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NEWS ANALYSIS


Chuck


Swoboda: As industry consolidation sets in, Cree is


ready to make acquistions. [Cree]


lower cost structure, but we are not going to see the same level of price cuts,” he says. “The combination of subsidies in North America and the prices manufacturers are offering today means we are ready for widespread adoption.”


Dorsheimer also reckons the company’s partnership with the Home Depot has helped it build the Cree brand. At the beginning of this year, the analyst, for one, didn’t believe the name ‘Cree’ was selling bulbs. Not anymore.


“Cree is definitely becoming well known as a lighting company, which is their goal,” he says. “They have having success here and the Home Depot has helped.”


But if the market really is on the cusp of mass LED adoption, where next for Cree? Despite its hefty spending on development and brand building, Cree remains a cash-rich company. On its latest balance sheet, cash and investments come in at $1.2 billion, and so now the company is eyeing future acquisitions.


As part of his post-earnings call, Swoboda said: “We believe some opportunities may emerge over the next 24 months... as industry begins to go through a consolidation phase. The strength of our operating model gives us the flexibility to make these investments and continue to maintain a strong balance sheet.”


For a vertically integrated cash-rich company such as Cree, surely the opportunities for acquisitions are vast? Dorsheimer believes Cree will remain focused. He reckons thanks to its well-established components and bulb business segments, acquisitions from these markets are unlikely.


But highlighting how Philips Electronics bought commercial and industrial lighting systems manufacturer, Genlyte, back in 2008 he says: “Cree is a newcomer in the commercial and industrial lighting systems market. We would positively view any acquisitions that would expand its presence here.”


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June 2014 www.compoundsemiconductor.net 21


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