February 14, 2011 / 8:22 AM / 7 years ago

RPT-UPDATE 2-Chipmaker TowerJazz Q4 profit up on record sales

(Repeats to additional subscribers)

* Q4 revenue up 34 percent to $135.1 million

* EPS ex-items $0.14, in line with forecasts

* CEO targets 2011 revenue growth 13-16 percent

* Q1 revenue to be between $120 million and $125 million

(Adds CEO quotes, background, share reaction)

By Tova Cohen

TEL AVIV, Feb 14 (Reuters) - Israeli chipmaker TowerJazz (TSEM.TA) posted record quarterly sales and a second net profit after a decade of losses, and said it aimed to double revenue in a few years.

TowerJazz forecast revenue would grow 8 percent in the first quarter from a year ago and its target is to remain profitable, excluding financing charges related to convertible bonds that might be triggered by an appreciation in its share price.

“In 2010 we outgrew the industry by 2.2 times,” Chief Executive Russell Ellwanger told Reuters, noting revenue in 2010 reached $509.3 million, surpassing a $500 million target.

“The fact that we posted our highest quarter ever in the fourth quarter shows we are still gaining market share against the industry,” he said.

Ellwanger is targeting revenue growth of 13-16 percent in 2011 and is striving to reach annual revenue of $1 billion within the next few years.

“Sometime in 2014 on a quarterly basis we will hit a $1 billion run-rate and possibly earlier,” Ellwanger said.

TowerJazz (TSEM.O), a small player in a $20-billion-a-year chip industry, has carved out a niche as a specialty maker of image sensors used in medical and dental x-rays, mobile phone cameras and digital cameras as well as radio-frequency chips and embedded memory chips.

It competes with smaller specialty foundries as well as Taiwan Semiconductor Manufacturing Co (2330.TW).

The company’s shares were down 0.1 percent at 5.433 shekels in midday trading, after a 7 percent jump on Sunday. The Tel Aviv market was flat.

Eran Jacoby, an analyst at DS Brokerage, initiated coverage of TowerJazz on Monday with an “outperform” rating and a $1.80 price target. The shares closed at $1.41 on Friday on Nasdaq.

    DECADE OF LOSSES

    TowerJazz earned 1 cent a share in the fourth quarter, compared with a loss of 16 cents a year earlier and its second consecutive quarter of net profit.

    Profit excluding one-off items rose to 14 cents a share from 8 cents a year earlier as revenue grew 34 percent to a record $135.1 million.

    Analysts had forecast TowerJazz would earn 14 cents a share excluding special items on revenue of $134.97 million, according to Thomson Reuters I/B/E/S.

    TowerJazz forecast first-quarter 2011 revenue would be between $120 million and $125 million, up 8 percent on a year earlier but down 9 percent from the fourth quarter, in line with the chip industry’s first-quarter seasonality.

    The company is actively on the hunt for acquisitions that satisfy one of two criteria.

    “One is to have a great increase in capacity; that’s something we need imminently,” Ellwanger said. “We’re very aggressively pursuing an asset acquisition.”

    The other is an acquisition that would bring new technology, he added.

    For the best part of a decade the company carried a heavy debt load and was burning its way through cash. It changed management and its business model five years ago, and revenue has increased sharply since its acquisition of U.S. chipmaker Jazz in 2008.

    TowerJazz reduced and restructured $450 million of debt in 2010 so that most of its debt is due in 2015-2016. It held a record $198 million in cash at the end of the year, after generating a $121 million surplus from operations during the year. (Editing by Will Waterman)

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