LED prices have fallen sharply. CREE announced to reorganize the LED product division and reduce production.

LED manufacturer Cree announced after the U.S. stock market closed on the 24th that its board of directors has decided to reorganize the LED product division and authorized the use of US$500 million (equivalent to approximately RMB 3.1 billion) to buy back its own company shares in the 2016 fiscal year (July 2015 to June 2016). Cree estimates that revenue in fiscal year 2016 will rise to approximately US$1.8 billion (equivalent to approximately RMB 11.17 billion); operating profit margin will rise to approximately 8%; free cash flow will reach approximately US$75 million (equivalent to approximately RMB 465 million).

Cree said that in view of the fact that the average price of LED has dropped more than originally expected and the factory capacity utilization rate continues to be at a low level, the company decided to reduce excess production capacity and recurring expenses to improve the cost structure. In addition, Cree decided to increase the price loss of LED products to reflect the more intense pricing environment this quarter and lowered its price outlook for this year.

Cree estimates the organizational restructuring costs to be US$85 million. Among them, production capacity and overhead cost reductions accounted for US$47 million, and losses from channel and inventory price declines accounted for US$27 million and US$11 million respectively.

Cree bought back 16 million shares of its own company's stock in fiscal year 2015, at an average price of US$34.33.

MarketWatch reports that Cree estimates that revenue for this quarter (ending June 28, 2015) will reach US$375 million, lower than the US$431 million market average estimate surveyed by FactSet.

Cree, a component of the Philadelphia Semiconductor Index, fell 1.55% to close at US$30.56 in normal trading on the 24th; it fell 5.37% to US$28.92 in subsequent trading.