SecProbe.io

CORRESP
1
filename1.htm

    filename1.htm

      February
10, 2009

      VIA EDGAR AND FEDERAL
EXPRESS

      United
States Securities and Exchange Commission

      Division
of Corporation Finance

      450 Fifth
Street, N.W.

      Washington,
D.C.  20549-0306

      Attention:
Brian Cascio, Accounting Branch Chief

      Re:           Cree,
Inc.

      Annual Report on Form 10-K for the
fiscal year ended June 29, 2008

      Filed on August 20, 2008

      File No. 000-21154

      Dear Mr.
Cascio:

      Set forth
below are our responses to the comments of the staff of the Division of
Corporation Finance of the Securities and Exchange Commission contained in the
comment letter dated January 29, 2009, relating to the Form 10-K for Fiscal Year
Ended June 29, 2008 of Cree, Inc. (the “Company”).  This letter
includes each comment from the letter in italics, with the Company’s response
set forth immediately below.  The Company has repeated the headings
and paragraph numbers from the letter for your convenience.

      Form 10-K for the Fiscal
Year Ended June 29, 2008

      Item 1A. Risk Factors, page
10

                1.

                We
      note a number of your risk factors could apply to almost any
      business.  For example, many of the 21 bullet points in your
      first risk factor describe matters that could apply to any
      registrant.  In future filings, please ensure your risk factors
      specify the risks you face and quantify their impact so investors can
      evaluate how those risks affect your business.  See Item 503(c)
      of Regulation S-K.  Also, please disclose all material risks
      pursuant to

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        Page
2

                this
      item and avoid using language in the heading paragraph before the first
      risk factor that would imply
otherwise.

      RESPONSE:

      In
response to the Staff’s comment, we note that the discussion of risk factors, in
accordance with Item 503(c) of Regulation S-K, was intended as a discussion of
the most significant factors that could impact the Company’s business and
financial results, without including risks that could apply to any
issuer.  The first risk factor highlights the risk of significant
fluctuations in the Company’s operating results and margins.  We
considered this volatility to be a risk specific to the Company.  The
bullet points listed in support of this factor are examples of circumstances
that could cause significant fluctuations in operating results and
margins.  Nonetheless, we recognize that some of these bullet points
may be viewed as too generic or as overlapping with the discussion of other risk
factors and that the presentation could be improved by limiting the examples and
avoiding overlap between these bullet points and other portions of the risk
factor discussion.  In future filings, the Company will ensure that
the risk factor discussion contains only a discussion of the most significant
factors that could impact the Company’s business and financial results, without
including risks that could apply to any issuer, and explains how each risk
factor could affect the Company.

      With
respect to the language in the heading paragraph before the first risk factor,
we note that this language was intended to impress upon the reader that the
discussion of risk factors does not include unknown risks or immaterial risks or
risks faced by all issuers.  In light of the Staff’s comments,
however, in future filings the Company will avoid using language that could
imply that the discussion of risk factors includes less than all risk factors
required by Item 503(c).

      Item 11. Executive
Compensation, page 87

      Compensation Discussion and
Analysis, page 28

                2.

                In
      future filings, throughout your Compensation Discussion and Analysis
      please include a comprehensive discussion of how you determined each named
      executive officers’ compensation.  This disclosure should
      include a discussion about each element of compensation such as base
      salary, cash bonus and long term equity incentive
      compensation.  Your Compensation Discussion and Analysis should
      also be sufficiently precise to identify material differences in
      compensation policies with respect to individual executive
      officers.  This should include explanation of the reasons for
      the differences in the amounts of compensation awarded to the named
      executive officers.  We

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        Page
3

                refer
      you to Release 33-8732A, Section II.B.1.  For example, we note
      the disparity between your chief executive officer’s compensation and that
      of the other named executive officers and your future filings should
      provide a more detailed discussion of how and why your chief executive
      officer’s compensation differs from that of the other named executive
      officers.  See Item 402(b)(2)(vii) of Regulation
      S-K.

RESPONSE:

      The
Company acknowledges the Staff’s comment and, in future filings, will provide a
more detailed discussion in Compensation Discussion and Analysis of how each
named executive officer’s compensation was determined, including a discussion of
each element of compensation.  Further, we will provide an explanation
of the reasons for material differences in the amounts of compensation awarded
to the named executive officers.  With respect to compensation policy
differences regarding individual executive officers, we note that we have
disclosed all material differences in our Compensation Disclosure and Analysis,
and we will continue to disclose all material differences in future
filings.

                3.

                We
      note you state in the third full paragraph on page 29 of your proxy
      statement that you use two compensation data from two
      sources.  While it appears you have listed the “peer group”
      companies in the subsequent paragraph, it does not appear you have
      identified the four different published market surveys or their
      components.  In future filings, please identify the surveys you
      used and their components, including component companies, the elements of
      compensation that are benchmarked and how such benchmarks are
      determined.

      RESPONSE:

      While the
Company acknowledges the Staff’s comment, the Company respectfully submits that
compensation was not determined by benchmarking against any specific survey or
company.  Our Compensation Committee engaged a consultant who blended
published surveys and peer group proxy data to derive recommended target
compensation ranges.  The surveys comprised aggregated data from over
one hundred companies, and the consultant did not analyze the compensation
practices of the individual component companies in the surveys.  The
consultant did, however, analyze the compensation practices of the specific peer
group companies when developing the recommended target compensation
ranges.  These peer group companies were disclosed in our proxy
statement.  In future filings, where applicable, we will provide the
names of the published surveys used by our consultant, the categories of
companies included in the surveys, and where available the approximate number of
companies that participated in the

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        Page
4

      surveys in
order to provide additional context with respect to the survey
data.  Because our consultant does not analyze and we do not utilize
information with respect to the individual compensation practices of survey
component companies, we respectfully submit that providing a comprehensive list
of over one hundred companies who participate in the surveys would not enhance
investor understanding of our compensation process.

