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Towering Inferno finds new cash to burn |
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Mar 15, 2007 at 12:00 AM |
Tower Semiconductor has made some important strides in its efforts to remain a going concern and return to profitability since Russell C. Ellwanger took the helm in May 2005.
That said, the niche foundry continues to struggle with cash flow issues as it attempts to spend money for capacity expansion of its 200mm fab.
Tower is somewhere between a rock and a hard place!
It needs to expand production to get the revenue levels required to make a profit, but it has to buy tools to do that. Then when the tools are installed it is hit with high depreciation costs. Worse is the fact that the increase in wafer starts pushes up operating expenses, which adds to losses.
While all this is going on, the company burns cash and therefore has to find fresh cash from investors on an all-too-often basis.
Today the foundry raised $29 million by selling shares and warrants to institutional investors in the United States. It is also expecting to bring in a further $32 million due to issuing short-term warrants on shares.
According to Tower, the proceeds will be used for expansion of capacity at Fab 2. If the majority of that money does indeed get used for tool purchases rather than keeping the wolves at bay, then Tower is making renewed headway to get back to profitability.
Should that happen, things would still be extremely tough, as the debt burden will need to be addressed. Long-suffering investors will also want some payback after experiencing consistent stock dilution due to the number of shares released to keep afloat.
There is a turn-around story in the making with Tower, but not quite yet!
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