Good afternoon, my name is Tammy. I will be the conference facilitator today. At this time, I would like to welcome everyone to the Cree, Inc. Fourth Quarter Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. (Operator Instructions) As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, August the 7, 2012. Thank you. I would now like to introduce Raiford Garrabrant, Director of Investor Relations of Cree, Inc. Mr. Garrabrant, you may begin your conference.

Thank you, Tammy, and good afternoon. Welcome to Cree’s fourth quarter fiscal 2012 earnings conference call. By now you should have all received a copy of the press release. If you did not receive a copy, please call our office at 919-287-7895, and we will be pleased to assist you. Today, Chuck Swoboda, our Chairman and CEO; and Mike McDevitt, our Interim CFO, will report on our results for the fourth quarter of fiscal year 2012. Please note that we will be presenting both GAAP and non-GAAP financial results in our remarks during today’s call, which are reconciled in our press release and financial metrics posted in the Investor Relations section of our website at www.cree.com under Quarterly Results in the Financial Information tab. Today’s presentations include forward-looking statements about our business outlook, and we may make other forward-looking statements during the call. These may include comments concerning trends and revenues, gross margin and earnings, plans for new products and other forward-looking statements indicated by words like anticipate, expect, target and estimate. Such forward-looking statements are subject to numerous risks and uncertainties. Our press release today and the SEC filings noted in the release mention important factors that could cause actual results to differ materially. Also, we’d like to note that we’ll be limiting our comments regarding Cree’s fourth quarter, the fiscal year 2012, to a discussion of the information included in our earnings release and the metrics posted on our website. We will not be able to answer any questions that would involve providing additional financial information about the quarter beyond the comments made in the prepared remarks. This call is being recorded on behalf of the company. The presentations and the recording of this call are copywritten property of the company and no other recording, reproduction or transcription is permitted unless authorized by the company in writing. Consistent with our previous conference calls, we are requesting that only sell-side analysts ask questions during the Q&A session. Also since we plan to complete the call in the allotted time of one hour, we ask that the analysts limit themselves to one question and one follow-up. We recognize that other investors may have additional questions, and we welcome you to contact us after the call by e-mail or phone at 919-287-7895. We are also webcasting our conference call and a replay will be available on our website through August 21, 2012. Now I’d like to turn the call over to Chuck.

Thank you, Raiford. In fiscal 2012, we once again demonstrated the strength of our industry leadership, delivering solid results in a very tough market, by focusing on innovation to drive LED lighting adoption. We gained significant momentum in scale in lighting with our acquisition of Ruud, which has better positioned Cree to lead the market. For the year, revenue increased 18% to $1.16 billion with non-GAAP net income of $109 million, or $0.95 per share. We finished the year strong in fiscal Q4 with record revenue of $307 million and non-GAAP net income of $29 million, or $0.25 per diluted share. Revenue was slightly higher than the midpoint of our target range as LEDs, lighting and power and RF delivered solid growth in Q4. Non-GAAP earnings per share were also on the high-end of our target range for the quarter, primarily due to continued improvement in gross margins at a lower tax rate than we had forecast. The revenue trends in Q4 were as follows: lighting sales increased more than $14 million, or 16% from Q3 as we regained momentum with our agents and saw the initial benefits of our new product launches. LED sales increased $4 million from Q3, which was driven by growth in LED components. Power and RF sales increased almost $4 million from Q3, driven by growth in both product lines. Non-GAAP gross margin increased 70 basis points to 36.3% in Q4, which was on the high side of our target for the quarter. The overall improvement in margin was driven by a combination of factory cost reductions, lower cost new products and slightly higher factory utilization. While the LED market remained very competitive, pricing declines were in line with our targets for the quarter. We continued to closely manage inventory across our factories, while working…

Thank you, Chuck. I will be providing commentary on our financial statements on both a GAAP and non-GAAP basis, which is consistent with how management measures Cree’s results internally. However, non-GAAP results are not in accordance with GAAP, and may not be comparable to non-GAAP information provided by other companies. Non-GAAP information should be considered a supplement to and not a substitute for financial statements prepared in accordance with GAAP. A reconciliation of the non-GAAP financial information to the corresponding GAAP measures for all quarters mentioned on this call is posted on our website, along with a historical summary of other key metrics. For fiscal 2012, revenue increased 18% year-over-year to $1.16 billion as compared to $988 million for the prior year. GAAP earnings were $44 million and $0.39 per diluted share for fiscal 2012 and non-GAAP earnings decreased 42% year-over-year to $109 million and $0.95 per diluted share. Non-GAAP earnings excluded $65 million of expense, net of tax, or $0.56 per diluted share from the amortization of acquired intangibles, stock-based compensation, and Ruud acquisition-related expenses. Please note that starting with our upcoming 10-K, we are reporting revenue and gross profit for our LED products, lighting and power, and RF reportable segments. Beginning with the first quarter of fiscal 2013, we will provide quarterly revenue and gross profit by reportable segment. For fiscal 2012, revenue and gross profit for our reportable segments were as follows: LED products revenue and gross profit were $757 million and $291 million, respectively, for a 38.4% gross margin. LED products include LED components, LED chips and materials. Lighting products revenue and gross profit were $335 million and $103 million, respectively, for a 30.9% gross margin. Lighting consists of sales from our indoor and outdoor LED lighting products, plus traditional lighting systems. Power and RF revenue…

