07/13/06 -  DURHAM, NC, Cree, Inc. (Nasdaq: CREE) today announced that, based on preliminary financial results, revenue for the fourth quarter ended June 25, 2006, is expected to be approximately $106.7 million, with earnings below the company’s previously announced target range of $0.22 to $0.24 per diluted share. These preliminary financial results are subject to revision.
* The expected revenue is at the low end of Cree’s previously targeted range of $106 million to $110 million due to lower LED sales. The shortfall in LED sales stemmed primarily from production challenges, which limited the company's ability to meet customer orders for the quarter.

* Gross margin for the quarter is expected to be approximately 42%, which is below Cree’s previously targeted range of 46% to 47%. The decline in gross margin was attributable primarily to lower LED revenue as a percent of total company sales, a less favorable mix within the LED product line, and incrementally higher production costs associated with new products.

* Operating expenses are expected to be in line with Cree’s previously targeted level of approximately 25% of sales.

* The company also expects approximately $3.5 million of additional income tax expense, above the previously targeted tax rate of 32%, related to the company’s investment in Color Kinetics and other end-of-year tax adjustments.

For the first quarter of fiscal 2007, the company currently anticipates LED chip sales may decline slightly from the fourth quarter of fiscal 2006 due to a recent slowdown in demand for mobile products, but this decline should be mostly offset by increased sales of the company's XLamp® LED and Schottky diode products.

“Although we knew this was going to be a transition quarter, it proved to be more challenging than we expected,” stated Chuck Swoboda, Cree’s CEO and chairman. “Despite these near-term challenges, we are making progress in growing our new lighting and power product lines, which are key to driving our future growth.”

The company will release final financial results for the fourth quarter of fiscal 2006 on August 10, 2006, and will hold a conference call and web broadcast at 5:00 p.m. U.S. EDT that day to discuss the results.

About Cree, Inc.

Cree is a market-leading innovator and manufacturer of semiconductors that enhance the value of solid-state lighting, power and communications products by significantly increasing their energy performance and efficiency. Key to Cree’s market advantage is its world-class materials expertise in silicon carbide (SiC) and gallium nitride (GaN) for chips and packaged devices that can handle more power in a smaller space while producing less heat than other available technologies, materials and products. Cree drives its increased performance technology into multiple applications including exciting alternatives in brighter and more-tunable light for general illumination, backlighting for more-vivid displays, optimized power management for high-current, switch-mode power supplies and variable-speed motors, and more-effective wireless infrastructure for data and voice communications. Cree customers range from innovative lighting-fixtures makers to defense-related federal agencies. Cree’s product families include blue and green LED chips, lighting LEDs in all colors, LED backlighting solutions, power-switching devices and radio-frequency/wireless devices. For additional information please refer to www.cree.com .