Note: The Skinny blog is written by Rick Smith, editor and co-founder of Local Tech Wire and business editor of WRAL.com.

DURHAM, N.C. – Some of the luster is coming off the LED market. Just ask Cree executives and Cree shareholders who watched their shares plummet 15 percent – down $9.18 in after-hours trading to $53.53 – after Tuesday’s earnings report.

Cree Chairman and Chief Executive Officer Chuck Swoboda had to go into damage control mode to stop the bleeding in a conference call with analysts after the LED maker reported what the Street considered both a disappointing quarter and a lower than expected revenue forecast.

He had good reasons to do so. As Eric Savitz wrote at Forbes, Cree delivered a “rotten quarter.”

Said CNBC: “A big earnings miss.” (Read more coverage here of the earnings report.)

Sowboda conceded that earnings and revenues were “lower than our targets.” He citing slow sales in China.

The conference call is filled with Swoboda seeking to offer reassurances. Here’s a key example, as reported by Seeking Alpha in a transcript of the call:

Daniel Amir – Lazard Capital Markets LLC

“I was wondering if you can give a comment about how do you view kind of the big-picture industry growth currently, considering where we are kind of in the market and the issues that you’re facing? And how does Cree fit into that industry growth, considering you got about three quarters here that it’s been flat to slight growth?”

Charles Swoboda

“Look, Daniel, I think you got to consider where we’re at. Our best estimate would be somewhere in that roughly, let’s call it 4 percent of adoption in LEDs and the overall lighting market.

“I think anytime at that early stage of the market, you’re basically counting on specific applications that turn on and ramp up, and it’s not one application, it’s lots of different onces.

“So for example, there’s obvious things that are going well because our Direct business continues to grow. But for example, in our Asia’s China Streetlight business, which is a big chunk of our business, when that specific segment pauses, I don’t think anyone believes that LED streetlights aren’t going to continue to be adopted, but it does go through a two-quarter pause when they’re trying to do the regulations.

“So from my standpoint, I think everyone likes to look at industry transitions in hindsight and think they were straight line. I think they’re always a little bit lumpy on the way up.

“And I think when you’re this early, I remain pretty optimistic, right? I think we’re going to be able to make LED streetlights better than they are today with new LEDs. They’re going to become more cost effective, I think that drives more adoption. I think the same thing happens in bulbs, commercial lighting.

“I just see lots of opportunity out there. I see lots of innovation required to make it happen but, I think we’re in the early stages of this thing and I think as long as we keep driving innovation that makes our customers’ products better, that makes their value proposition better, then we should be in a good position to benefit as the market grows, and frankly make it happen.

“And I think if we make it happen, that puts Cree in a pretty good position.”

Was Wall Street reassured?

Is the LED market overhyped?

When trading opens today in New York, Swoboda and Cree’s shareholders will find out.

(Read the full transcript here.)

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