---
title: "Penguin Solutions sells Cree LED for an undisclosed price as inventory near-triples to $749 million"
description: "Penguin Solutions paired a 68% sales quarter with a $167 million quarterly cash outflow, then agreed to sell Cree LED, its LED-chip segment, for cash at an undisclosed price. The company calls the sale a sharpened data center focus; the balance sheet suggests the cash also has work waiting, and January's fiscal Q1 report tests it."
publisher: "The Inference"
section: "Chips"
published: 2026-11-06T22:03:41.356Z
modified: 2026-11-06T22:03:41.356Z
canonical: https://theinference.org/article/penguin-solutions-sold-cree-led-for-an-undisclosed-price-while-inventory-nearly-tripled-to-749-million
language: en
keywords: "Penguin Solutions, Chips, Memory, Mergers And Acquisitions, Free Cash Flow, Semiconductors"
---

# Penguin Solutions sells Cree LED for an undisclosed price as inventory near-triples to $749 million

> Penguin Solutions paired a 68% sales quarter with a $167 million quarterly cash outflow, then agreed to sell Cree LED, its LED-chip segment, for cash at an undisclosed price. The company calls the sale a sharpened data center focus; the balance sheet suggests the cash also has work waiting, and January's fiscal Q1 report tests it.

## A sale with every detail except the price

[Penguin Solutions](https://theinference.org/markets/companies/penguin-solutions), the Nasdaq-listed data center supplier formerly called SMART Global Holdings, agreed on November 3 to sell Cree LED, the Optimized LED segment that makes LED chips for lighting and screens, to Transom Capital Group, a middle-market private-equity firm, in an all-cash deal expected to close in the first quarter of 2027 [1].

[The 8-K, the SEC filing that reports current events](https://www.stocktitan.net/sec-filings/PENG/8-k-penguin-solutions-inc-reports-material-event-dd1a77505eb7.html), names the buyer, the advisors and the closing conditions [1]. It never names the price [1]. Chief executive Kash Shaikh calls the divestiture "another milestone" in a transformation into a pure-play, data center-focused company [1].

## Record sales, deeper outflows

The quarter behind the sale, reported on October 6, is the kind that gets small caps re-rated: [net sales of $567 million, up 68%, diluted earnings of $1.00 a share, up 133%](https://cryptobriefing.com/penguin-solutions-revenue-growth-micron/), with AI-driven work at 78% of revenue, growing 141% [2]. Integrated Memory rose 158% to $341 million, three-fifths of the quarter [2]. Six new AI infrastructure customers signed, four of them neoclouds, the GPU renters outside the hyperscaler club [2].

Cash moved the other way. Fiscal 2026 [free cash flow](https://theinference.org/article/penguin-solutions-record-fiscal-year-had-negative-152-million-cash-flow-insiders-sold-4-4-million) ran at an outflow of $163 million, after inflows between $58 million and $100 million every year from fiscal 2022 through 2025, on capital spending of just $12 million [3]. Inventory ended the year at $749 million, near triple the $255 million a year earlier [3].

The outflows deepened as sales accelerated: roughly $78 million in the May quarter and $167 million in the August quarter [4]. A $750 million zero-coupon convertible note due 2031 bridged the gap, lifting total debt to $853 million from $525 million [3].

*Chart: **Sales set records as quarterly cash flow went negative** Column chart of Penguin Solutions quarterly net sales and free cash flow from the quarter ended November 2024 to the quarter ended August 2026, showing sales climbing to a record while free cash flow turns negative.*

*Quarterly net sales and free cash flow, $ millions, quarters ending November 2024 through August 2026. Source: Penguin Solutions SEC filings. [4]*

## Two believers on file

[Fidelity's Schedule 13G, the SEC's passive-holdings disclosure, filed on November 5](https://www.sec.gov/Archives/edgar/data/1616533/000031506626002838/0000315066-26-002838-index.htm), puts FMR and [Abigail Johnson](https://theinference.org/markets/people/abigail-johnson) at 15.0% of the common stock, 7.7 million shares, a filing that certifies the shares were acquired in the ordinary course [5].

[SK hynix](https://theinference.org/markets/companies/sk-hynix), the Korean memory-chip maker, [went further the week before](https://theinference.org/article/sk-hynix-paid-377-million-for-9-1-of-penguin-solutions-at-a-strike-37-below-its-october-22-price): [a Schedule 13D with an event date of October 29](https://www.msn.com/en-us/money/other/penguin-solutions-stock-rises-after-sk-hynix-discloses-stake/ar-AA2gFShw) shows about $377 million of convertible preferred, a 9.1% beneficial stake, convertible at $32.81, far below the $52.69 the shares touched on November 3 [6].

[Bank of America](https://theinference.org/markets/companies/bank-of-america) opened coverage on October 9 at Buy with a $100 target [3]. The eight-analyst average sits at $85.62, 130% above the November 5 close of $37.22, and the stock is still up 90% for the year after a 23% five-session slide [7].

