Based on lower sales of LED chips and LED components, Cree has revised financial targets from a range of $215 million to $220 million for its fiscal third quarter ending March 27, 2011.

According to the company,despite LED component demand is improving post-Chinese New Year, revenue is lower than originally targeted. Though it has taken longer to work through customer inventories than previously anticipated,pricing was lower than the company had previously forecast.

At the same time, due to more aggressive pricing and weaker demand,the LED chip business is also weaker than targeted.

Gross margin for the quarter is expected to be approximately 43%. The decline in gross margin targets result from increased pricing pressure in the LED chip product line.Operating expenses are expected to be slightly lower than previously targeted.

However, Chuck Swoboda, Cree’s CEO and chairman is still confident that the LED components business appears to be turning the corner.Despite the challenges in Q3, distributor sell-through has improved and they target solid growth next quarter. Based on the preliminary outlook for Q4, they are currently targeting revenue to increase 10 to 12% in fiscal Q4 led by growth in LED components.