<font color=red> CC Notes thanks to marimba on the FOOL thread.
"These notes are mostly unedited, I think that's the safest way to avoid copyright and posting violations. They're fairly coherent (I am a pretty good typist if I do say so myself)
I did totally miss the question on intellectual property and patent infringement. If someone could supply those comments, I'd be most appresh...
CREE CONF CALL 10/12/2000
Q12000
FRAN (ADMIN)
introduction
Admin notes regarding how to get press release.
Statement of agenda
Disclaimer
Requesting only analysts and instituional holders speak during the session
Available via webcast
CINDY (FINANCIALS):
Highest product and operating margins in history
11% sequential, triple results for year
Margins solid at 55% of revenue
HB continues to experience the heaviest demand
Small chip product now comprises 15% of total volume
Sales price declined 55% due to contractual discounts
Handsets as percent of chips sold is steady
Only 5% of revenue in europe (no euro worries)
60% increase in Osram contract
Siemens-osram largest customer in 2001
SiC sales decreased 2% due to C&C
C&C less than 10% of revenue
Decline in moissanite expected to be offset by HBLED
5% increase in gov't contracts
Product margins 58%, highest ever ***
Lower HBLED offset by other products and efficiencies
Challenges:
Increasing capacity for HB and UB while decreasing costs
Sales prices will design 25% during FY2000
R&D up 7% for microwave and optoelectronics including HBLED
Cash 282 mil
Inv up 13%, 57 day well below industry average
Roadmap for capacity increase over 2 years
125,000 sq ft complete in Q2, equipped in Q4
Accts Rec up, but well below industry avg at 48 days
ROI increased to 16%, well above industry average
2x HBLED released in Q2
NEAL (OPERATIONS)
2001 fiscal Q1 “finest performance in the history of the company.”
Signed “largest ever supply contract”
“backlog to unprecedented levels”
“CREE is now the dominant supplier of nitride LED devices.” Customer signed an order on the spot which is unusual. Claim to have closed the brightness gap between sapphire and SiC
CREE is lowering the price of existing products because of brighter products
Blue laser is gaining momentum. Achieved power outputs capable of reading and writing to optical media. On track to release laser duing f2002. Need to reduce defects, increase lifetime, greater efficiencies
Radio Frequency: Customers indicate that CREE products will help them shorten design cycle from 2 yrs to 3 mos
Customers have verified that products perform, and there is a compelling benefit for next generation infrastructure
30W RF on the horizon
WAFERS: Quality improving in 2 and 3” diameters. Have not included C&C in fiscal projections
Facility construction on schedule.
Acquisitions: looking for targets where outside expertise adds value.
Staff additions: Dr. shuji nakamura, working on a part-time basis exclusively for CREE lighting
(is it just me, or did he totally deadpan this announcement….)
First questioner:
Questions: how many customers compriseover 10% of revenue? A 2
Q: Last yesr, CREE shipping to 7 of 10 largest LED's. any change? same, but on verge of expanding
Q: rf delivering in q3? A: 30W prototypes, 10W going in Q2
Q: 10W as revenue or trial? Revenue
Q: How many customers for 10W? A 25 to 30
q: 10W used in driver amps? Y
q: looking to 100-150W next calendar year? A: 60, then 100, 120… “probably could” do 150 next calendar year, but focusing on increasing yield in lower areas.
q: is there demand in 10-30W? A: Y
Q: ZMOD? A : zmod is the “next generation power amp manufacturer.” “changes the methodoology” “using modules insteaed of discrete components.”
Q: evaluating other partnerships in that area? Y
Blue laser:
Q: Milstones for blue laser? On track. Haven't slowed.
Q: Is there visible demand for blue laser? Not yet, but ASP's see the potential
Q: Biggest challenge? Lowering power requirements, decreasing defects
John mile of soundview
Q: Surprising announcement of UHB (ultra high brite) LED's. Changes my model a little. As you introduce UHB into production, what's the price difference, and would it modify the blended ASP revenues? A: in conservative view, standard products will decline quicker. Blended avg price would stay the same as your models. Does not expect gross margins to change drastically.
Q: Still able to hit milestones for gross margin? Y
Q: Same rampdown in ASP's? Y
Q: RF – when does 10W go into full production? 2nd half cal 2001
JD Abuchar, pacific edge investment management
Q: New potential competitors. Have you seen them out there in bidding product? A: It's mostly press releases. We sampled products, they are about 2 years behind. Not seeing them in volume in the marketplace. Competitors can't supply the volume
Q: Sell any MVIS stock this quarter? A: NO.
Q: Any change with customers on allocation? Some products, yes. They are accepting new customers. UHB will be on allocation for quite some time.
Ram Kasergad of Morgan and Keegan
Q: Can you talk about supply/demand balance in the marketplace right now b/c sapphire increasing capacity?
A: Competitors can only penetrate by lowering price and increasing brightness… capacity won't help if they can't do that.
Q: Concern about handset sales flowing in wireless business. Europe weakness. How should we view their exposure to wireless market? We might be in single digit millions of handsets, even less. Exposure is extremely low in that area. When price goes down, we can penetrate into a declining market
Q: Where do we stand on 2” to 3” transition? Good progress in last month. Optimistic for late this quarter or next quarter
Another guy:
Q: Nakamura impact on laser dev? No impact on Laser, he'll be working on lighting.
Q: What about UV product? 2nd half FY01
Hans mossman, Prudential
Q: UB – was this Nitres work? No, CREE work. Working on a follow-on increase, expect in FY2002.
Q: How does this compare to sapphire in relative brightness? Customer comment: “As bright as sapphire.”
Q: Traditional SiC advantage still applies? Yes
Q: Expectation on margins? Low to mid 50%, same range as before
Questions from ZaksDad:
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