Asia is Key for TowerJazz
Ken Nagy, CFA
the global specialty foundry leader, will issue its second quarter
2012 earnings release tomorrow, August 09, 2012.
The Company's Nishiwaki, Japan factory has met or exceeded all of
Tower's forecasted metrics since the acquisition and management
continues to anticipate the same trend happening throughout 2012.
Furthermore, the facility greatly expands Tower's geographic reach
and distribution capabilities enabling the Company to take
advantage of increased interfab efficiencies in manufacturing which
resulted in a 2 percent sequential increase in gross margin in the
first quarter 2012 over the fourth quarter 2011.
The Nishiwaki facility has also enabled and management believes
will continue to empower significant growth throughout the Asia
In Korea, Tower has now grown from one image sensor customer in
2010 to over 40 active engagements.
In Japan, three tier-one integrated device manufacturers (IDMs) are
now actively qualifying Tower's flows in the Nishiwaki, Japan
factory with production targeted for the first half of 2013.
Along the same lines, one of these tier-one IDMs is doing multiple
Another Japanese IDM is in advanced stages of qualification at the
Migdal Haemek, Israel facility and there have been pre-wafer
engagements with a multiple number of other Japanese customers for
manufacturing in Nishiwaki, Migdal Haemek or Newport Beach,
As a result, Tower anticipates fiscal 2012 second quarter revenues
to be in the range of $163 million to $173 million. The guidance
would represent just over a 20 percent year over year growth in
revenues at the midpoint of the projected range for the quarter.
Furthermore, management foresees growing orders and strength in the
second half of the year and continues to prepare operationally for
that scenario. The Company anticipates continued growth at a double
digit rate in 2012 as a whole and expects to continue to exceed
The Company continues to target a $1 billion annualized quarterly
revenue run rate within the 2014 year.
Perhaps the recent disconnect in the shares performance versus its
operating results lies in the fact that the firm has capital notes
and equity options that if converted could increase the number of
shares outstanding. (Shares would be much higher if the capital
notes are converted at 100% as capital notes are convertible to
approximately 400 million shares on a pre-split basis) The notes
along with some other equity options may be a medium term headwind
for the firm, yet they were given at a time when the firm was
questionable as a going concern and was hemorrhaging cash. What
once saved the firm now may be holding it back. The notes can be
negotiated or bought out, (likely at less than 100% dilution) but
that seems to be a longer-term issue for the firm to tackle.
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