## January settles it

Management says the inventory was built to match customers' deployment schedules and calls working capital efficiency "an important priority for fiscal 2027" [3]. [The reaffirmed fiscal 2027 outlook, about $2.43 billion of sales or roughly 40% growth](https://www.marketscreener.com/news/penguin-solutions-to-sell-cree-led-business-to-transom-capital-reaffirms-fiscal-2027-outlook-ce785fdfdc8af325), still counts a full year of Cree LED, about a tenth of projected net sales, and will be updated after the sale closes [1][2].

The memory trade repriced anyway. [Micron](https://theinference.org/markets/companies/micron) plunged 17.46% and SanDisk 22.26% on November 5 on concern that political scrutiny could slow data-center construction [8], then rebounded in Friday-morning trading, with PENG quoted up 14.9% on [Yahoo Finance](https://finance.yahoo.com/markets/stocks/articles/penguin-solutions-134-free-cash-122525464.html) [8][3]. At the November 5 close, Penguin traded at 8.16 times forward earnings, cheaper than all but Micron among the ten cheapest US chip stocks [9].

*Chart: **Penguin's 8.16 forward P/E is second-lowest of ten US chip stocks** Bar chart ranking ten US semiconductor stocks by forward price-to-earnings ratio, with Micron lowest at 3.72 and Penguin Solutions second-lowest at 8.16.*

*Forward price-to-earnings ratios at the November 5, 2026, close, the ten lowest among US semiconductor and semiconductor equipment stocks. Source: Seeking Alpha via TradingView. [9]*

The fiscal Q1 report, likely in early January, settles it: watch operating cash flow and inventory as closely as EPS [3]. If the chips ship on customers' schedules, the outflow was the cost of a 68% quarter [3]. If they sit, Penguin is borrowing at 0% to hold memory chips customers have not yet taken [3]. Whenever the Cree LED price is disclosed, that figure shows how much relief the balance sheet actually gets.

## Takeaway

Penguin's record 68% growth quarter came with its deepest cash outflow yet; January's fiscal Q1 report, and the undisclosed Cree LED price, will show whether the inventory bet pays.

## Sources

1. [StockTitan, Penguin Solutions to sell Cree LED to Transom Capital, PENG 8-K filing, 4 November 2026](https://www.stocktitan.net/sec-filings/PENG/8-k-penguin-solutions-inc-reports-material-event-dd1a77505eb7.html)
2. [Crypto Briefing, Penguin Solutions posts 68% revenue jump as AI memory demand lifts smaller players, 5 November 2026](https://cryptobriefing.com/penguin-solutions-revenue-growth-micron/)
3. [Yahoo Finance, Penguin Solutions Is Up 134% This Year. Can Its Free Cash Flow Keep Up With the Story?, 6 November 2026](https://finance.yahoo.com/markets/stocks/articles/penguin-solutions-134-free-cash-122525464.html)
4. [Penguin Solutions quarterly figures from its SEC filings, EDGAR CIK 0001616533, retrieved 6 November 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001616533)
5. [SEC EDGAR, Schedule 13G/A, FMR LLC and Abigail P. Johnson, Penguin Solutions common stock, filed 5 November 2026](https://www.sec.gov/Archives/edgar/data/1616533/000031506626002838/0000315066-26-002838-index.htm)
6. [Benzinga via MSN, Penguin Solutions stock rises after SK Hynix discloses stake, 3 November 2026](https://www.msn.com/en-us/money/other/penguin-solutions-stock-rises-after-sk-hynix-discloses-stake/ar-AA2gFShw)
7. [MarketScreener, Penguin Solutions to Sell Cree LED Business to Transom Capital; Reaffirms Fiscal 2027 Outlook, 4 November 2026](https://www.marketscreener.com/news/penguin-solutions-to-sell-cree-led-business-to-transom-capital-reaffirms-fiscal-2027-outlook-ce785fdfdc8af325)
8. [TipRanks, Chip Stocks Micron, SanDisk, and SK Hynix Are Surging in Premarket Today After Thursday's Crash, 6 November 2026](https://www.tipranks.com/news/micron-sandisk-and-sk-hynix-stocks-are-surging-after-thursdays-crash-whats-driving-the-rebound-november-6)
9. [Seeking Alpha via TradingView, Micron tops U.S. chip stocks with lowest forward P/E amid broad sector selloff, 5 November 2026](https://www.tradingview.com/news/seekingalpha:1d8301a25094b:0-micron-tops-u-s-chip-stocks-with-lowest-forward-p-e-amid-broad-sector-selloff/)


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Penguin Solutions sells Cree LED for an undisclosed price as inventory near-triples to $749 million — The Inference. Canonical: https://theinference.org/article/penguin-solutions-sold-cree-led-for-an-undisclosed-price-while-inventory-nearly-tripled-to-749-million