Thanks, Mike. We’re focused on four priorities to drive our business in fiscal 2013. Our first priority is to accelerate adoption of LED lighting and increase sales of our indoor and outdoor lighting products. We created a name for Cree in the lighting industry as an innovator, with best-in-class products and a wide range of LED lighting customer wins. We now need to build on this momentum and further expand the audience of potential customers. We target product innovation to deliver more lumens per dollar. We target further investment in marketing and expanded sales channels to access more customers and sell the benefit of better light that pays for itself through energy and maintenance savings. Our second priority is to drive growth in our LED component product line through innovation by leveraging the SC3 LED technology into a range of new products. Our LED components’ goal is to deliver more lumens per dollar to the customer and make it easier to expand their LED-based lighting product offerings into new categories and applications. We continue to innovate and develop new products like our recently released second-generation XP-G LED, which delivers 20% more lumens per watt and 2.5 times more lumens per dollar than the original XP-G. We’re also working to expand our portfolio of value-added LED components and modules to add additional features, which simplify our customers’ product designs and reduce their time-to-market. Our third priority is to leverage our technology lead in power and RF to open a new generation of applications for these products. In the power product line, we are working to combine our market-leading MOSFET and Schottky technology to enable higher power modules for one kilowatt and higher solar, UPS and motor control applications. In RF, we’re working to leverage our GaN technology into new military applications,…

Thank you. (Operator Instructions) Our first question comes from the line of Brian Lee with Goldman Sachs. Your line is open, sir. Brian Lee – Goldman Sachs: Hi, guys. Thanks for taking the question. I guess, it seems like the agency issue from last quarter has been resolved. Is that a fair read? And I guess how shall we view the lighting systems growth trajectory as we move into fiscal 2013? Is double-digits still the right growth rate to expect? And then I have a follow-up.

Yes. So, I would say that we definitely – as you can see in the Q4 numbers, that the big transition we went through in the third quarter is definitely – we’ve got the momentum back, and we’re moving in the right direction. With that being said, we changed a lot of agencies. So, I would hope, and we would target that, we would actually continue to get some additional momentum going forward, as the new agencies get more experience and build their product pipeline. But generally speaking, we’re moving in the right direction right now. In terms of the lighting growth, we continue to target pretty significant growth in the lighting product line. We believe as the paybacks come down that we can certainly see good growth over the next year, and that’s what we’re working on right now. And then you had a follow-up? Brian Lee – Goldman Sachs: Yeah. Just on the gross margin outlook, I was wondering what are the drivers of the 100 basis point uptick in 1Q, and how can we think about the near-term trend in margins from those levels? Thanks.

What I’d tell you is, right now the growth margin driver is really a case of a combination of lower cost new products becoming a larger percentage of the business, so that’s helping us really across the product lines. And then continued cost reductions at the factory level. We saw a little bit of benefit in Q4 from utilization, but really that’s becoming less of a driver, at least in the near term, and it’s more about just factory cost reductions, process improvements, and new products coming online. And so, obviously we’re targeting 37%-plus or minus this quarter. And our goal is to keep finding incremental improvement, but I really don’t have a forecast beyond this quarter. Brian Lee – Goldman Sachs: Okay. Thanks.

Sure.

Thank you. And our next question comes from the line of Chris Blansett of JP Morgan. Your line is open. Chris Blansett – JP Morgan: Chuck, can you hear me?

I can hear you now, yep. Chris Blansett – JP Morgan: I’m sorry. I wanted to get a feel for your thoughts on the longer term operating margin targets for the company, because right now, operating margins are relatively low. I wanted to get a feel for how much of this is caused by the difficult pricing environment versus, you’re investing forward for future revenue growth?

Well, I think there are two things, Chris. Obviously, if you look at the last year you can see that, actually over the last 18 months, the LED product line specifically has gone through a very competitive market cycle. So, we had lots of capacity come online. Frankly, I think if you look at our margins versus everyone else from a gross margin standpoint, we came through that really well. And as I think I said earlier, it’s really a strength, of I think keeping product innovation ahead of the curve. So, in my mind, it starts with gross margin. We’re trying to make incremental improvement there. From an operating margin standpoint it’s really a case of how does the top-line come on, and we’ve been investing in both R&D and really sales and marketing, I think as you see last quarter and now the targets for the quarter ahead, we are starting to target some incremental improvement, and that’s going to vary a little bit in the near term just with the rate of revenue growth and gross margin relative to those two investments. So, I think we’re kind of in a, at least in a relatively stable place here in the short term. I would say over time, our target is that as both R&D delivers products that drive higher revenue growth and the sales channel becomes more efficient, we would target leverage from both of those in the mid to longer term. Really short-term though it’s about how do we hit the Q1 targets and build on that. Chris Blansett – JP Morgan: I guess the second question I had was tied to the announcement of the big win in the municipality in China. I think there’s still a lot of detractors out there who don’t think Cree is going to have a long-term presence in China. So, I mean, how do you feel about the project pipeline out there, and your position given that now we have a whole new wave of Chinese competitors?

