Writen by Ken Nagy, CFA
Given fourth quarter guidance, Towerjazz ( TSEM ) will make good on its promises of $500 million revenue run rate and 70% year over year growth. For good measure the firm got to GAAP net profit one quarter earlier than the firm originally promised. (the first in 10 years) The firm has been building capacity due to accelerated design-win momentum, which have been realized within a large group of diversified, global customers, many of which being market share and technology platform leaders for their respective markets. We feel Towerjazz (TSEM) should outpace its foundry competitors as well as the overall semiconductor industry in 2011. Specialty foundry enjoys higher margins and is less susceptible to industry downturns. In addition the firm is out in front on several industry leading technologies such as HPA, Power, and optical. The Tower and Jazz merger was completed at a time when the rest of the industry was struggling to survive. The balance sheet improvements are a source of strength which likely sets up the firm for further growth activity in the future.
On November 11th 2010 TSEM announced results for the third quarter of fiscal year 2010 ending September 2010. Revenue for the period was $134.7 million rising 7.2% sequentially from $125.7 million and up 69.3% year over year.
Pro-forma gross profit for the third quarter 2010 was $62 million, representing a year over year growth of 139% and sequential growth of 9%. This represents a gross margin of 46%, compared with a gross margin of 32% in the third quarter of last year and a gross margin of 45% in the prior quarter. On a GAAP basis, the Company reported a gross profit of $36 million.
Looking at the balance sheet, the company’s cash balance, as of September 30, 2010, was $88 million, as compared to $52 million as of September 30, 2009, and shareholders’ equity was $102 million as compared to $56 million as of December 31, 2009.
Management forecasts revenue in the fourth quarter of 2010 to range between $133 and $137 million, representing a sequential revenue growth of -1.3 % to + 1.7% and 71-72% year-over-year growth in revenues.
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TOWER SEMICOND (TSEM): Free Stock Analysis Report
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