The LED lighting market is anticipated to grow 45% per year through 2019. The LED lighting market at $4.8 billion in 2012 is anticipated to go to $42 billion by 2019. This anticipated market size has provided a driving force to companies like CREE. The Company remains focused on product innovation and to expand its product offering. CREE is continually engaged in development of low cost next generation LED bulb, with new price points leading to LED adoption. The company adopts a reinvesting policy from its profits to fund additional marketing investments and generate even more awareness that the Cree LED bulb pays for itself.
The company recently declared its third quarter results for fiscal 2014 and was impressive. Solid quarterly results with revenue of $405 million and non-GAAP net income of $47.7 million or $0.39 per diluted share. Revenue and operating income were much in-line with the target range set by the Company. It further feels that the business is poised to grow in Q4 (current quarter). The sales trends in Q3 were up in all the segments. Lighting sales grew 35% year-over-year to $177 million, LED sales grew 3% year-over-year to $201 million and Power and RF sales increased 21% year-over-year to $27.4 million.
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This exemplifies that CREE once again demonstrated its ability to deliver strong operating results. The revenue in gross profit growth was mainly due to higher sales, cost reductions and higher factory utilization. To further extrapolate its growth line it is investing in new technologies and also creating a stronger CREE brand with market awareness programs.
The LED market’s dynamics have improved considerably over the past, primarily driven by the launch of new innovative products and the closing price gap with traditional lighting. With this dynamic, the company in the current fourth quarter, the Company anticipates growth in all three product segments. CREE anticipates Q4 revenue to increase to a range of 430 million to 460 million. The growth in sales is driven by double digit growth in LED fixtures and LED bulb, Power and RF sales are also anticipated to be slightly higher.
Research & Development catalytic to growth
From an R&D standpoint CREE established a completely new efficiency benchmark for lighting systems with the first 200 lumen per watt LED concept luminaire that is more than twice the efficiency of the best linear fluorescent luminaires. It also reinvented the concept of lighting controls with self-programming one button “SmartCast” technology, which reduces energy consumption by more than 70%.
With an innovative approach supported by R&D, Cree LED bulb is now brighter and more affordable. The prime focus of CREE is on innovation that enabled it to reduce pricing and expand the LED bulb product line with the introduction of 100 watt warm and cool white LED replacement bulbs. The customers for LED bulbs are constantly increasing providing momentum to sales of CREE LED bulb and brand recognition.
Furthermore, the Company is persistent to raise the bar in LED price performance with their new ZR LED troffer that now delivers excellent light quality and aesthetics for under a $100. CREE also achieved a breakthrough with XSP street light series with the XSP Area and XSP W Wall Pack products.
Revenue from patents
CREE has numerous patents registered under its names for LED light. This again generates a revenue stream for CREE as license cost from various LED manufacturers using technology patented by CREE. Various global LED light manufacturers like Philips, Bridgelux Inc, Kingbright Electronic Co. Ltd, Rohm co, Stanley Electric Co. Ltd, etc are under the license contract with CREE for using the LED chip technology that is patented by CREE.
CREE provides total LED solutions and is also increasing its market share for LED lights. As it’s a company with vertical integration, it helps it to churn out low cost LED lights which boost its revenue. LED chips are important components in LED lights. The company has a rich product portfolio pertaining to LED solutions, which includes a wide range of LED lights home and commercial application.