Look, I think China has been a big market for us. On a percentage basis with the growth in lighting, it’s actually become a little bit less over the last year, but it’s still an important market for us. We continue to invest there. And what I see in the near to mid-term is that LEDs that deliver a benefit in terms of lumens per dollar, especially in the outdoor markets, and LEDs that work as they’re supposed to still drive a lot of these projects. When you’re looking at capital or infrastructure investment, one of the things that happened in China a few years ago is there was a lot of initial failed projects that tried to use local LEDs. And so I still think there is a benefit for certain applications, and we continue to see that as an important market for us going forward. Where does it go longer term? I think it’s a little hard to tell, but in the short term, we’re really competing for the higher performance applications anyway. So, I think in that case, we feel pretty good about the opportunity to continue to do that over the next year-plus. Chris Blansett – JP Morgan: All right. Thank you.

Sure.

Thank you. And our next question comes from Satya Kumar of Credit Suisse. Your line is open. Satya Kumar – Credit Suisse: Yeah, hi. Thanks for taking my question. Chuck, you mentioned that you saw some weakness on the LED business given by the macro issues. I was wondering if you could add a little bit more color geographically, are you seeing this mostly concentrated in Europe, or is it also in Asia, any color there?

Yeah, what I would tell you is that there’re really two pieces to that story. First, the new products we’re very happy, because the new products we’ve introduced kind of a little after the first of the year, we are seeing the momentum there. So, we’re getting traction getting those design wins. But there’s kind of a – I’d call it a just a dampening effect from the macro right now in terms of its – there’s just some headwinds kind of, I think it’s as much as anything affecting customers affecting kind of people’s outlook on the business in the short term. Where is it at? We definitely see it in Europe. We see it in Asia. I’d say the North America is less than, compared to the rest of them, but definitely we see it’s more than just a European thing, and so that’s why I would put it in the macroeconomic category for now. Satya Kumar – Credit Suisse: Okay. And then a quick follow-up on gross margins, I appreciate the extra disclosure. I think that’s very helpful. Can you give us a sense from where the gross margins are in the June and September quarters relative to the fiscal 2012, just so we have a starting point for modeling. And following up a little bit on Chris’ question on the long term margins, where should we think system gross margins can – lighting system gross margins can go in the longer term, is 3% sort of the right level or (inaudible).

I’m going to have to apologize. You broke up partially through that question. So, can you kind of give me the quick version of what you wanted on that? Satya Kumar – Credit Suisse: Yeah. I just wanted to know if your June and September gross margins by products are similar, roughly in the same zip code of the fiscal 2012 numbers you gave? And longer term, what’s the outlook for system gross margins, is 30% the right level or should it be higher?

Yeah. So, I think those are annual numbers. What I would tell you is as we finished the year, and you can see that in our total gross margins, we’re seeing overall gross margin improvement pretty much across the business as we exit Q4. And I would target incremental improvement across those product lines as we head into September. So, right now, the target is incremental. We try to make incremental progress each quarter. Obviously, there’s going to be some variability, that plus or minus, but our goal as we go through September is, we’d like to see each of those product lines move forward. And the reason we think that’s possible, it’s a combination of both things we can do to reduce costs, but also as some of the new products come online; many of these products were targeted to be fundamentally lower cost to begin with. So although we are reducing the price, we also have a benefit of the fact that they’re essentially lower cost platforms to begin with. And so, I would say if you think about those product lines, you should assume that over the next year, we’re targeting to make incremental improvement in all three of them.

Thank you. Our next question is from Amir Rozwadowski. Your line is open, sir. Amir Rozwadowski – Barclays: Thank you very much and good afternoon, folks.

Good afternoon. Amir Rozwadowski – Barclays: Chuck, if we could talk a bit more on the gross margin front. It seems as though at this point you folks have made a lot of efforts in terms of process improvement to stabilize your gross margins. Where do you think ultimately that leaves you in terms of underlying improvements? I mean, how much is left, I should say, from process improvement in order to drive gross margins? And then, if we think about sort of the next leg in improving your gross margins, is that really very much volume dependent?

