It was an ugly quarter for Cree (CREE), which develops chips for LED lighting. In early trading Wednesday, the shares were off 13% to $54.21.

In the fiscal second quarter, revenues came to $257 million, which was well below the Street consensus of $276.6 million. Non-GAAP earnings were 55 cents per share. The Street forecast? It was three cents higher.

General Electric Company (GE) is promoting a new standard in LED lighting for consumer use. Although the new LED technology from GE may be expensive for now, the company could be, once more, changing how the world looks at light bulbs.

According to GE, this new LED technology produces a quality of light similar to that of the old incandescent light bulbs, but which is so efficient it has been awarded Energy Star designation. No other similar LED light bulb has yet accomplished that. Better yet, the new GE LED bulbs contain none of the harmful lead which makes today's compact florescent light bulbs rather undesirable.

Changewave Investing, with its well-known editor Toby Smith, is recommending Cree (NASDAQ: CREE) as a play on "the secular shift to solid-state lighting" which he considers an emerging "green" trend.

He explains, "This sector -- a promising play on clean energy -- is growing by leaps and bounds, and we don't want to hold off any longer on buying LED solid-state lighting component manufacturer Cree."

Toby Smithe notes that the transformation from commodity LEDs for cell phones to broader market opportunities has gone slower than expected for the company. However, he adds, "With a key new acquisition and mandates around the world for the elimination of incandescent bulbs, I believe the time is right to buy shares."

He notes, "Our thesis about the transformation of lighting from 90% inefficient incandescent bulbs to 80% efficient solid-state is playing out exactly as we forecast -- and there is no turning back."

Once consumers see the difference in durability (50,000 hours versus 1,000) and the quality of light for LEDs vs. compact fluorescent bulbs (night and day, he states that he expect light bulbs to "go the way of the dodo bird."

An innovator in LED (light emitting diode) lighting and display, Color Kinetics (Nasdaq: CLRK) may, after 10 years in business, begin to gain some momentum if recent earnings are any indication. 1Q 2007 revenue increased 28% to $18.8 million, so this is a small company. The big news, however, is that GAAP net income increased 697%, not a typo, to $1.5 million or diluted EPS of $0.07, up from 1Q 2006 net income of $188,000 or $0.01 diluted EPS. Non-GAAP net income was $2.3 million, from which $814,000 went to stock-based compensation.

Gross margins improved to 55%. More importantly, Color Kinetics signed 12 new licensing agreements, several of them huge customers such as Ford Motor Company. As a result of landing new big clients, licensing revenue was up 88%. Color Kinetics is living up to its reputation as a lighting innovator, receiving 7 patents in 1Q 2007 alone. This stock may catch some momentum, as the company is flexible and innovative enough to respond quickly to market demand, has a demonstrated record of technical expertise in its field, and can offer clients a necessary product, lighting, that is much more energy efficient, longer lasting, lower maintenance than most current products.

2Q 2007 revenues are forecast in the range of $20-$21 million, with GAAP net income between $0.05-$0.07 per share.The stock closed recently at $27.48, down $0.19.

The third name in my list of the top 25 stocks for the NEXT 25 years (again, in no particular order) is Color Kinetics (NASDAQ: CLRK). This Boston-based company has the opportunity to redefine the world of lighting -- a massive market. Color Kinetics closed at $21.55 and currently sports a market capitalization of $459 million. Color Kinetics has $100 million of cash on its balance sheet. My estimates for this year call for revenues of $85 million and earnings per share of $.44-.47 and for 2008, revenues of $110-112 million and earnings per share of $.65-.67.

Color Kinetics makes intelligent solid-state lighting systems using light emitting diodes (LED). The company has 68 awarded patents in its portfolio with another 100+ applied for. The intellectual capital that Color Kinetics possesses is becoming extremely valuable. Its business model is to directly sell lighting systems, from architectural design to implementation, to licensing its technology, to third party partners.

The world of lighting is undergoing a revolution and Color Kinetics is emerging as one of the de facto leaders. The traditional incandescent light bulb is going the way of the horse and buggy. The incandescent bulb uses far too much energy to operate efficiently, and the lifespan is limited to normally a couple of thousand hours. LED lighting, not yet economical for mainstream homeowners, is winning in the commercial world. Color Kinetics systems are the choice for casinos, theaters, new commercial building projects, and street lighting. The technology included allows the customer to change the color of the lights from pure white to an array of different colors. The physical beauty of the systems are awe-inspiring.