Cree Exceeds Consensus EPS Expectations For First Quarter of Fiscal Year 2002

Gross Margins Increased to 46 Percent

Durham, NC. Cree, Inc. (Nasdaq: CREE) today announced financial results for the first quarter of fiscal year 2002. The company reported revenue of $43,166,000, a 15 percent increase over the $37,642,000 reported in the year ago period. Product revenue grew 12 percent to $38,578,000 over the $34,311,000 reported in the prior year. Gross margins increased to 46 percent, a 7.5 percent increase, sequentially, over the fourth quarter of fiscal 2001. Net income, excluding intangible amortization as a result of the acquisition of UltraRF was $8,061,000, or $0.11 per diluted share, compared to $12,655,000, or $0.17 per diluted share (as adjusted for the company s 2-for-1 stock split in December 2000), for the corresponding period.

Chuck Swoboda, President and Chief Executive Officer stated, ``We re pleased to deliver results that exceeded analysts earnings expectations and are particularly excited with the progress we have made in improving our gross margins. We intend to continue to leverage our strong financial position by investing in development activities designed to drive both our operating performance and new product pipeline. These efforts should expand the market for new enabling applications.

The company also noted a recent development relating to its ongoing patent litigation with Nichia Corporation in Japan and the United States. On October 2, 2001 the Tokyo High Court, in a proceeding to which the company was not party, issued a decision finding that the Japanese Patent Office incorrectly upheld the validity of one of the two Japanese patents Nichia has asserted against Cree products, Patent No. 2,778,405. Unless reversed or modified on appeal, the decision in effect requires that the Japanese Patent Office invalidate at least the major claim of the patent and may provide an additional ground on which to seek dismissal of Nichia s complaints based on the patent.

North Carolina-based Cree, Inc. develops and manufactures semiconductor materials and devices based on silicon carbide (SiC), gallium nitride (GaN) and related compounds. The company s products include blue, green and UV LEDs, RF power transistors for use in wireless infrastructure applications, Schottky diodes for power conditioning and switching, SiC crystals used in the production of unique gemstones and SiC wafers sold for use in production and in research and development. Cree has new product initiatives based on its experience in SiC and GaN-based semiconductors, including blue laser diodes for optical storage applications, high frequency microwave devices for radar and other communications systems. For more information on Cree, visit http://www.cree.com.

Cree, Inc. will host a conference call at 4:30 p.m. EDT today to review the details of the first quarter. The conference call will be available to all interested parties through a live audio web broadcast via the Internet. Log onto Cree s website at www.cree.com and go to ``Investor Info for webcast details. The call will be archived and available on the website through October 18, 2001.

The schedules attached to this release are an integral part of this release. This press release contains forward-looking statements involving risks and uncertainties that may cause actual results to differ materially from those indicated. Actual results could differ materially due to a number of factors, including uncertainty regarding economic conditions; risks from increased competition; uncertain product demand; uncertainty whether we can achieve our targets for increased yields and cost reductions needed to protect our margins; risks associated with the production ramp-up for our MegaBright(TM) blue and MegaBright(TM) UV LED chips, including the possibility of unexpected delays, increased costs and manufacturing difficulties or less than expected market acceptance; risks associated with the planned release of new products under development, including the possibility we will be unable to develop and manufacture commercially viable versions of such products; the risk that our investments in third parties will generate losses; the possibility of adverse results in our pending intellectual property litigation; uncertainty whether our intellectual property rights will provide meaningful protection; concentration of our business among few customers; and other factors discussed in our filings with the Securities and Exchange Commission, including our report on Form 10-K for the year ended June 24, 2001 and subsequent reports filed with the Commission. Cree and the Cree logo are registered trademarks, and MegaBright is a trademark, of Cree, Inc.