Cree (Nasdaq: CREE) could very well cash in on the proposed spin-off of its Power and RF (radio frequency) businesses. While the group makes up only 6 percent of Cree’s annual revenues, its products have a high gross profit margin.
And Cree’s top exec recently predicted continued growth while LEDs face challenges.
Frank Plastina, the veteran Triangle tech executive with extensive leadership experience at both Nortel and Tekelec, is the designated CEO of the group. He should knopw the Power and RF businesses well already, having served as a Cree board member.
In a conference call with Wall Street analysts on April 21, Cree Chair and CEO Chuck Swoboda forecast continued growth for the group, too.
According to Cree’s annual 2014 report, the Power and RF group revenues grew to $107.5 million in 2014. That was up from $89.4 million in 2013 and $73 million the previous year.
Gross profits were:
- $60.7 million last year
- $48 million in 2013
- $32 million in 2012
Gross profit margins also increased each year:
- 56 percent in 2014
- 54 percent in 2013
- 44 percent in 2012
Margins are as BIG problem for LEDs.
Here’s what Swoboda had to say in that conference call, according to a transcript provided by financial news site SeekingAlpha:
“Although the LED components market is likely to remain very competitive over the next year, we believe we are well positioned for the growth in our lighting business to drive overall growth in the company. Our Power and RF business also continues to make good progress, commercializing our market leading silicon carbide and gallium nitride device technology and building customer momentum.”
He added later:
“We continue to believe that the best way to predict the future is to create it and we’re focused on building a technology company that continues to redefine what is possible in lighting and shape the future of the industry. While that vision guides our strategy, we are equally focused on converting the tremendous market opportunity for LED lighting into value for our shareholders, which comes down to growing our lighting business and operating profit.
“As we said last quarter, we know there are going to be some near-term challenges, but we’re confident that we are on the right track and optimistic about the future growth in lighting and potential upside from our Power and RF product line. That is why we continued to repurchase shares in Q3 and target additional purchases in Q4.”
In its announcement Monday, Cree said it intended to maintain a majority share in the spun-off group.
The numbers show why.