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No. of Recommendations: 39
And this time, it's not from me. :-)

I received this in an email from someone who isn't (yet) registered, and asked his permission to post it here. (I did some slight editing for readability.) Any comments are welcome:

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re: post 2575 on TMF,

I haven't played with foolish theory much but, I think
that a lot of the problem in defining CREE
within the parameters discussed is that CREE has
potentially captured so much, so early that it
is very difficult to compare. I think of CREE as
being a conglomerate that is already showing
many of it's eventual business segments, as opposed to
a GE that started with few areas and broadened out
through luck, timing, and an excellent management
history.

CREE, through luck, timing, beneficial gov
interference (rare example), and seemingly high
quality
management has captured a place in the marketplace
roughly equivalent to an imaginary situation
in which Intel had invented the process to economically
produce silicon wafer(with IP rights), and had an
immediate and mature, but growing market to sell to.

If broken down into different business segments, it's
surprising how powerful each of these businesses
may become;

CREE Materials: The only company in the world
producing "virtually defect free" electronic grade
silicon carbide wafers (The quote is from Pengally at
Key West, this week re
stated by hunter in Boston, they refer to the two inch
substrate), a material that the electronics
industry has recognized as a superior material and
aggressively sought after for nearly fifty years.
Westinghouse demonstrated a 3 inch SiC crystal
several years before CREE..they now buy from CREE,
Same thing with Northrup Grummon. ABB, and
Siemens have been trying for a long time..they buy
from CREE. I think that some of these companies
could produce. Just not at a good price, and not
without infringing on CREE's patents. Hunter
believes that they are at least 6 years ahead of any
competition. CREE also has done work with
AlN and diamond film on SiC. The "holy grails" of the
semi materials industry were, and still are;
bulk single crystal diamond, bulk single crystal SiC,
bulk single crystal AlN, and diamond films.
Pretty much in that order.

CREE Lighting: CREE sells LED chips for less than the
material cost for sapphire based chips.
Hunter says that while it may be difficult, they
intend to deflate the price of nitride based
LED's by %50 in the next year while maintaining
current profit margins. All this while improving
brightness to be the brightest in the world (Hunter
again). Because the majority of applications
for b/g/w LED's are extremely price dependant, the
greater share of the market that all the other
players are supposedly drooling over cannot be reached
until LED chips are sold for less than 10
cents apiece and produce at least 10L per watt. In a
research report, Banc of America opined that
CREE was close to 10 lumen per watt. CREE's cost of
SELLING a LED chip to include SG&A is about
18 cents. According to UTCI (the only sapphire based
company to ever give a public estimate) the
material cost alone of a single chip, for them is "20
- 40 cents", per the CEO. The only current,
credible threats are a sudden breakthrough in bulk
single crystal GaN growth, or GaN Pendeo epi
on Si. Thus far, bulk GaN isn't working, and by the
time Nitronex gets GaN on Si chips to market
(if ever), CREE will be selling b/g/w chips under 10
cents. To be successful (and not a temporary cash
cow), this portion must
sell at commodity levels but, CREE is on the growth
ramp with this future commodity and can divest
it after it matures as a very large company on it's
own, or keep it as a slow growth cash cow for
an even bigger conglomerate.

CREE Microwave: In the intermediate term, by far the
most potentially explosive segment. Of
current substrates, SiC has the best demonstrated
lattice match for GaN, and dissipates heat very
well, allowing higher temp operation. GaN is needed
to push the frequency bands above current
materials and, it is needed now. GaN on SiC allows
all of the high power infrastructure to have
fewer components, thus making them smaller, more
reliable, and cheaper. Also, with current
comparable technology, the push to higher freq bands
will require GaN in the handsets/PDA's also.

CREE Power: Perhaps the most important segment for
CREE but, most of CREE's growth may very well
happen before this becomes their killer product line
(market willing). While initial products
may be available very shortly, mass use by utilities
may be a couple of years out (they have a
tendency to only upgrade as the old equipment breaks
down), current "growth" attempts by utilities,
and a potential oncoming energy crunch may speed this
somewhat. A very important caveat; electric
vehicles could benefit greatly from SiC, and Detroit
may move faster than the utilities (while a
great deal of this advantage belongs under "CREE
Lighting").

CREE Logic: (hasn't been formed by the company, yet).
Exceptionally non volatile memory.
SiC may offer benefits with complex logic circuits as
engineering demands increase, as some of
the love affair with computers that need to babied
somewhat declines, and the demand for very
robust semi's that will operate reliably without being
cooled even when embedded in cars that sit
in the sun in Georgia during the summer. Not to
mention simple logic chips embedded directly in
the engine/motor, transmission, aircraft engines, etc.

Each one of these separate companies easily support
current market valuations, IMO. CREE is a
super conglomerate in the making. It is now their
game
to lose.
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I have enjoyed the information on Cree. I have looked at this company for a while now and think that is has great prospects. My concern however is that its ROE does not look too great. I wonder if you have any opinion on this. Any help would be appreciated.
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That "anonymous" message was excellent. Makes me want to buy more right now. Get that Creetin registered, dammit!!

; )

P.S. Unless I discover something I have to have, my next cash infusion will be going to CREE. I need more!!!

P.P.S. I smell another August split coming.
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No. of Recommendations: 1
markoose wrote:
P.S. Unless I discover something I have to have, my next cash infusion will be going to CREE. I need more!!!

I started looking yesterday at GlobalStar (GSTRF). Today it went up over 20% !!! Sometimes I feel like I am being toyed with....

