deals, IT

Color Kinetics Stock Soars, Yellow Flag Raised

Robert Buderi 6/15/07

It’s been a good year for Boston-based digital-lighting leader Color Kinetics, whose stock surged Thursday to an all-time high after the company announced a big licensing deal that will make its LED technology even more visible at events and performances. But shares dipped Friday when a leading analyst downgraded the company from “Buy” to “Hold.”

If you had bought Color Kinetics’ stock last year around this time, you would have paid about $15 a share. On Thursday, the stock closed at twice that—$31.15—after the announcement of a deal with High End Systems of Austin, TX. High End is a leader in lighting systems for the entertainment industry. The companies reported that High End would license Color Kinetics’ patents in order to develop a line of products incorporating multicolor LEDs. The value of the deal, which includes royalty payments to Color Kinetics, was not disclosed. Color Kinetics will also receive royalty-free licenses to certain of the Austin company’s patents.

The good news was tempered by James Ricchiuti, an analyst with investment bank Needham & Company. The Associated Press reported that Ricchiuti praised the deal as firming up Color Kinetics’ lead in the growing market for LED lighting for concerts and other performances. However, it noted that by Ricchiuti’s estimates, the stock price at Thursday’s close was some 49 times the company’s likely 2008 per-share earnings, hence the hold.