Yeah. So, I understand the question. I think you’re probably viewing the business a little bit too – it’s not that discrete is best way to think about it. So, if you look at the improvements over the last three quarters, or last two quarters, it’s a combination of process improvement, actually just sheer cost reduction activities and new products. So, we really got three variables that are working together. And I would say that – and we got slight incremental benefit from volume, each of the last few quarters, but it’s a relatively small piece of that. Going forward, there is – we’re going to continue to work on process, we’re going to continue to work on cost, and we’re certainly not done from a new product standpoint. I think this is maybe where people – we sometimes don’t communicate this maybe as effectively as we intend to, but – so, when we come out with a new LED that’s twice the lumens per dollar, that means we’ve fundamentally redesigned an LED that has significantly lower cost. And we don’t stop, right. We’re going to continue to try to work on innovation and try to increase lumens per dollar. That same applies to our system, so this year, we came out with a series of offers that were half the price and half the cost of the ones we were selling the year before. So, there is really a ton of innovation, whether it’d be at the product design level or at the process design level. That is something that we would continue to think of as a major driver. I do think that volumes help. But when you think about volume helping, keep in mind that the biggest driver for volume is at the chip fab level, and while that does benefit LEDs and does benefit systems, it’s a piece of those businesses. So, I don’t look at any one of them, I look at it’s actually as a combination of those things that we have to keep doing as we try to build momentum. Amir Rozwadowski – Barclays: That’s very helpful in understanding sort of the different elements there. Perhaps one other element that I’d love to get a little more color on is sort of where you see sort of pricing levels going? Obviously you folks are active in terms of introducing lower cost and lower price systems. I was wondering if you could give us a little bit more color on the chipset side as well. Are you seeing easing pricing declines in this kind of environment, or how should we think about that?

What I would say is that the LED business, which includes components and chips and all that, I would say that it’s – Q1 is targeted to be similar to Q4, and Q4, I think, we said it remains competitive. And so I think it is still a very competitive marketplace out there. It’s one that – it’s been this way for a while now. I think because of some of the new product things we’ve done and some of the other cost reductions, we’ve been able to work through that and still deliver solid gross margins. But I would say right now, I don’t see a significant change to the positive or to the negative; it’s really targeting to be in a similar range in Q1. And I would expect it will be similar like this for a while just because if you look at capacity versus total demand, while we’re increasing demand for LED lighting, there’s still enough capacity, I think, the market stays competitive. Amir Rozwadowski – Barclays: Great. Thanks for the incremental color.

Sure.

Thank you. Our next question comes from Andrew Huang of Sterne Agee. Your line is open, sir. Andrew Huang – Sterne Agee: Thank you. For lighting products, can you give us a sense of what percentage of revenue goes through agencies versus direct?

Boy, Andrew, I don’t have that breakout in front of me. What I can tell you is I think the agencies are probably the biggest percentage of that; I’m pretty sure about that. But we do have a relatively sizable direct business, and direct would be through a number of different ways. It’s not only – obviously, we sell products to the Home Depot, but we have a national account sales team, and that would also be direct business. But I would say today, agent/distribution would be the bigger of the two pieces. I don’t have an exact number for you. Andrew Huang – Sterne Agee: Okay. And then I think longer term, there are concerns out there that as lighting products increases as a percentage of total revenue, that your SG&A will have to ramp up significantly. So, can you comment on that?

Andrew, I think it varies by a couple of different factors. So, different channels have different SG&A costs, and so I think it’s going to be partially a mix of where that business comes in going forward. But you know, generally speaking, when you sell through agents or distribution, there is incremental sales cost for incremental sales dollars, but they generally track together. So, do I think it – I don’t see it growing out of proportion with the revenue growth in the lighting segment, but obviously, lighting does come with some amount of costs especially through those channels. With that being said, when the direct side of the business is growing faster, you get that with a – less of an SG&A increase. So, it’s just going to depend on the mix going forward, and my guess is there’ll be some variability quarter-to-quarter, because there’s enough project business both in the national account direct side and the agent disti side that you’re going to get some variation from quarter-to-quarter there. Andrew Huang – Sterne Agee: Thank you.

Sure.

Thank you. Our next question comes from Ahmar Zaman with Piper Jaffray. Your line is open, sir. Ahmar Zaman – Piper Jaffray: Hi, thanks for taking my question. Just going back to gross margins, your gross margins for the lighting segment surprised me at about 30%. Can you give us some color as to where they have been historically, and what was the impact from the agency transition in the March quarter on gross margins?

