already double the daily average volume at 6.5 million shares.

By late morning, shares plunged 12 percent to a new 52-week low of $42.92. Trading volume continued to soar, hitting 11.8 million shares by 11:30 a.m.

The company disclosed the new guidance before the markets opened.

In a conference call with Wall Street analysts, Cree Chairman and Chief Executive Officer Chuck Swoboda said he remained “optimistic” in what he called a “very aggressive pricing environment.”

Swoboda said Cree will present a “revised detailed plan” going forward when the announces its quarterly earnings on April 19. He added management will be looking for “leverage” across the business but added the company will continue to make ‘investments.”

Cree said revenues for the quarter ending March 27 will range between $215 million and $220 million. The consensus of analysts polled by Thomson Reuters is $254.8 million.

In January, Cree forecast revenues of $245-265 million.

That figure fell well below Wall Street analysts’ expectations of $288 million.

Cree’s lower forecast sparked a 15 percent decline in its share price.

The latest revision is “primarily due to lower sales of LED chips and LED components,” Cree said in a statement.

The company cited several points behind the reduction:

  • “LED component demand is improving post-Chinese New Year, yet revenue is lower than originally targeted. It has taken longer to work through customer inventories than previously anticipated and pricing was lower than the company had previously forecast.
  • “The LED chip business is also weaker than targeted due to more aggressive pricing and weaker demand.
  • “Gross margin for the quarter is expected to be approximately 43%. The decline in gross margin targets is attributable primarily to increased pricing pressure in the LED chip product line.
  • “Operating expenses are expected to be slightly lower than previously targeted.”

Looking ahead, Swoboda forecast improvement in the next quarter.

“The LED components business appears to be turning the corner,” Swoboda said in a statement. “Despite the challenges we faced in Q3, distributor sell-through has improved and we target solid growth next quarter. Based on our preliminary outlook for Q4, we are currently targeting revenue to increase 10 to 12% in fiscal Q4 led by growth in LED components.”

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