                4.

                We
      note your disclosure that you seek “…a target range that is between the
      50th
      percentile and the 75th
      percentile of competitive market compensation…,” but that base salary may
      “vary from the target range….”  Given that you target the
      elements of your compensation packages, please briefly discuss in your
      applicable future filings how each element of compensation you provide to
      the named executive officers relates to the data you have analyzed from
      the peer companies and include an analysis of where actual payments under
      each element of compensation actually fell within the targeted
      range.  If any of your named executive officers are compensated
      at levels that are materially different from the targeted levels of
      compensation, please also provide discussion and analysis as to
      why.  Refer to Item 402(b)(2)(xiv) of Regulation
      S-K.

      RESPONSE:

      The
Company notes the Staff’s comment and, in future filings, will discuss in
Compensation Discussion and Analysis each component of the named executive
officer’s compensation relative to the target range in additional detail and
include an analysis of actual payments made under each
element.  Should any named executive officer be compensated at levels
that are materially different from the targeted levels of compensation, we will
provide further discussion and analysis.

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        Page
5

      Base Salary, page
30

                5.

                We
      note your disclosure about how annual salaries are set taking into account
      “the Company’s performance, the executive’s experience, qualifications and
      scope of responsibilities, the goals and objectives established for the
      executive, [and the] performance of the executive.”  In future
      filings, please describe specifically how these factors were used to make
      compensation decisions during the applicable periods, including discussing
      how the committee determined the compensation amounts and avoiding the use
      of boilerplate disclosure in this section.  If instead
      compensation decisions were based on the subjective discretion of the
      committee, please say so clearly and directly without implying that
      objective factors were used.

      RESPONSE:

      The
Company acknowledges the Staff’s comment.  As disclosed in our
Compensation Discussion and Analysis, the Compensation Committee considers a
number of factors in determining compensation.  Consideration of these
factors is necessarily subjective.  In future filings, we will clearly
state in the Compensation Discussion and Analysis that consideration of these
factors involves the subjective discretion of the Committee, and we will
describe more specifically how these factors were used in compensation
decisions.

      Performance-Based Incentive
Compensation, page 30

                6.

                You
      provide little discussion and analysis of the effect of individual
      performance on incentive compensation despite disclosure suggesting it is
      a significant factor considered by the committee.  In future
      filings, please provide additional disclosure and analysis of how
      individual performance contributed to actual 2008 compensation for the
      named executive officers.  For example, disclose the elements of
      individual performance, both quantitative and qualitative, and specific
      contributions the compensation committee considered in its evaluation, and
      if applicable, how they were weighted and factored into specific
      compensation decisions.  Also expand your discussion and
      analysis of the factors the committee considered in establishing personal
      objectives for Mr. Swoboda.  Please see Item 402(b)(2)(vii) of
      Regulation S-K.

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        Page
6

      RESPONSE:

      The
Company notes the Staff’s comment.  In future filings, we will provide
additional disclosure and analysis in the Compensation Discussion and Analysis
regarding how individual performance contributed to actual compensation for the
named executive officers and the factors the Committee considered in
establishing personal objectives for the chief executive officer.

      Performance Units, page
32

                7.

                We
      note your discussion of the incentive award to Mr. Swoboda in the form of
      performance units.  While you state “[t]his provided flexibility
      to require a portion of any future payments under the award be paid in
      shares” and permitted the award to “qualify for the performance based
      exemption under Section 162(m),” please tell us why payment of shares to
      Mr. Swoboda was important to the committee and why this program was not
      extended to other officers.  Please revise future filings to
      expand your disclosure about such awards including clarifying the reasons
      for such awards.

      RESPONSE:

      The
requirement that the Company pay a portion of any payment under the performance
units awarded to Mr. Swoboda in August 2007 in shares of Company stock reflected
the desire of the Compensation Committee at that time that Mr. Swoboda increase
his ownership stake in the Company.  The Committee did not consider it
necessary to require that other executive officers accept payment of annual
incentive compensation in shares based on a review of their share ownership
relative to their positions.

      For
fiscal 2009, the Committee determined not to require partial payment in shares
under the performance units awarded to Mr. Swoboda based on his increased share
ownership.  There are presently no plans to require payment of
performance units in shares in the future.  However, if the Company in
the future does award performance units with terms that require payment or
partial payment in shares, the Company will expand its disclosure about such
awards in future filings including clarifying the reasons for such
awards.

        United
States Securities and Exchange Commission

        Division
of Corporation Finance

        Page
7

      Long-Term Equity Incentive
Compensation, page 33

                8.

                In
      future filings, please explain with specificity how you determined the
      amounts of stock options to be granted to your named executive
      officers.  We note you state on the top of page 34 that the
      awards were the same as the prior year, yet revenue was below target and
      earnings only approximated the plan targets.  Please tell us why
      “revenue was below target established at the beginning of fiscal 2007
      under the 2008 Plan,” yet on page 32 you appear to have achieved just over
      100% of the revenue target under the 2008 Plan.  In future
      filings, please describe the elements of “corporate performance” and
      “individual performance” that are taken into account in granting these
      options.  Your revised disclosure also should clarify the
      reasons for the relative size of the grants among the
      officers.

      RESPONSE:

      The
Company acknowledges the Staff’s comments and in future filings will include a
more specific discussion of how the amounts of stock options granted to named
executive officers were determined.  The Company will also describe
with more specificity, when applicable, how the elements of “corporate
performance” and “individual performance” affect option grants to the named
executive officers and the reasons for the relative size of the grants among the
executive officers.

      Regarding
the discussion on page 34 of the equity awards made in