Investors dumped Cree (Nasdaq: CREE) shares Thursday in the opening hours of trading following the firm’s announced $525 million acquisition of privately held Ruud Lighting.

Shares recovered a bit in afternoon trading but closed down 10 percent, or losing $3.49 to close at $31.25.

Trading was heavy at 10.3 million shares. The daily average is just over 4 million.

Cree hosted a conference call ahead of the market open Thursday, but investors weren’t reassured. Cree shares fell as low as $30.02 from Wednesday’s close of $34.74.

“If we drive adoption faster, it will help increase demand for both our lighting products and our components,” Cree Chairman and Chief Executive Officer Chuck Swoboda said in the conference call. “By changing the lighting industry to LED, we become the market leader.”

Ruud is a so-called luminary company focused on outdoor lighting utilizing LEDS. It is a Cree customer.

In announcing the deal, Cree said the combination with Ruud would help Cree drive LED lighting adoption.

“This acquisition creates a market leader for indoor and outdoor LED lighting, accelerating adoption and expanding the market for both Cree’s LED systems and components,” the company said. “Other synergies include increased access to the lighting market through expanded sales channels and operating leverage from increased economies of scale. Through a broader presence in the lighting systems market, Cree gains additional knowledge and expertise to develop the next generation of industry-leading, lighting-class LED components.”

However, investors may have been concerned by the financial data Cree noted as part of the deal. As Bloomberg noted, Cree lowered its gross margin to 37-38 percent from a previous forecast of 38-39 percent.

Cree also said its revenues would increase to $265-275 million from $245-255 million for the current quarter.

In other words, Ruud’s addition would add as little as $10 million to as much as $30 million.

Read more about the deal here.

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