Cree shares drop on CFO departure

PALO ALTO, Calif.

Shares of light-emitting diode products maker Cree Inc. plunged Tuesday after the company's chief financial officer resigned to join Extreme Networks Inc.

THE SPARK: The company said Tuesday that CFO John Kurtzweil has resigned to join Extreme Networks, which is an ethernet networking technology company. Kurtzweil was the company's CFO for six years and will consult with Cree through June 15.

Cree has hired an executive search firm to find a permanent replacement for Kurtzweil. Michael McDevitt will be Cree's interim CFO. McDevitt joined Cree in 2002 and was interim CFO in 2006, before Kurtzweil was hired.

Cree said Kurtzweil wanted to take a more active role at a smaller company. Extreme Networks, based in Santa Clara, Calif., said Kurtzweil will replace interim CFO Jim Judson.

THE ANALYSIS: Jefferies analyst Jesse Pichel said in a note to clients Tuesday that Cree's stock was falling on fears that Kurtzweil's resignation might signify deeper problems at the company.

Pichel said that Kurtzweil's departure has negative implications for Cree because it is losing a competent manager who is well respected by investors.

But Pichel suggested the departure does not signify broader problems with Cree or its financial health.

"We do not view the move as an indication of looming weakness for Cree or the LED industry," Pichel wrote, using the shorthand for light-emitting diodes.

Pichel rates the stock as a "Buy," and gave its stock a target price of $35 per share.

THE STOCK: Shares of Cree dropped $2.09, or 7.2 percent, to $27 in late afternoon trading. The stock has traded between $20.25 and $33.45 over the last year.