Cree Inc. at Deutsche Bank Securities Technology Conference Transcript

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

Question: Carter Shoop - Deutsche Bank - Analyst : (Inaudible) Maybe I'll start off with a couple and then we can go with some questions from the audience. I think the previous slide there was -- if you're able to see that type of growth, it's a pretty compelling story. So the big question is, can you essentially see this LED lighting market increase by 5X over the next four years? I think that's the big question that a lot of investors are trying to better understand. Maybe you could help us better understand what gives you confidence that we'll see that type of explosive growth over the next four years? Obviously, there's a lot of factors involved, but what kind of input do we really need to see to see this market really adopt. Maybe when you answer that question, maybe discuss how you foresee the LED market being adopted and how that compares to the adoption of CFLs.

Question: Carter Shoop - Deutsche Bank - Analyst : Sorry for that long question there.

Question: Carter Shoop - Deutsche Bank - Analyst : When I look at that chart, though, it seems so aggressive. Right? It's like CFL is roughly four decades to get to the adoption rate we're at now. Mercury has never been that big of a deal, based on the people I talked to in the lighting market. And at the same time, I feel like the biggest hurdle for consumers and businesses adopting CFLs was the upfront cost, not everyone is an economics major and will sit there and do the calculation for total cost of ownership, where it doesn't make perfect sense now for LEDs in a lot of applications, if you're working at -- or running a Denny's in Hawaii where electricity costs are really high and you're running that boom, 25 a day I think that makes a lot of sense right now, but it's a small REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 09, 2008 / 10:40PM, WOLF.N - Cree Inc. at Deutsche Bank Securities Technology Conference part of the market. So I guess what I want to better understand is what kind of price point do we need to see for something like your LOF product to really get this market moving in the right direction and start to see that type of trajectory? Because I feel like -- I feel confident that we're going to see continued growth here in this space but seeing a market increase by 5X over the next four years seems pretty aggressive to me.

Question: Carter Shoop - Deutsche Bank - Analyst : If I can try to ask that question maybe a little bit different way, which is if I look at the two parts of your business, right, there's a chip business and a fixture business and it's the chip business where you're spending the R&D, where you have the patent. If I look at your chip business, obviously you guys are the easiest one to tell, because you're the easiest of your peers to have the financials on. You guys aren't increasing CapEx. The revenue is flat. So the growth it seems would come from the fixtures business where there is less of a barrier to entry, at least less of a technological barrier to entry. Assuming the LED business is growing now, I understand there's a huge potential for it down the road, but I guess I'm surprised to see an industry where the patents and the IPs for this super growth business, you guys aren't spending more in CapEx and your revenue's not growing. Is the pricing pressure that bad in chips and why would that change going forward?

Question: Carter Shoop - Deutsche Bank - Analyst : And second part of that question is when you look at the growth potential going forward, do you believe that the growth rate is going to -- obviously there's a much bigger dollar opportunity, the growth rate accelerates from where the industry is going right now?

Question: Carter Shoop - Deutsche Bank - Analyst : What's the current relative cost per lumen between a compact fluorescent and an LED and how fast has the brightness of an LED been increasing for the last few years?

Question: Carter Shoop - Deutsche Bank - Analyst : What's the relative cost -- what's the cost per lumen today for an LED versus a fluorescent?

Question: Carter Shoop - Deutsche Bank - Analyst : What was the TAM in those markets combined?

Question: Carter Shoop - Deutsche Bank - Analyst : John, maybe you can give us a progress update on LED backlit notebooks and kind of where Cree stands with regards to the positioning for that market?

Question: Carter Shoop - Deutsche Bank - Analyst : Great. I think we're out of time. John, thank you very much. Appreciate it.