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Cree's Stock Plummets In After-Hours Trading On Earnings Forecast

Posted July 13, 2006

— The message boards about


(Nasdaq: CREE) were lit up with panicked talk, and after-hours trading reflected the trend Wednesday night as stockholders dumped shares in the light-emitting diode manufacturer to prices not seen in two years.

After the markets closed Wednesday, Cree issued a press release saying that earnings for the quarter than ended June 25 are expected to be "below the company's previously announced target range" of 22-24 cents a share.

Within minutes, Cree stock went into free-fall. Cree had closed down 53 cents, or 2.29 percent, to $22.59 in day trading. That's already far below the $35 price Cree was worth in April.

By 8 p.m., however, Cree fell a further $5.58, or 24.7 percent, to $17.01.

That's the stock's lowest price in two years and half its 52-week high of $35.30.

For the day, the stock plunged 26 percent.

One person posting to a Yahoo! chat room wrote: "Cree-mated".

The mean target price for the stock is $24.67, according to Thomson First Call.

In its announcement, Cree said it expected revenues of $106.7 million for its fiscal fourth quarter. Its most recent guidance had been for revenues between $106 million and $110 million.

Thomson Financial was predicting $107.3 million in revenue and 23 cents a share.

Cree cited "lower LED sales" for the revenue dip, but said demand wasn't the problem. "The shortfall in LED sales stemmed primarily from production challenges, which limited the company's ability to meet customer orders for the quarter," Cree said,

Cree also cut its gross margin forecast to 42 percent from a forecast range of 46-47 percent.

"Although we knew this was going to be a transition quarter, it proved to be more challenging than we expected," Chuck Swoboda, Cree's chief executive officer and chairman, said in a statement. "Despite these near-term challenges, we are making progress in growing our new lighting and power product lines, which are key to driving our future growth."

Looking ahead to the first quarter of fiscal 2007, Cree warned that LED chip sales "may decline slightly" due to a slowdown in demand. However, the company said it expected to increase sales of other products.

Cree will release its official fourth-quarter results on Aug. 10.


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