UPDATE 1-Israeli chipmaker TowerJazz sees growth in 2013

Thu Nov 15, 2012 5:26am EST

* Q3 net profit flat at $32 mln vs $35.6 mln forecast

* Q3 revenue falls to $154.6 mln

* Sees Q4 revenue $147-$157 mln

By Tova Cohen

TEL AVIV, Nov 15 (Reuters) - Israel-based TowerJazz expects 2013 to be a year of growth even as the chipmaker reported a flat third quarter that was below analysts' expectations as part of its business was affected by a consumer shift from PCs to tablets.

"We are very confident now," Chief Executive Russell Ellwanger told Reuters. "We saw record design wins in the third quarter, we see a strong long term and a very strong mid term."

Shares in the firm, which makes chips used in smartphones like Apple's iPhone and Samsung's Galaxy models as well as battery chargers and AC/DC adapters, were up 0.7 percent to 29.8 shekels in a declining Tel Aviv market.

"We see 2013 as a growth year for both revenue and profit," Ellwanger said on Thursday.

In Japan TowerJazz is in the final stages of signing a contract with a top Japanese integrated device maker (IDM), Ellwanger said, noting the "strong brand name" company has a factory that is not running at high utilisation. Under the agreement, the Japanese firm would close the plant and TowerJazz would transfer the work and core group of engineers into its Japanese plant.

Ellwanger believes this is a model that other Japanese IDMs could copy.

TowerJazz posted third quarter net profit excluding one-time items of $32 million, unchanged from a year earlier as revenue fell to $154.6 million from $176.1 million. Analysts expected TowerJazz to post profit of $35.6 million on revenue of $157 million, according to Thomson Reuters I/B/E/S.

The company completed an efficiency plan in its Japanese plant, acquired last year, that included a reduction of 300 workers out of 1,300, leading to $30 million in annual savings.

TowerJazz had forecast third quarter revenue would be between $152-$162 million.

"We have a portion of our business that at this moment is weak, in the area of discrete components," Ellwanger said, referring to chips that are not integrated circuits.

As consumers opt to buy tablets instead of more expensive and larger personal computers, the number of discrete components sold has been reduced. But over time, the market for these components will recover as consumers tend to replace tablets frequently.

"More tablets are sold on a regular basis and there's always a next generation and the price point is low so demand is high," Ellwanger said. "We don't think the discrete business will remain weak in the long term."

Ellwanger forecast the company will have revenue of $147 million to $157 million in the fourth quarter, which is not usually the strongest quarter for the chipmaker as purchases by its customers for Christmas occur in the third quarter.