But I sure do love me that Cree! I think I have enough, though, proportionally speaking. (Please don't hate me because I'm heretical.) ;^)
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Does anyone have any insight as to whether or not SiC has any optical properties? Any and all answers appreciated. My second post here,

Roughbeast
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Roughbeast writes:
Does anyone have any insight as to whether or not SiC has any optical properties? Any and all answers appreciated.


Are you speaking in the chemical sense of stereoisomers or do you mean suitable as a material for optics?

I poked around on the web to find some answers but was unable to find anything that directly answered either of those questions. From my readings, it appears that SiC as a crystal by itself has a tetrahedral or hexahedral symmetrical structure so chemically it would not be considered optical.

As far as physically optical, well, we know that SiC crystals can be cut into diamond surrogates (popularly called Moissanite). That means it's transparent and could conceivably be cut into lenses if anyone ever determined that this were the solution to any existing optical engineering problem (which I do not believe to be the case).

It's important to remember that SiC needs to be doped with other ions in order to have the commercially needed electrical properties. When we talk about CREE's products we are not actually talking about SiC crystals but crystals based on an SiC matrix. Some understanding of crystal-matrix doping provides valuable background toward understanding semiconductor function and fabrication.
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Does anyone have any insight as to whether or not SiC has any optical properties?

You can see through it. Someone is bound to make an interesting electronic device based on this.
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No. of Recommendations: 1
The reason the ROE is sub-par right now is because of the secondary offering back in January. Shareholder's Equity jumped from $142 M in December to $426 M in March while Net Income rose from $5.8 M to $9.2 M. This dilluted the ROE calculation significantly.

A lot of the cash generated from the secondary is currently sitting idle in various short term investments and the balance is going to finance the new factory.

You might want to take a stab at calculating ROIC from the assets side and exclude the investments. I haven't tried this yet, but I'm fairly sure that it'll be better than the ROE.

Marv
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This article explains some of the differences in light refraction between moissanite and diamonds.

http://infoseek.go.com/?win=_search&sv=M6&lk=noframes&nh=10&ud9=IE5&qt=cree+research&oq=&url=http%3A//cbc.ca/consumers/market/files/scams/moissanite/index.html&ti=Market+Place+Files+-+Moissanite&top=

"Glass is a singly refractive material, as are cubic zirconia, garnet and diamond itself.
Synthetic moissanite is doubly refractive. This means that a ray of light passing through this sort of gem is slowed, bent and split in two as it passes though the medium."

I don't know what this characteristic means optically.
My first reaction is that it is not desireable, unless the splitting could be controlled somehow.

Good Luck.

Paul

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Click on "How can I spot Moissanite?" when at the link mentioned in my previous post.

Good Luck.

Paul
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Thanks Madmarv. I have been following Cree for some time. It sounds like a great story but this was one piece of the puzzle I was not really sure of. When it dropped to around 100 earlier this year I hesistated because I wasn't sure and now I am kicking myself. Will eventually get in I'm sure.
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As long as we are on the topic of theoretical alternative uses for SiC, has anyone heard about this material being used for watch crystals? I would think that the hardness of SiC would lend itself to that application and even hold advantages over the traditional use of saphire wafers.

And there are a LOT of new watches out there. . . .

Y365
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Just took a whirl at the ROIC calc. Here's what I got.

TTM Operating Income $29.9M
Less 35% tax 10.5M
After tax Op Income 19.4M

Invested capital computed from the following:

IC = Total Assets - Current Liabilities - Cash - ST Investments - LT Investments + Account Payables

Qtr IC
June 99 94 M
Sep 99 98 M
Dec 99 108 M
Mar 00 129 M

Average IC 107 M

ROIC = 19.4 / 107 = 18.1%

Notes:
CREE has no Debt so all Current Liabilities are deducted.

As a compromise to excluding all cash & equivalents I added back just enough cash for CREE to cover their payables.

LT investments were excluded from IC because they were purchased w/ money from the secondary offering. Adding them back in dillutes ROIC to 15.3%

Marv
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Thanks for doing the math. 18% isn't bad at all, but how can this be used to judge if the stock is either fairly valued or overvalued? I've been reading up on ROIC, getting ready to try to put it to use, but I've missed the relationship to value somewhere. Any chance you'll do the last couple quarters/years ? :) It'd be interesting to see how it fluctuates.

pablo
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"Thanks for doing the math. 18% isn't bad at all, but how can this be used to judge if the stock is either fairly valued or overvalued? I've been reading up on ROIC, getting ready to try to put it to use, but I've missed the relationship to value somewhere."

I'm not sure if there is a relationship between ROIC and valuation. It is just used as a measure of management's effeciency to leverage the capital at their disposal. Indirectly, a company whose ROIC is declining should tell you that there are possibly more problems beneath the surface.

I'll post my analysis of CREE's financials separately.

Marv

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Previously, on channel CREE...

Does anyone have any insight as to whether or not SiC has any optical properties? Any and all answers appreciated.

...From my readings, it appears that SiC as a crystal by itself has a tetrahedral or hexahedral symmetrical structure so chemically it would not be considered optical.

Actually, SiC can come in a variety of crystal structures. I'm not sure which is/are being exploited by CREE, since they're doping it up for the solid-state electronics, but crystal structure alone doesn't determine the optical properties. Mostly, it's the electrons' behaviors within a particular crystal structure that determine this. Believe me, reliably predicting what they will be for a given crystal structure is a difficult problem, and has only really possible within the last decade.

I know, not really on topic, but it's likely that profit-making from optical applications are likely to rely on "non-linear optical" properties, much like the frequency doubling sapphires used to turn YAG infrared laser light into bright green laser light. I've even seen it used in green laser pointers.

clasota
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