Cree’s (Nasdaq: CREE) latest revenue, earnings and margin forecast on Tuesday disappointed investors and shares tumbled in after-hours trading. But in a conference call with analysts, Chairman and CEO Chuck Swoboda spoke confidently about the company’s surging sales, especially for its recently introduced LED bulbs for consumers. He sees these bulbs as helping Cree build its brand and expand its opportunities in the big markets: Commercial LED lighting.
Citing the fact the LED bulbs recently received Energy Star status and thus helping lower consumer costs through rebates, Swoboda noted sales have reached the point that the company is pushing capacity.
“I would say that we are currently running a very full factory,” he said.
Cree’s exclusive agreement with Home Depot offers the company 2,000 retail outlets and online sales opportunities, he added. And people are buying.
Mehdi Hosseini, with Susquehanna Financial Group, Research Division, asked Swoboda about the emphasis right now on consumer sales as opposed to commercial LED sales with such products as fixtures and street lighting.
The transcript as provided by financial website Seeking Alpha:
Chuck, it seems to me that there is a material change in the strategy with you putting more focus on the consumer segment, especially given The Home Depot and the like channel. Can you please help me understand, how do you see the overall LED market mix between commercial and consumer? Because I’m still under the impression that commercial still accounts for the majority of the market?
“Yes, so the market opportunity has not changed. And we’ve been pretty clear about that probably for the last five, six, maybe going on seven years. The biggest market for LED lighting is commercial lighting. It’s just the biggest market for lighting. It’s 75%, 80% of all lighting is in a commercial, industrial, municipal-type application.
“The consumer is a much smaller segment of the market. As far as our change, we’ve been talking since we launched the bulb, one of the things we said is the bulb is a means not only to sell to consumers but also to build a brand.
“And what we’ve found, and this is something we said last March when we announced the product and it’s proven to be very true, is that while we were able to move some of the commercial markets, because the consumer wasn’t involved, with the bulb, we’ve been able to engage a much broader part of the population into a conversation about LED lighting and getting people to think about why do you still use that old energy wasting, frankly, money wasting technology. And so the bulb has become and the consumer market has become both an incremental revenue and profit opportunity.
“But really, and as well as a brand opportunity for Cree, it’s also become a way to really drive the conversation about LED lighting generally in adoption. …
“But if you want to look at the big picture, at the end of the day the bulb is – I mean, it’s funny. The bulb is a relatively small part of the overall market. Yet at the end of the day, there’s 5 billion sockets, I think, in North America alone. …
“And so what I think you’ve got to keep in mind is, is that the 2 parts of the market work together. It’s part of our strategy to drive adoption, be a leader, build brand. But both of them are big opportunities given where we stand today.”
The full transcript can be read online.
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