Cree unveils $10 LED bulb for consumers

dbracken@newsobserver.comMarch 5, 2013 

The first branded LED light bulb sold by Durham company Cree.

COURTESY OF CREE

Cree shares jumped 14 percent on Tuesday after the Durham company unveiled its first branded LED light bulb for consumers.

The product, which sells for about $10 and will be available exclusively at The Home Depot, marks a bold new branding effort for a company that until now has focused exclusively on selling LED lights to commercial customers.

Cree is betting that the bulb’s low price and performance, which more closely resembles incandescent light bulbs, will draw customers who until now have opted for the cheapest alternative.

“For the first time, consumers really have a reason to change,” said Mike Watson, Cree’s vice president of corporate marketing.

Cree has long been an evangelist for the adoption of LEDs, and the company is betting that raising awareness among consumers will ultimately help expand its commercial business. Cree produces its own indoor and outdoor light fixtures as well as components that other companies use in their lighting products. Its LEDs also are used for illuminating car dashboards, mobile phones, televisions and signs.

“Consumers have always been important to lighting adoption,” Watson said. “But there’s also allies for commercial lighting adoption, and commercial is still the largest segment of lighting.”

Cree’s new bulb made a splash Tuesday in part because of its price.

“Cree is coming into the market at pretty much a game-changing price – 50 percent off some of the competition that’s out there,” said Jed Dorsheimer, an analyst with Canaccord Genuity.

Dorsheimer, who has a hold rating on the stock, said he likes the move because it opens up another revenue stream for the company. He said the big question is what type of profit margins the company will be able to earn from selling to the residential market.

He said historically companies that have had success selling large volumes of replacement bulbs to consumers have struggled due to a lack of profitability.

LEDs currently make up less than 1 percent of the 1.5 billion residential light bulbs shipped annually in North America, according research firm IHS. LEDs are expected to make up 32 percent of installed residential light bulbs by 2020, in large part because of the gradual phasing out of incandescent bulbs because of government imposed light-bulb efficiency standards.

“That’s huge for Cree, who’s coming in now so they build up that reputation as a lamp provider,” said Philip Smallwood, a senior lighting market analyst at IHS.

He said the energy-efficient alternatives to incandescent bulbs, such as compact fluorescent lamps, have struggled to gain market share because of their light quality.

Cree’s LED bulb lasts about 25 times longer than an incandescent bulb and uses about 85 percent less energy. Up until now, LED lights have been slow to catch on with consumers because they give off directional light more suited for use in spotlights.

“It’s been a little difficult to get the LED lamps to look omnidirectional where they have a uniform light in every direction,” Smallwood said.

He said from his limited experience with Cree’s new bulb, the company appears to have largely addressed that shortcoming. While other manufacturers have done it, Cree is the first to offer it at such a low price, Smallwood said.

Watson said the company’s new corporate branding initiative, which will include both television and online advertising, includes the tagline “Made affordable through expensive science.”

“There’s a lot that goes into this particular bulb,” he said.

The new residential bulbs are being manufacturing in Durham, where Cree employs 2,335 people. About 200 people were hired to manufacture the new bulb, Watson said.

“Whenever you’re closer to your consumer, the product is better, and ultimately the cost can be more affordable as well,” he said.

Cree shares closed Tuesday at $51.16, up $6.44. The stock is up 51 percent this year.

Bracken: 919-829-4548

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