Cree Inc at Credit Suisse Group Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Satya Kumar - Credit Suisse - Analyst : All right, I guess I'll kick it off with a couple of questions here. Totally on the same page with you, John, on the adoption front. Clearly there's tons of rooms to go for LED adoption and covering this sort of space as well, when I look at LED and look at the economics of payback for your customers it's pretty interesting that the adoption curve isn't a whole lot faster. But maybe I'll start off with just how things look sort of from a near term environment. There's a lot of cross current since the times you guys reported until now. It seems like there's more (inaudible) on what's happening in Europe and just concerns on the overall [macros]. I was wondering if you could talk a little bit about how you view (inaudible) trends and your lead times, and how you see inventories and the supply chain?

Question: Satya Kumar - Credit Suisse - Analyst : Just quickly, touch on inventories in the supply chain I guess on the component side. I know you lowered your inventories in the September quarter a fair bit. Is your expectation that inventories continue to burn for yourself and the supply chain in December?

Question: Satya Kumar - Credit Suisse - Analyst : A question on the strategy and thought processes behind I guess the Ruud acquisition. So obviously, you're moving steps away from just being a chip manufacturer when you moved to component and then I guess to Ruud. What do you think will be sort of the most differentiated core competency for you? Would it be more from providing solutions at a system level or at a chipboard package level? And clearly, this year has been a very big year in terms of new capacity that's been added at the chip level by your competitors with the (inaudible). How do you sort of think about balancing your own strategy from the perspective that there is all this capacity out there for chips?

Question: Satya Kumar - Credit Suisse - Analyst : I know right now you buy some of the red LED chips and you make most of your blue and green LED chips. If you saw an opportunity to take advantage of the excess chip supply in the market, which is blue green from your competitors, to drive more adoption in the systems business, would you be open to that? Or is to stick with more of a vertical integration?

Question: Satya Kumar - Credit Suisse - Analyst : Early on you said that your system visibility is good when you compare that with all the other lighting companies, which they increased LED adoption as well. What product claims do you see higher or if you could rank order like your top of the line where you dramatically lowered your cost in the last year versus some of the outdoor product lines that you got from the Ruud acquisition? Where do you see the best payback for your customers and where do you see the strongest demand reaction?

Question: Satya Kumar - Credit Suisse - Analyst : Since we're talking about that, I was wondering if you could touch briefly on what that might do to your systems cost structure. I guess at the time of the acquisition, Ruud had close to 30% gross margins and I think you've said that systems margins can be [not] the 40% looking at some of your peers. Does this factory expansion and (inaudible) of the property capacity, what type of cost savings does it give you in the systems business?

Question: Satya Kumar - Credit Suisse - Analyst : I guess the high-level question on the gross margins. So your targets have been to try and get the gross margins back up to the mid to high 40s. Just over a year ago, you were close to 50 so you've been there before. Cyclically, obviously utilization dates are depressed now and you're at 37, 38. So it's hard to say whether there's a secular decline in gross margins or cyclical, but the entire industry is running at a low utilization rate. Your competitors are also benefiting from lower sapphire wafer prices and what have you. What does it take for your gross margins to move higher? Is REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 29, 2011 / 6:00PM, WOLF.N - Cree Inc at Credit Suisse Group Technology Conference it going to take an improvement in utilization of cost in the entire industry or an acceleration in your own cost curve related to the rest of the industry?

Question: Satya Kumar - Credit Suisse - Analyst : I guess a question on China. There was what seemed like a fairly important announcement a few weeks ago that China is going to ban incandescent lights above 100 watts from Q4 of next year. Can you put into context how big a deal that is? Yesterday there was some news, I believe, that the profitability level for China is going to introduce for LEDs maybe supposedly a lot lower than what people were expecting? So could you put those data points in context?

Question: Satya Kumar - Credit Suisse - Analyst : One last question on the Ruud acquisition. I guess when we do our industry checks and what have you, we consistently get feedback that Ruud is clearly a leader in the street lighting market in the US and they have good differentiated products. But they have almost all their exposure in the US. So what can you do to take those products and get them penetrated more in other markets like Europe or other international markets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 29, 2011 / 6:00PM, WOLF.N - Cree Inc at Credit Suisse Group Technology Conference

Question: Satya Kumar - Credit Suisse - Analyst : I think with that, we're out of time. Thanks.