Yeah. So, what you’ll do is – I know that in the K – I don’t have them sitting here in front of me at the moment, but in the K, you’ll get the historical numbers. I think we do a comparison for this year versus 2011 and 2010. I think what you’ll see is some incremental improvement, very – it’s been moving up slowly over the last couple of years, is my sense. And don’t – I don’t have the exact numbers in front of me, but I think what you’ll see is very slight incremental improvement over the last couple of years. I think what you’ve got to keep in mind is, is that we are – we’ve been in a really in a race to drive innovation to where we could get payback down into that less than two-year kind of frame. And so we’ve been basically taking all of our product innovation that results in lower cost products, and turning it into lower price products because we’re really in the – still in this early stage of trying to open up markets for LED lighting. And frankly, up until the last – probably in the last – somewhere in the last year, LED lighting was still not viewed as a mainstream alternative in a lot of places. Now, I would tell you I think that’s starting to change, and it’s becoming considered a lot more. So, what I would hope is that as the innovation continues, that less of that innovation over time gets turned into just price reductions, and hopefully, some of that helps us drive some incremental margin improvement. So that’s kind of the view going forward. But remember, when LED lighting over the past couple years has been – two years ago, it’s many times higher than conventional technology, now we’re getting it down into a more reasonable multiple. But until we got there, really it was about how do you get to the point where you drive real adoption? And so that’s kind of been the pricing/cost strategy on that business. So, it’s really not too different than what we were trying to do strategically with the product line. Ahmar Zaman – Piper Jaffray: Thanks. And then you mentioned China. Can you give us any update on what to expect or when to expect Chinese indoor lighting subsidies, potentially this year?

So, there’s obviously – there’s been less speculation recently than there was three months ago. What I’d tell you we’re still watching. We’re working – obviously, that’s really an LED sale to the local lighting companies for us. I can’t give you any real tangible update from what you heard the last time. So, it appears to be there’s things come in the works. So, I’ve heard various speculation and right now we’re just focused on the design wins, but nothing real big to push it one way or another on that. Ahmar Zaman – Piper Jaffray: Thank you.

Sure.

Thank you. Our next question comes from Vishal Shah of Deutsche Bank. Your line is open.

Hello, do you have a question?

Please check your mute button. Vishal Shah? Okay, we’ll –

Let’s go to the next question.

Certainly. One moment. Our next question is from Smittipon Srethapramote from Morgan Stanley. Your line is open. Smittipon Srethapramote – Morgan Stanley: My question. Can you please provide some color on revenue split between industrial, commercial and residential end markets, and how you see that competition trending in the next couple of quarters?

And are you talking specifically about one of the product areas? Are you talking about LEDs or the lighting segment? Smittipon Srethapramote – Morgan Stanley: For both. That’d be for both, that’d be great.

Yeah, so what I would say is that the vast majority of the LED sales and the majority of our lighting sales are all going to be for, what I’ll put – I’ll call it commercial-industrial right now as kind of a big bucket. So, residential is a relatively small percentage. I don’t have an exact number for you, but I would make that the smallest piece of that. And it’s just – it’s not a big piece of it right now. In terms of commercial-industrial way I would generally classify those is if you think about outdoor lighting, it tends to be what I would call more industrial. I guess you can call it in some case as commercial, but a lot of the municipal projects I put more in the municipal category versus industrial. And then the indoor tends to be more commercial. And I don’t have an exact breakout for you, but my guess is, is that the outdoor, or what I would call the industrial-municipal is probably a little smaller than the indoor piece of that if you combine it between both the LEDs and the lighting segment. And probably within our own product lines, it’s fairly similar. So, outdoor-municipal is an important piece, but probably indoor-commercial has probably become the largest one of those three. Smittipon Srethapramote – Morgan Stanley: Great. Thank you.

Sure.

Thank you. Our next question comes from Carter Shoop with KeyBanc. Your line is open. Carter Shoop – KeyBanc: Great. Thanks for my questions here. First off, thanks for providing the incremental color on gross margins, the more disclosure, the better. And the first question I have relates to gross margins. Given the mix shift that we have and the better growth coming out of the lighting business versus components, which will probably continue here for at least another year, does it make sense to revisit the kind of medium-term gross margin target for the company? It seems that one of the problems with the stock over the past couple of years has been that investors continue to want to see a gross margin increase by a couple hundred basis points per quarter, which is – it’s difficult to do in this environment. And given the mix shift that you have here, does that make sense to revisit that target and talk a little bit about it?

Carter, at this point, not spending much time on those targets. They’re out there. Frankly, what we’re focused on is really trying to drive that incremental improvement. So, at some point, we may do that, but really our focus has been really how do we try to drive momentum in all three product lines. And yeah, we might do that at some point, but haven’t spent much time on that recently as we’re just really trying to drive that incremental improvement each quarter right now. So, it’s something we’ll have to think about. Carter Shoop – KeyBanc: Fair enough. As a follow-up question, just on the acquired inventory write-off, can you comment on what that was from, and if we should expect additional charges in the future from that?

Yeah, so if you look at what that was, it has to do with some components that we – when we bought the business that we had acquired. They were basically being qualified, they were a new design. In the end, we weren’t able to put those into the product as we had expected, so we had to take that charge in this quarter. I think given that we’ve just gone through the end-of-year audit, feel pretty good about where we sit today. Obviously, the business has puts and takes each quarter, but right now we feel pretty good about where we’re at. Carter Shoop – KeyBanc: Okay. Thank you.

