Cree will focus on LEDs
After an $850 million deal to sell its second love fizzled in February, followed by the May resignation of Chuck Swoboda, pictured, who’d been CEO for 16 years, it was clear that Durham-based Cree had seen the light. It wants to devote full attention to its first love, LEDs — those energy-stingy, light-emitting diodes found in everything from table lamps to cars and space stations.
How it’s going to do that is less clear, but a number of industry analysts and others say the idea is burning bright as ever, despite hiccups.
“The real opportunities in the next decade or so will be in the smart-lighting space,” says Angelo Zino, senior industry analyst at CFRA, a New York-based financial-research firm. The highly efficient lighting automatically reacts to such variables as who’s in a room, what they’re doing and available natural light. “If they’re looking to get acquisitive, it’ll probably be in small, nimble, technology-driving segments of that market.”
That’s not an entirely new tack for the Triangle technology pioneer that was founded in 1983. In 2015, Cree said it would spin off Wolfspeed, a division that makes radio-frequency transistors and components for uninterruptible power supplies, radar and other applications. By last summer, Wolfspeed had more than 600 employees and sales of about $124 million. Instead of a spinoff, Swoboda decided to sell it to Germany’s Infineon Technologies and use the proceeds to bankroll purchases of companies more aligned with Cree’s core lighting business.
However, the sale fell through in February, ostensibly because U.S. regulators were reluctant to let Wolfspeed fall into foreign hands, says Asif Anwar, a London analyst with Newton, Mass.-based Strategy Analytics. The division had been working on sensitive projects, such as a sophisticated radar-defense system. Meanwhile, despite his longevity, Swoboda’s standing within Cree was dimming, along with the company’s stock on Wall Street.
In April, about a month before Swoboda announced he was stepping down because an undisclosed health issue prodded him to rethink his “life balance,” the company reported third-quarter sales of $342 million, down 7% from a year earlier. Net income tanked to about $750,000 from $17 million a year earlier.
“The reason given for the resignation was health, and I wouldn’t question that, but there was obviously more to it than that,” Zino says, pointing to the failed Wolfspeed deal. “They were unsuccessful in doing that, and there could be a lot of disgruntled investors out there.”
Some analysts say Cree needs to find new segments in a mature industry in which LEDs have become as common as discount-store lightbulbs. Cree recently projected a loss of $16 million or more on sales of about $340 million for its fourth fiscal quarter ending June 25.
Cree did not respond to interview requests but in a statement said Swoboda will stay until a successor is named. He’ll remain board chairman until the directors “determine his services are no longer needed,” or until 2018, according to an SEC filing. In a statement, Robert Ingram, the board’s lead director, skirted the issue of Swoboda’s performance but says the executive and the board “agree that now is the right time to accelerate the process to identify a new CEO to lead Cree and further grow our businesses.”
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