Report of Cree, GE pact denied

Report of Cree, GE pact denied
Investors were left wondering whether LED lighting company Cree has won a big contract from General Electric after conflicting reports emerged Tuesday.

Shares in the Durham company rose nearly 5 percent in early morning trading after analysts at Canaccord Genuity reported that Cree won a GE contract to make LED bulbs equivalent to a 60-watt light bulb that would screw into a conventional socket. But those gains were lost after a GE spokeswoman labeled the report inaccurate.

"We have not [awarded] a contract to Cree or anyone else at this time," spokeswoman Kim Freeman wrote in email.
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Cree itself issued a somewhat ambiguous statement late Tuesday afternoon.

"As a policy, Cree doesn't comment on specific customer deals or projects unless the customer chooses to disclose this information first," spokeswoman Erin Grohs said.

GE already uses Cree LEDs in its 40-watt LED bulbs.

At the end of the day, Cree shares closed at $41.11, down 45 cents. Its shares have fallen 38 percent this year.

Canaccord Genuity analyst Jonathan Dorsheimer was undaunted by GE's denial.

"I stand by all our data, our sources and on what we published today," he said. He declined to comment further.

The research note by Dorsheimer and fellow analyst Josh Baribeau didn't disclose their source for the contract information.

They estimated that the contract could generate from $337 million to $1.6 billion in revenue over the next five years.

"The most likely result is our base case, which predicts $727 million in revenue" over five years, they wrote. "These figures are strong, but not 'game changing' in our opinion."

They also wrote that they believe that Cree was aggressive on pricing to win the contract, and "volumes may not be significant until year two/three of the contract."

Throughout the recession Cree reported stellar quarterly results, but recently its results have disappointed Wall Street.

Cree makes its own LED light fixtures as well as LED components that other companies use in lighting products. Cree's LEDs also are used for illuminating car dashboards, cell phones, televisions and signs.

Cree has nearly 2,000 workers in Durham and 5,000 workers worldwide.

LED lights account for a small slice of the overall lighting market, but demand has been growing fast despite their higher price tag because they last longer and are more energy-efficient

The race to create LED bulbs at an attractive price point is intensifying, with 60-watt bulbs getting a lot of attention because they're the most common.

According to an Associated Press report, Phillips has the equivalent of a 60-watt bulb sold at Home Depot for $40. Sylvania's version, available at Lowe's, also is $40.

But prices are expected to fall quickly. The Department of Energy projects that a 60-watt equivalent LED bulb will cost $10 by 2015, according to AP.

Read more: http://www.newsobserver.com/2011/05/25/1223081/report-of-cree-ge-pact-denied.html#ixzz1NPp1U8GW