May 15, 2019 / 9:53 AM / 4 months ago

UPDATE 1-Chipmaker TowerJazz quarterly profit slips on weak data centre market

(Adds comments from CEO interview, share reaction)

By Tova Cohen

TEL AVIV, May 15 (Reuters) - Israeli chip manufacturer TowerJazz reported on Wednesday lower first quarter net profit although it still matched estimates, as weakness in the data centre market weighed on revenue.

TowerJazz, which specialises in analogue chips used in cars, medical sensors and power management, posted fully diluted earnings per share (EPS) excluding one-time items of 29 cents in the first quarter, down from 31 cents a year earlier.

It was forecast to earn adjusted EPS of 29 cents on revenue of $309 million, according to I/B/E/S data from Refinitiv.

Revenue slipped to $310 million from $313 million but slightly beat expectations.

TowerJazz’s shares were up 4.4 percent in midday trade in Tel Aviv.

“Despite macroeconomic uncertainties that have led to tighter market inventory management, the indications we see in the wide market as well as from our specific customers, are for a stronger second half,” CEO Russell Ellwanger said.

The data centre market, which was a big part of the company’s revenue last year and is expected to play a major role in the second half of 2019, has been strongly down, he said, as customers consume inventory before making new purchases.

“Certainly at the start of January no one forecast data centre would have the pullback it did but we’ve had other upsides,” Ellwanger told Reuters, saying this included the power management sector.

The company sees various growth drivers, including the global rollout of 5G networks as well as automotive applications, including sensors such as lidar for use in autonomous vehicles and battery management for electric cars.

TowerJazz expects second-quarter revenue in a range of 5 percent above or below $306 million. Analysts are forecasting $308.8 million in revenue.

Ellwanger said its renewed contract with Panasonic Corp for their joint venture in Japan reduced revenue by $20 million in the second quarter due to a price adjustment though demand from Panasonic remains the same.

Excluding this reduction from Panasonic and Maxim at TowerJazz’s San Antonio plant, the company’s forecast represents a 1 percent increase from the quarter a year earlier, Ellwanger said. (Reporting by Tova Cohen Editing by Steven Scheer and Edmund Blair)

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