February 18, 2020 / 11:21 AM / 6 months ago

UPDATE 1-Chipmaker TowerJazz misses Q4 estimates, expects impact from coronavirus this quarter

(Adds details, quotes from CEO interview, share reaction)

By Tova Cohen

TEL AVIV, Feb 18 (Reuters) - Israeli chipmaker TowerJazz missed fourth quarter earnings estimates on Tuesday and said the impact of the coronavirus would cut its first quarter revenue by up to $5 million.

It said it still expected to return to revenue growth this year and its order book was filling up, but its shares tumbled 5.9% on its fourth quarter performance and as chipmakers worldwide took a beating after a sales warning from Apple Inc due to the coronavirus.

The outbreak of the deadly virus in China has disrupted supply chains and delayed the reopening of Chinese factories after the Lunar New Year holiday.

TowerJazz CEO Russell Ellwanger said his company has cut its revenue forecast for the first quarter by $3 million-$5 million due to the impact of the virus, but did not give details on how its business was affected.

“We don’t see it bigger than that at this point. That might change over time,” he told Reuters by phone.

“It is becoming a worldwide crisis,” and its scope can’t be forecast, he added.

TowerJazz expects first-quarter revenue in a range of 5% above or below $300 million. Analysts forecast $301 million in revenue, according to I/B/E/S data from Refinitiv.

TowerJazz, which specialises in analogue chips used in cars, medical sensors and power management, reported diluted earnings per share excluding one-time items of 22 cents for the fourth quarter, down from 41 cents a year earlier.

Revenue slipped to $306 million from $334 million, mainly due to a renewed contract with Panasonic Corp in March that will see quarterly revenue fall by $20 million.

It was forecast to earn adjusted EPS of 25 cents on revenue of $312 million.

Ellwanger was upbeat on TowerJazz’s outlook in 2020, especially in the second half as it sees several important markets snapping back after weakness last year.

He said the market for silicon-germanium driven by data centres was “recovering very nicely,” helped by the adoption of 5G mobile networks.

“Our customer forecast and present orders indicate good overall growth ramping sequentially throughout 2020, resulting in a significant second half 2020 performance as compared to the second half 2019,” he said.

“We expect 2020 to achieve year-over-year growth with low double-digit organic growth.”

This will be achieved in the short to medium term by organic capacity growth and capacity growth through acquisitions for long-term demand, he said.

The focus of any acquisition is likely to be boosting capacity for 300 mm wafer production.

TowerJazz has manufacturing plants in Israel, the United States and in Japan through a joint venture.

TowerJazz in July decided to expand capacity for power management and image sensor platforms, at an investment of $100 million, due to a forecast for customer demand to exceed capacity at its joint venture in Japan. (Reporting by Tova Cohen Editing by Steven Scheer and Susan Fenton)

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