• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Technology

Cree's Prospects Look Dim

The LED maker faces tough competition from Philips.
By CHRIS LAUDANI Jun 04, 2013 | 01:00 PM EDT
Stocks quotes in this article: CREE, PHG

Competition is heating up in the light-emitting diode (LED) business, and it could be lights out for Cree (CREE). It seems that all the major LED makers are getting aggressive about taking market share, and Cree could be in the crosshairs.

Specifically, I keep hearing about competitive pressure coming from Koninklijke Philips (PHG). Philips is undergoing a major worldwide restructuring, and all divisions are getting serious about growth. Philips has laid off more than 3,700 employees year to date and has managed to increase earnings five quarters in a row.

Philips is waking up its sleepy Dutch corporate culture and has set aggressive financial goals for 2013. In lighting, for example, Philips' objective is to return the division to profitability and drive returns on invested capital to between 12% and 14%. To get there, the lighting division has to start pulling its own weight.

North America contributes about 31% of Philips' 22.7 billion euros in revenue. Lighting makes up 37% of global revenue. Philips sells more than 80,000 lighting products and services worldwide. LEDs are a major focus of the company. About 25% of Philips' lighting portfolio is LEDs. LEDs make up 23% of lighting revenue, and LED sales grew 38% in the first quarter. Since 75% of lighting sales come from commercial accounts, Philips has a very large sales force. (Worldwide, more than 49,000 people work in the lighting division.)

LEDs are expected to make up 45% of Philips' lighting business by 2015, which is estimated to be a 75 billion to 80 billion euro business, growing between 5% and 7%. Philips is No. 1 in lighting worldwide, and it has no desire to lose that position.

While it's hard to exactly quantify, I believe Cree's revenue growth is about to slow dramatically. Right now, I'm thinking Cree's revenue growth will be cut in half. In fiscal 2013, revenue is poised to grow between 18% and 19%. (Cree reports fourth-quarter and year-end results in August.) If I'm right, Cree will be lucky to increase revenue by 9% in 2014. Right now, the consensus estimate for fiscal 2014 is $1.66 billion in revenue and $1.85 in earnings. If I'm right, Cree will cut guidance when it reports in August.

Since Cree's shares are up 78% year to date, a cut to 2014 guidance could be news to a lot of folks. It could be lights out for Cree investors.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Laudani had no position in any stocks mentioned.

TAGS: Investing | U.S. Equity | Technology | Short-selling

More from Technology

Doug Kass: Why Today's 'Nifty Five' Is More Dangerous than the 70s 'Nifty Fifty'

Doug Kass
May 27, 2023 12:15 PM EDT

What goes up must come down..

Cadence Design Systems Has the Right Tempo for Further Upside

Bruce Kamich
May 26, 2023 12:47 PM EDT

Check out my price targets.

I See No Reason to Quit Workday Now

Bruce Kamich
May 26, 2023 11:55 AM EDT

Let's check the charts of WDAY after its beat and as it's working its way higher and higher on the charts.

Taiwan Semiconductor Breaks Out: Here's When to Buy

Bruce Kamich
May 26, 2023 10:36 AM EDT

My technical strategy for the chipmaker, with price targets.

The Market's Message: Stick With the Hot Stocks, Be Cautious With the Rest

Bob Byrne
May 26, 2023 8:30 AM EDT

The impressive runs in several big-tech names have grabbed media attention, but not discussed are the recent implosions of some household-name stocks.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 09:48 AM EDT CHRIS VERSACE

    Latest AAP Podcast With Portillo's CEO!

    Listen in as we talk with a rising star in the Chi...
  • 03:25 PM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Don't Just Sit There and 'Hope' for Your Stocks, M...
  • 07:32 AM EDT BOB LANG

    Webinar Thursday After the Close: Option Spread Trading

    Thursday, my good friend and colleague Sam DeMarco...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login