Question: What will Cree's bulb sales be in its first full year? What about LED light bulbs in general?

Table B Sales of Light Bulbs in the United States in 2010 Incandescent CFL Linear Fluorescent Halogen LED Other Total Units (in millions) 1,500 600 550 150 30 Dollar (in millions) $ 800 1,200 900 500 900 400 $ 4,700 30 2,860 Source: Adapted and simplified from Cree company documents. A Move into General Lighting In response, Cree looked to the general lighting market. Indeed, technological breakthroughs both within Cree and across the industry encouraged such a move. These included brighter blue LEDs that produced the warm white light that individuals had come to expect in general lighting. Key to this progress was a group of former Cree scientists, led by Neal Hunter, who had left the company to form a lighting fixtures business called LLF (LED Lighting Fixtures), Inc. After several years of R&D, in 2006, LLF introduced the world's first LED light engine, and in July 2007, offered a recessed can light fixture for use in ceilings. While more expensive (at $125 per fixture) than traditional lighting fixtures, LLF's lamp offered 650 lumens of brightness and promised 20,000 hours The target market for these fixtures included designers, general contractors, real estate developers and others who were concerned either about the aesthetics or the lifetime economics of a lighting solution. Within three months of launch, sales exceeded $1 million. In February 2008, Cree fully acquired LLF. of use. Exhibit 4 Cree Income Statement, 1994 to 2013 (in millions of dollars) 1994 1995 1996 1997 1998 1999 2000 Revenue Cost of Goods Sold Total Gross Margin Total Operating Expenses Operating income $ 7.5 5.9 1.6 2.5 (0.9) $ 11.1 8.9 2.2 2.7 (0.5) $ 17.0 14.3 2.7 3.3 (0.6) $ 29.0 19.1 9.9 6.8 3.1 $ 42.5 28.0 14.5 6.4 8.1 $ 62.4 34.2 28.2 12.1 16.1 $ 108.6 52.4 56.2 19.5 36.7 2001 2002 2003 2004 2005 2006 2007 394.1 260.1 Revenue Cost of Goods Sold Total Gross Margin Total Operating Expenses Operating income $ 177.2 89.7 87.5 53.1 34.4 $ 155.4 92.1 63.3 157.6 (94.3) $ 229.8 130.6 99.2 64.5 44.7 $ 299.6 150.8 148.8 59.5 89.3 384.4 173.0 211.4 72.3 139.1 $ 423.0 222.1 200.9 102.1 98.8 134.0 117.3 16.7 2008 2009 2010 2011 2012 2013 Revenue Cost of Goods Sold Total Gross Margin Total Operating Expenses Operating income $ 493.3 327.5 165.8 153.8 12.0 $ 567.2 355.3 211.9 181.3 30.6 $ 867.3 456.2 411.1 213.3 197.8 $ 987.6 551.8 435.8 267.1 168.7 $ 1,164.7 755.2 409.5 370.2 39.3 $ 1,386.0 862.7 523.3 426.8 96.5 Source: Cree, Inc. 1996-2013 Annual Reports, http://investor.cree.com/annuals.cfm, accessed August 2014. Note: Fiscal Years end June, 30th each year. The end result was two Cree-branded LED light bulbs - an 800 lumens bulb and a 450 lumens bulb. The 800 lumens bulb offered the brightness of a 60-watt incandescent, but used 9.5 watts of energy. It had an expected life of over 20,000 hours, came with a 10-year warranty, offered the warm- white light people had come to expect, and was dimmable. The 450 lumens bulb offered the brightness of a 40-watt incandescent, used 6 watts of energy, and had the same life, warranty, and light quality as the 800 lumens Cree bulb. Table B Sales of Light Bulbs in the United States in 2010 Incandescent CFL Linear Fluorescent Halogen LED Other Total Units (in millions) 1,500 600 550 150 30 Dollar (in millions) $ 800 1,200 900 500 900 400 $ 4,700 30 2,860 Source: Adapted and simplified from Cree company documents. A Move into General Lighting In response, Cree looked to the general lighting market. Indeed, technological breakthroughs both within Cree and across the industry encouraged such a move. These included brighter blue LEDs that produced the warm white light that individuals had come to expect in general lighting. Key to this progress was a group of former Cree scientists, led by Neal Hunter, who had left the company to form a lighting fixtures business called LLF (LED Lighting Fixtures), Inc. After several years of R&D, in 2006, LLF introduced the world's first LED light engine, and in July 2007, offered a recessed can light fixture for use in ceilings. While more expensive (at $125 per fixture) than traditional lighting fixtures, LLF's lamp offered 650 lumens of brightness and promised 20,000 hours The target market for these fixtures included designers, general contractors, real estate developers and others who were concerned either about the aesthetics or the lifetime economics of a lighting solution. Within three months of launch, sales exceeded $1 million. In February 2008, Cree fully acquired LLF. of use. Exhibit 4 Cree Income Statement, 1994 to 2013 (in millions of dollars) 1994 1995 1996 1997 1998 1999 2000 Revenue Cost of Goods Sold Total Gross Margin Total Operating Expenses Operating income $ 7.5 5.9 1.6 2.5 (0.9) $ 11.1 8.9 2.2 2.7 (0.5) $ 17.0 14.3 2.7 3.3 (0.6) $ 29.0 19.1 9.9 6.8 3.1 $ 42.5 28.0 14.5 6.4 8.1 $ 62.4 34.2 28.2 12.1 16.1 $ 108.6 52.4 56.2 19.5 36.7 2001 2002 2003 2004 2005 2006 2007 394.1 260.1 Revenue Cost of Goods Sold Total Gross Margin Total Operating Expenses Operating income $ 177.2 89.7 87.5 53.1 34.4 $ 155.4 92.1 63.3 157.6 (94.3) $ 229.8 130.6 99.2 64.5 44.7 $ 299.6 150.8 148.8 59.5 89.3 384.4 173.0 211.4 72.3 139.1 $ 423.0 222.1 200.9 102.1 98.8 134.0 117.3 16.7 2008 2009 2010 2011 2012 2013 Revenue Cost of Goods Sold Total Gross Margin Total Operating Expenses Operating income $ 493.3 327.5 165.8 153.8 12.0 $ 567.2 355.3 211.9 181.3 30.6 $ 867.3 456.2 411.1 213.3 197.8 $ 987.6 551.8 435.8 267.1 168.7 $ 1,164.7 755.2 409.5 370.2 39.3 $ 1,386.0 862.7 523.3 426.8 96.5 Source: Cree, Inc. 1996-2013 Annual Reports, http://investor.cree.com/annuals.cfm, accessed August 2014. Note: Fiscal Years end June, 30th each year. The end result was two Cree-branded LED light bulbs - an 800 lumens bulb and a 450 lumens bulb. The 800 lumens bulb offered the brightness of a 60-watt incandescent, but used 9.5 watts of energy. It had an expected life of over 20,000 hours, came with a 10-year warranty, offered the warm- white light people had come to expect, and was dimmable. The 450 lumens bulb offered the brightness of a 40-watt incandescent, used 6 watts of energy, and had the same life, warranty, and light quality as the 800 lumens Cree bulb