DURHAM, N.C. — Shares in light emitting diode manufacturer Cree (NASDAQ: CREE) tumbled over 20 percent Thursday morning after the company cut its revenue and profit forecast for the current quarter.

Cree opened at $15.25, down nearly $6 from Wednesday’s close of $21.15, but rallied to $18.50 in late afternoon trading. Cree announced the revised earnings and revenue figures shortly before trading opened Thursday.

The stock closed Thursday at $18.39, off 12.8 percent.

Citing slower than expected sales for LEDS used in portable devices such as cellular phones, Cree set a revenue target of between $90 million and $92 million. Cree also forecast profits of between 12 and 14 cents per share, but 9 cents of that will come from the sale of marketable securities held by Cree.

In October, Cree predicted revenues of between $105 million and $109 million with earnings between 14 and 17 cents per share.

Thomson Financial had expected revenues of $107.2 million and earnings of 16 cents per share, based on its poll of analysts, according to The Associated Press.

“The LED chip market remains challenging, particularly for our mid-brightness products in mobile applications,” said Chuck Swoboda, Cree’s chief executive officer and chairman, in a statement. “Despite the slowdown in the LED chip business, we are pleased with the growth in new product sales from our recently introduced lighting class XLamp power LED’s and our ability to attract a global distributor such as Arrow Electronics.”

Looking ahead to the next quarter, Swoboda doesn’t expect much improvement.

“Based on our preliminary outlook for Q3, we target the LED chip business to be in a similar range as Q2 with incremental growth coming from the new product lines,” he said.

Cree’s fiscal year ends in June 2007.

The company did report that sales of its recently introduced XLamp products were “in line with our prior expectations.” XLamps are designed for use in outdoor lighting, industrial lighting, and for use in emergency vehicles.

Expenses also remain as projected at $28 million.

Cree will disclose its second quarter results on Jan. 18.

Cree: www.cree.com