Thank you. Our next question comes from Jed Dorsheimer of Canaccord. Your line is open, sir. Jed Dorsheimer – Canaccord: Hi, thanks. Chuck, don’t mean to beat a dead horse here, but do have a couple gross margin, a little bit different than some of the previous. I guess just in the systems business, the 31% – and maybe there’s been some modest improvements, but if we look at some of your competitors in the North American markets such as – now Eaton – but Cooper Lightings business or Acuity or Hubbell, even if we – there are some slight differences in terms of, including freight or, not including freight and stuff like that, there’s about a 10 percentage point difference in terms of – or there’s a large difference, large enough where it begs the question, why are the Ruud and your LLF business so much different than some of the competitors? And at the same time, does this have to do with the channel, or is this a function of you’re really trying to go out and take market share?

Yeah. Jed, I think it’s really a strategy difference. So, those guys have obviously very large, established businesses of traditional products whether it be through distribution or through the agents. And so in those businesses, they’re in a different situation where they’re going to – they’re able to sell LED lighting as an alternative to a traditional product, and they’re going to position it differently. We’re going in, and have for the last couple of years, we’re going in saying you don’t even need to consider traditional, we want to take LED lighting to make that a – we want to make it so obvious you should go to LED lighting you don’t even consider the old technology. So I think we’ve been much more aggressive in how we’ve positioned our products and our technology, and it’s really a difference of being a pure play trying to drive people to go to LED from the conventional versus – one of the large conglomerates is going to play it as more of it’s a choice. And so I think that’s what you’re seeing the difference. I’m not sure I understand what their specific LED margins are. The other difference is, obviously is we have the highest percentage by a long shot of LED sales to total sales. So, you’re getting a better picture of how our LED biz – product line looks probably than the other ones. But again, I think your initial instinct is right, it’s more of a strategy difference than anything else. Jed Dorsheimer – Canaccord: It’s kind of what I had thought, and maybe next week at our conference, we can discuss it in more detail. But just as a follow-up, if we look at the strategy, on streetlights you’re in some cases 50% of the price point of some of the competitors, so I guess it really begs the question at what point at least in your strategy do you feel like you don’t have to go for that market share? I guess, when the leverage – when do you start seeing that where you can start to monetize that?

Yeah, Jed, I think it’s going to depend on products and categories. So, I think if you look at both indoor and outdoor, for example, and you get into some of these markets whether it be a commercial LED down-light versus a commercial fluorescent down-light, they’re already the same price, right? So you’re going to see that business change in the near term. I think in the outdoor space, depending on the, depending on the market and the segment, with the new XSP streetlight, and it’s, depending on what it’s competing against, you’re going to see it being very close to the conventional technology, so we’re not – it’s not going to have nearly the same pricing strategy as one that we might be chasing a very low cost incumbent. And we’re not – we definitely want to win business against what the best thing to compete is, but our goal is to go after pretty much all the major conventional lighting technology. So my guess is in certain categories we should start to see some benefits over the next year, but at the same time, there are other categories will continue to be pretty aggressive. But when you net it all out, the goal is if we can make some incremental improvement as that mix shift to the more, what I’ll call, the newer product that should give us some more margin leverage. You’ll hopefully see that flow through into the bottom line. Jed Dorsheimer – Canaccord: That’s helpful. Thank you.

Sure.

Thank you. We do have Vishal Shah with Deutsche Bank is back in the queue. Vishal Shah – Deutsche Bank: Hi. Thanks for taking my question. Just wanted to follow up on the question on the indoor versus outdoor lighting revenues in the last quarter and the going-forward quarter. Where do you think the growth is going to be faster, is it going to be the outdoor lighting or the indoor lighting segment? And across different regions do you see different trends? Or is it pretty much the same across both the U.S. and outside the U.S.?

So, Vishal, we’re going to have a different view about the U.S. market than the other ones, because in the U.S. we’re not only selling LEDs, but we’re actually in the market directly with our systems business. In the U.S., I’d say they’re both growing. They’re going to vary a little bit quarter-to-quarter, but we see good project momentum, both for indoor commercial applications, as well as the outdoor municipal. And, so, I don’t know, I don’t have a different growth rate for the two of them. I would say both of them have good project momentum, and now we’ve just got to convert that into orders and revenue. In terms of a more global view of the business, I would say it varies. I’d say in Europe we see strength both in indoor and outdoor. In Asia I think outdoor has been ahead of indoor in most markets, but then you’ll get into places like Japan, where in Japan actually indoor is ahead of outdoor. So, there’s unique market factors, depending on the region that are going to move that between the two. So, I think what we saw in China was outdoor is ahead of indoor at the same time, that in Japan is the opposite. So, it’s hard to give you one number, because it’s going to vary by region. At this point I’d say we’re working on both sides of it. Vishal Shah – Deutsche Bank: Okay. Thank you. And then one other question on just the overall utilization rate improvement over the last quarter, can you quantify that? And then how shall we think about that going forward, especially considering that your inventory levels have come down significantly? If I were to assume that you should be in a position to see a bigger impact on overall utilization rate. Thank you.

