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Technology Stocks : Wolf speed -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (3443)	8/3/2000 7:40:24 AM
From: unclewest	Read Replies (6) \| Respond to of 10713

Any thoughts on CREE doug asked me to respond to this post found on yahoo. 1. Analysts were doing their best to fool each other into thinking this was a great quarter so they could offload their positions first. The "Great quarter" comments were hardly enthusiastic. 2. CEO Neal was largely unprepared and shaky. In April CC, Neal stated that having penetrated only 0.1% of the wireless backlighting market was a positive in that there was huge potential for future growth. Now in July, with wireless stocks floundering, Neal was trying to sell to analysts that it was a positive that penetration was only 0.1% in that it would not affect forward growth. What kind of double talk is this from a CEO? this is precisely what you want a new product to do...add value to the top end...much easier to roll down hill than up hill...the ceo knows his market...i think cell phone penetration at the top end is quite positive...due to normal trickle down effect....top end today is middle in 6 months, bottom in a year...then you have top, middle and bottom end... cree now has nokia and panasonic high end cell phones... ask yourself are the cell phones you bought last year, and the features they have, still high end? do you think audi, vw and cadillac are the only car companies that will use LEDs? do you think sony is the only consumer electronics company that will switch to cree LEDs? these companies are leaders...the others will follow. i have spoken with and exchanged e-mails with cree several times...i found them to be polite, courteous, very thorough, and 100% professional....but personalities aside, i am results oriented...cree is producing results. 3. Revenue growth as a Q over Q percentage slowed drastically. it did slow...but to 13% sequential and neal forecasted that he would sustain that for next year. 13% sequential is 63% annual...that works for me. he forecasted 40% last year and produced 2x that. 4. Book to bill ratio of less than 1. Backlog has been depleted from 12+ months since the start of the year to 6 months. And why are they expanding capacity? In addition, contract of primary customer is up for renewal in August and there are no guarantees. Just take a look at HLIT and how it was affected by slowing orders from its 40% customer AT&T and what impact it had on its stock price. backlog is around 76 million vs total revs last year of 108 million...i believe this is cree's biggest backlog ever. i don't recall cree ever being booked a full year out. what company is? 16 concecutive quarters of increasing revenues and profits and the ceo's word that it will continue...tells me what i need to know. neal said contracts are being negotiated...and he told us to look for new contract announcements this quarter... where else is osram going to buy high quality SiC? 5. The "blue laser 50-100 point gapper" Unclewest is so fond of looks like it may never come. I have to believe once the JDSU-SDLI acquisition is completed, SDLI's blue laser program will be accelerated with JDSU's resources and will come to market well before CREE in June 2002. i do not believe you can change the entire DVD industry overnight...every PC mfr has to change simultaneously. that will take a while to coordinate. i believe cree has the laser...they need 100,000sf to produce it...that imo is the reason for the increase from 125,000sf to 250,000sf building. construction is underway. half of this building will be for rf production the other for laser...and cree is paying cash for all of it. cree's definition of the blue laser includes a price point of < $15 and a life of 10,000 hours...i am not aware of any other company claiming anything that comes anywhere close to this. i do not believe jdsu's pump lasers have anything to do with cree's laser...in addition to being used for totally different applications...i assure you they are miles away from the price point...on the other hand, if cree's laser can be adapted to jdsu's uses...look out. 6. Analysts were obviously disappointed with the (lack of) progress on the 3" wafer fab line. It appears this will not impact capacity expansion/mfg efficiencies/revenue growth for another 12 months at earliest. i agree. 7. Neal warned that prices for LEDs and margins would begin falling--but that this was a good thing. What business school did this guy attend anyways? cree's pricing effectively takes the the sapphire guys out of blue/green and forces big LED users to consider cree even though they are loath to single source. the fact that sapphire blue/greens continue to be sold at 2x cree's price is a testament to the strength of market demand. the fact that nokia, panasonic, sony, audi and vw (and many others) have recently switched to cree is a testament to cree's product quality, pricing strategy and business acumen. cree has been increasing yield and passing along a portion of the cost reduction to customers for the past year...cree's margins remain very high, in view of continued production increases, and LED penetration into major new consumer goods....telling the customers that further price reductions are planned is good