Cree's (CREE) Spin of Power/RF Business Will Unlock Additonal Value - Needham & Company

Needham & Company affirms its Hold rating on Cree, Inc. (Nasdaq: CREE) after the company announced that Cree’s wholly owned Power and RF subsidiary has submitted a draft registration statement on a confidential basis to the U.S. Securities and Exchange Commission for a potential initial public offering of the subsidiary’s Class A common stock.

Analyst Y. Edwin Mok sees Cree's unique Power/RF business as a unique asset, commenting, CREE's Power/RF product are built on the same SiC (Silicon-Carbide) substrate technology as its LEDs. These SiC-based devices can achieve higher power and wider frequency than traditional Si-based products, and we believe CREE will continue to see growing adoption. The SiC diodes (power) are used in high voltage switching applications such as solar inverters or power stations, and the business competes with IFX, STM and Rohm. The RF devices are GaN-based components used in cellular, satellite and radio communication applications, and the business competes with NXP, M/A-COM, and ADI's Hittite.

Mok continued, While the base technology of the Power/RF business shares the same based material (SiC) as CREE's LED production, the markets and sales channel are completely different. Therefore, we do not think it would be hard for the company to separate the businesses. As an example, SUNE was able to spin-off SEMI even though the solar wafer used the same base materials.

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