TEL AVIV Chipmaker TowerJazz forecast a drop of about 32 percent in first-quarter revenue due to a contractual decrease in sales to Micron at its Japanese plant and as a consumer shift from PCs to tablets continues to affect part of its business.
Israel-based TowerJazz on Thursday forecast revenue of $110 million to $120 million in the first quarter, down from $168 million in the year-earlier period. Analysts were forecasting revenue of $142.5 million in the quarter, according to Thomson Reuters I/B/E/S.
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 down 6.1 percent to 28.25 shekels in midday trade in Tel Aviv.
TowerJazz Chief Executive Russell Ellwanger said the company sees this revenue level as short term, in line with its supply agreement with Micron Technology, which sold its plant in Nishiwaki, Japan, to TowerJazz in 2011.
"The company sees growth through the year in revenue and profit," Ellwanger told Reuters. "The second half of the year will be stronger than the first half. I am very convinced the second quarter will be stronger than the first."
Besides a tapering off in sales to Micron, which was planned under the deal signed between the two companies, TowerJazz is also facing a decline in its discrete components business.
Weakness in sales of discretes, chips that are not integrated circuits (IC), was seen already in the third quarter.
As consumers opt to buy tablets instead of more expensive and larger personal computers, sales of discrete components have fallen. Manufacturers of the slim tablets use fewer discrete components, which take up a relatively large area.
But Ellwanger believes the market for discrete components will recover as consumers tend to replace tablets frequently, both because they are cheaper than PCs and because their sales are often driven by fashion rather than functionality.
"I think over time, probably the amount of discretes that will be demanded will stay the same," he said. "Going into the second quarter I am seeing a strengthening of our discrete business."
TowerJazz posted fourth quarter earnings excluding one-time items of 99 cents a share, down from $1.60 a year earlier as revenue fell to $147.6 million from $154.6 million, at the low end of the company's own forecast of $147-$157 million.
Analysts expected TowerJazz to earn 53-55 cents a share on revenue of $150 million. Earnings were better than expected due to lower than forecast costs.
(Editing by Steven Scheer)