business. with increasing sales and yield, as well as ramping production, i have no problem with cree's plan to drop margins to 50%. with increasing production and sales, cree can continue to increase revenues and profits dramatically while maintaining a firm grip on the market. cree is already the low cost LED producer. cree's LEDs sell for substantially less than the competition and cree makes much much higher margins... cree is: increasing production... increasing yield... increasing revenues... increasing profits... reducing prices... ramping new products... killing the competition...if you don't believe that, look at utci. 8. Forward quarterly analyst estimates raise the red flag of slowing growth. Actual EPS of .30 this Q, estimate for next Q is .31 and the following Q is .32? Can this P/E be sustained with forward Q over Q growth of 3%? analysts have nothing forecasted for the new plant (which is nearly 2x larger than existing)...since construction is incomplete. Longs, I am letting you know that you should seriously check yourself tonight. This is trading exactly like CTXS did prior to analysts downgrading their price targets from $135 to $15. Heavy down volume before and after the conference call and INCA on the ask indicates institutions running for the exits. They will get back in eventually, after they downgrade and bring the market cap back to a sustainable level. I wish you all well but I do believe that you will wish you had listened to Ace and sold at $180-200. IF this ever does recover, it won't be so swift--you will be fighting alot of bagholders who just want their money back. this is a ridiculous comparison. ctxs warned and suffered major revenue and legal problems and suffered major multiple downgrades...completely different story...ctxs profits were down about 46% last quarter...cree's profits increased 150%. same for hlit...in late june, hlit warned that earnings originally forecast for $0.29 would be 0.12 - 0.16...hlit got massively downgraded...another completely different story. totally unlike ctxs and hlit...after earnings release and cc, cree received several upgrades and strong buy reiterations... far from warning...cree promised: continued double digit sequential growth. ever expanding LED production. new SiC product introductions...beginning with rf/microwave now....lights in 6 months...followed by the blue laser...somewhere in there, i believe we get SiC based power devices too. cree is having some delay crossing the chasm with new products...if you read the book "crossing the chasm", you understand the difficulty posed at this junction of time with cree attempting to cross the chasm with new products. having said that...obviously cree is growing the LED business like crazy. no chasm problem there. the rf/microwave business is across the chasm...initial orders have begun. cree even announced a small backlog here...cree expects a customer base of six for this business...we are now waiting for the bowling pins to fall...nothing to do now but wait. the market potential for this product is approx 15x cree's current sales....ceo said cree already has an order backlog here to build on...in other words to ramp production on. cree sales were 108 million last year...with the current 60% forecasted increase...we will see around 173 million this year. on top of that, neal said the new lighting products that cree envisions from cree lighting (nitres) will rollout in 6 months...cree lighting could contribute another 10% this year...that is absolutely outstanding for a new product rolling out in the second 1/2... how many companies do you know that come out the chute with $17 million in sales the first 6 months? do you have any idea of what an ipo of a company like that would do? The fundamentals have changed. Given this, I suspect the max market cap this market will support is in the neighborhood of $1.5B. With 33M shares outstanding, that would put the price at 45 1/2. I can't wait to hear the longs howl that that will never happen. That's what the CTXS and HLIT longs said too... You think the execs saw the writing on the wall this Q when they dumped in the 120's? the only fundamental that i see changed is that with the rf/microwave orders cree is no longer a one-trick pony. cree salaries are very low, which is a good thing...bonuses are paid in stock. My question is this. If price targets mean anything, why is QCOM where it is after it had a $250 price target slapped on it when it was trading at $150. Answer: the fundamentals changed and the institutions dumped. Also, if the NAZ does have its typical August correction back to the low 3000's, where will that leave CREE--a company that has lost the trust of Wall St.? Only you as a shareholder can answer that question. Do you trust management? typical short scare tactic...i am a long long. shorts are short term day-traders...we need them for fuel for the next rise. I suggest all interested parties listen to the CC replay tonight and draw their own conclusions. >> i agree the market is not efficient...it overreacts constantly...i have found the greatest opportunities to be when the stock of a great company is unfairly and unreasonable pummeled...the best recent example i have of that is sebl....this year, in approx 4 months, sebl went from 175 to 75....then rebounded to 194. unclewest