LEDs … Declining or Growing?

Over the past few weeks I’ve been working with clients on their 2015 strategies. As an element we review much data, inquire about what has driven business in 2014 and discuss areas of focus for 2015. We’ve seen a correlation, especially for construction-oriented distributors, that lighting performance correlates to overall company performance.  We’ve also seen purchases from lighting manufacturers … and every company purchases from many, typically for specific projects.  And we’ve seen some trends regarding the “top 4-5” lighting manufacturers (but we’ll save that for another time).

But today’s stock market performance caught my eye.

The DOW was down 3.66 points, or .02%.  Essentially not much. I track some other electrical stocks, which were up .5-1.5%, so decent. And then I was surprised that Cree fell 12.03% (-4.76).  So I wondered why and saw an article titled “Cree Cites Weak LED Demand” and then another titled “Cree: Lighting products revenue will hurt us come earnings day“.

Something didn’t correlate given what I’ve heard in the marketplace … or perhaps I’m only talking to the distributors who are having growth? LEDs seem to be driving the lighting market.  It seems like a disconnect.

In reading the two articles, some comments included:

• From one article
  • Revenue fell short of expectations by $12-37M
  • Cree puts the blame on LED Products, a revenue line that is expected to decline 20 percent year over year and 13 percent sequentially to $174 million in the first quarter “due to weaker global demand than originally targeted.”
  • Lighting products revenue, however, is expected to grow 51 percent year over year. Cree estimates that segment will report around $223 million in revenue for the first quarter – at the higher end of the target “due to growth in both LED and LED bulbs.”
• From a second article
  • “Lower gross margin, doubts regarding the company’s capability to sustain its growth in the long term and rising competition from bigger players such as General Electric (NYSE:GE) are some of the key factors contributing to the negative sentiment around Cree’s stock,” Trefis analysts said in a research note.
    

Now part of this may be the distinction between LED lighting and LED components.  Cree may have challenges in being an OEM to other lighting manufacturers or, perhaps it’s lighting approach isn’t reaching the desired penetration to drive enough share.  In considering the electrical distribution business, lighting is about a $10-15 billion market (conservatively). While Cree may have been the initial LED leader, as others expand their product line-ups and have preferred reps as well as established distribution channels, coupled with there now being many, many, many LED fixture manufacturers, is that competitive advantage being minimized?

And the clients we reviewed, Cree did not appear as one of their top 20 suppliers.

So, it leads to the question of “how is LED lighting, as a product category, performing for you?”  We’ve put together a quick survey to gain some industry insights.  All input is confidential and we’re not collecting names, so let us know what you think regarding:

• Your LED performance
• What drives your LED sales?
• How much influence you have in recommending lines?
• Which are your key lines?

When you complete the survey you’ll see what others have said.

Do you see LED lighting decline in Q3? Comments re Cree? or could OEMing LED components be hindering Cree’s stock and confusing the market (and may just mean that LED lighting is increasing and other fixture manufacturers don’t won’t to support a competitor)?

Oh, and I didn’t use a graphic as I didn’t want to provide the appearance of favoritism to any manufacturer as all of the “good” LED online images were manufacturer photos.