What I would tell you is that we saw some small incremental improvements last quarter, and you have to be a little bit careful because when we talk about Cree, we actually have factories that go from making wafers to making chips to making components to making lighting systems. And, so, when we talk about that rate, typically what we’ve been referring to is the chip factory because wafer fab tends to be the semi metric of that. And, so, I’d say in the wafer fab slight incremental improvement last quarter. But keep in mind that the components factory obviously runs at a much higher utilization rate, as well as the lighting factory. So, there’s some variation. What we’re targeting as we go forward, is to try to grow the top line and get incremental improvement, but no big – we’re not forecasting it right now any big shifts in the near term. Vishal Shah – Deutsche Bank: Thank you very much.

Thank you. Our next question comes from Dale Pfau with Cantor Fitzgerald. Your line is open, sir. Dale Pfau – Cantor Fitzgerald: Good afternoon, Chuck. Thanks for taking the question.

Hey, no problem, Dale. Dale Pfau – Cantor Fitzgerald: When we take a look at your LED business in particular, you’ve introduced some pretty spectacular products at the beginning of the year and the design in cycle sometimes takes a while to get up and rolling. Are we in a transition phase with some of your customers here where the new products haven’t quite yet hit, but the demand is coming in, but perhaps there’s some push back on the older products? Could you give me a little color on how you see that transition going? Because I know some of the new ones are – your sales guys have been pushing your customers to replace the older stuff pretty rapidly.

Yeah. So, look, there’s definitely a transition going on, Dale, but I think that probably it affects us a little bit – there’s always transition and timing with new products as you’ve watched over the years. We’re actually having good success getting it designed in and starting to ramp up those new products. One of the things to keep in mind is the transition is partially a function of when the new product is twice the lumens per dollar, that means that you’ve got to sell double the units, right, to stay even. And, so, what we’re actually doing is gaining – I think the unit numbers are doing well, but because of this transition to a fundamentally lower cost product, in addition to what’s going on in the macro, you’re seeing some of the flat plus or minus kind of guidance going on right now. But in terms of customer acceptance and winning new designs, we’ve been very pleased with that. And – but we have to work through the two. And if the macro wasn’t pushing against us a little bit right now, I think we’d at least be seeing some, at least some modest incremental growth even through the transition. Dale Pfau – Cantor Fitzgerald: And then could you talk a little bit about the competitive landscape? Any major shifts? And how has the landscape changed with the introduction of your new products?

Look, I think it’s just another step in the process of driving – giving the customer more lumens per dollar, and it’s just another part of what I think we always knew was coming, which is LEDs are going to get cheaper so that we can truly enable lighting. So, I think right now it remains. Competitive landscape hasn’t seen any dramatic changes, plus or minus, in the last quarter. Obviously, there’s enough people out there. You can see their own comments. But, I think overall the LED business remains one where you’ve got to work pretty hard. And, frankly, new technology with better price performance or some better performance is still a big differentiator in the market. And, so, we’re going to stay focused on the innovation side. I think that’s where our benefit is. And at the same time, we’re going to continue to compete for some of the mainstream business just because I think it’s important for the model going forward. But no real big shifts one way or another right now. I think our expectation of this quarter is more of the same. And at least for the near term I would expect it to remain a pretty competitive market. Dale Pfau – Cantor Fitzgerald: And, one last one on your GaN business, power and RF, how do you see that business evolving next year? There’s been a – I’ve seen an awful lot of new GaN people pushing products on the market, reaching some critical acceptance levels. How are you viewing that one?

I would separate power and RF into two separate categories. So, in RF, it’s definitely a GaN-oriented business, and ours has been primarily military. But I think I commented earlier, there’s been some acceptance in some initial wireless platforms. We’ll see how that plays out. I think though that, that business – maybe some incremental growth over the next year, but I think that’s a little bit longer-term. And the power side, while there’s lots of people talking about GaN power devices, it’s silicon carbide power devices that have the real traction in the market today, whether it be Schottky diodes or MOSFETs. And, so, really a lot of our energy is around driving that design activity. I think in the next six months it’s a lot of design activity and then, depending on the success of that we can start seeing some incremental growth in that business as we get into the second half of the year. And that’s kind of where the focus is. But as you get to – when you combine a diode and a MOSFET you start to change the dynamics a little bit. You start to talk about pretty high power stuff. So, it’s not just discrete, but it’s enabling our customers to take both the diode and the MOSFET to build higher power modules, which I think are going to be pretty critical for some of what I think will be the bigger applications long term. Dale Pfau – Cantor Fitzgerald: Great. Thanks, Chuck.

Sure.

Thank you. Our next question comes from Aaron Chew with Maxim Group. Your line is open. Aaron Chew – Maxim Group: Hi, gentlemen. Good evening. Thanks for the question.

