- Up in after hours trading yesterday after posting an FQ1 beat and issuing FQ2 guidance that was below consensus at the midpoints, CREE has sold off today. Shares made a new 52-week low of $23.11 before bouncing a little.
- Ongoing margin pressure could be worrying the Street: FQ1 gross margin was 31.7%, -70 bps Y/Y and slightly below guidance of 32%. GM is expected to once more be at 31.7% in FQ2.
- Also: Cree's Power/RF chip unit (recently renamed Wolfspeed, due for an IPO) saw revenue drop 6% Y/Y to $29.3M, after rising 15% in FQ4. The division's gross margin fell 860 bps Y/Y to 49%. Management blamed lower RF transistor sales caused by delayed Chinese 4G network rollouts (peers can relate). It insisted both RF and power chip design activity remains strong, and that an IPO is planned for 2016.
- LED lighting product revenue (58% of total revenue) rose 11% Y/Y to $248M, with gross margin rising 300 bps to 27.9%. LED product revenue (chips/components, 35% of total revenue) remained under pressure, dropping 15% to $148.2M; gross margin fell 350 bps to 35.5%. Thanks to job cuts, GAAP operating expenses rose only modestly after backing out one-time charges, and $70M was spent on buybacks.
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FQ1 results/FQ2 guidance, PR