Sure. Aaron Chew – Maxim Group: Wondering if you could discuss how the improvement in lumens per watt impacts your costs? I mean, it’s clear how clearly boosting your lumens per watt makes better products. But could you maybe help us, just get our hands around how that may impact your lowering costs? I mean, is there a way to quantify it? Is there some way to maybe offer us a bit of a rule of thumb if we improve lumens per watt from 150 to 200, that would imply maybe some x percent reduction, everything else being equal?

Yeah. Unfortunately, I don’t have a great way to do that for you because there’s a couple of different variables. Obviously, lumens per watt generally tells you how much efficiency you’re extracting out of the base material. You’ve got to be a little bit careful because when you get into cost, it’s lumens per watt, per area of the material that you make. And, so, really the better metric, and there’s nothing – I can’t give you a formula for this, what you want to know is not just lumens per watt, but how many lumens per wafer are you generating, because that’s going to drive the cost factor that you’re looking for. So, for Cree, when we come up with higher lumens per watt, we usually do two different things. We come out with products that push the limits of efficiency, which do have real system benefit, depending on how you want to design a system, but then it also drives the LED business to also produce LEDs that sometimes are just more lumens per dollar, in other words, convert the efficiency instead of into a performance benefit, into a cost per lumen benefit, because you can use, for example, potentially less chip area to build that device. And, so, we’re really using both variables. And what I would tell there’s in the businesses we serve, which is a pretty wide range of the lighting market, different applications and, frankly, different companies approach the design differently. So, some go with – they want the best lumens per dollar, but they’ll use lots of LEDs to get there and solve the problem one way. And we have other customers that want to limit the number of LEDs because they have some cost advantage a different way. And, so, in general, it gives us efficiency, but more importantly lumens per watt generally drives cost per lumen, which is the other factor of it. Depend either – and you can take the system level benefit or LED benefit. And we’re just playing on both sides of that right now. But no good number for you because you can’t just use that. In addition to that, we’re doing things from a profit standpoint to build them cheaper. So, part of the leverage just comes from getting better maybe new processes to accomplish it. Aaron Chew – Maxim Group: All right, fair enough. That’s very helpful anyway. Lastly, real quick, any update on the CFO search or timing?

I can tell you that we’ve got lots of interest. I’ve met a number of interesting candidates, but we’re really pretty early in the search process. So, obviously, we’ll update you as we go along, but right now it’s just, we’re building momentum there, but it’s still pretty early. Aaron Chew – Maxim Group: All right. I appreciate the question. Thanks, much.

Thank you. I’m showing we have time for one more question. Our last question will be from Joseph Osha with Bank of America. Your line is open. Joe Osha – Bank of America: Wow, I made it.

You did. Joe Osha – Bank of America: Okay. Can you talk a little bit about what your thoughts are on the retail lighting replacement market? I know you had talked some about how the margins there were not attractive, but you’ve got to balance that against the need to fill a fab. What are your thoughts about that market, and what you want to do in it?

So, look. Obviously, the primary focus of our LED business has been to serve commercial/industrial. It’s actually, in the end the real big – the big market. And it’s the same thing really for our systems business. Now, I say that, but we do have, in our systems business we have done a couple of products that we sell – that Home Depot sells under their brand, because we do want to enable that market where it’s appropriate. I would tell you we have some customers today in different places around the world where our LEDs are designed into their products that are consumer or retail-based. It’s going to vary. It’s not the primary part of our business, but I think we stay pretty engaged there and continue to look for opportunities to enable customers to make products that really work. My personal view – so, we have activity there. It’s not a big driver of the business at this time. What I would tell you philosophically is that I think one of the reasons that the market is okay, but hasn’t moved really to that next level is, is it’s a combination of – I think, in my personal view consumers want a bulb that works pretty much like the one they have today, and they want the light to come out in all directions, and they want it to dim and do the other things they would expect it to do. And, so, I think that’s our first challenge as an industry, we’ve got to come out with products that really solve that problem. And then second, I think that we’ve got to continue to find ways to hit different cost/price points. So it’s a nice business. It’s obviously the LED bulb segment and grown over the last year, but at the same time, there’s another step away that has to have some other things happen to it. At the end of the day, it’s the old rule of thumb. Most new technology doesn’t really gain big adoption until it’s better than what it replaces and the value proposition makes sense. The consumer is pretty straightforward on that. I think we’re just not quite there. Some cool products. We’ve got lots of interesting stuff coming out, but I just think there’s more innovation that needs to happen to really make that, what I’ll call mainstream. Joe Osha – Bank of America: Thank you. I have your products in my kitchen and I think they’re great.

Awesome.

Thank you. I’d like to turn it back to you, Mr. Garrabrant, for any closing remarks.

Right. Thank you for your time today. We appreciate your interest and support and look forward to reporting our first quarter results on October 16th. Good night.

Good night. Thank you.

Ladies and gentlemen, this does conclude the conference. You may all disconnect at this time. Everyone have a great day.