TEL AVIV (Reuters) - Israeli chip maker TowerJazz reported higher-than-expected fourth quarter net profit on Thursday but its guidance for revenues in the first quarter was lower than forecasts, sending its shares down.

FILE PHOTO: The logo of Israeli chipmaker TowerJazz is seen at their offices in Migdal HaEmek, northern Israel September 13, 2017. REUTERS/Ronen Zvulun

TowerJazz, which specializes in analogue chips used in cars, medical sensors and power management, earned $60 million excluding one-time items in the fourth quarter, up from $53 million a year earlier.

Revenue rose to a record $358 million from $340 million.

Including two one-time income tax benefits, net profit in the quarter was a record $147 million.

The company was forecast to earn adjusted net income of $56.8 million on revenue of $358 million, according to Thomson Reuters I/B/E/S.

The firm said it expected first-quarter revenue in a range of 5 percent above or below $325 million, compared with $330 million last year. Analysts on average were forecasting $346.6 million.

The firm’s shares were down 5.8 percent at 111.30 shekels ($31.83) in midday trade in Tel Aviv.

Chief Executive Russell Ellwanger said the semiconductor industry had been expecting a weak first quarter after an especially strong fourth quarter. “The first quarter doesn’t shock us,” Ellwanger told Reuters.

Ellwanger said many customers had made more purchases than usual in the fourth quarter before the Christmas holidays, and as a result were now holding a bigger inventory than normal.

TowerJazz expects sales to pick up in the year and end 2018 with higher revenue than the nearly $1.4 billion recorded in 2017.

Ellwanger said the firm was pursuing an acquisition and was conducting due diligence, but he did not name the target and said there was no certainty that the deal would go through.

“We are looking at capabilities that are used by some or many of our customers right now but not used from us because we don’t have that technology,” Ellwanger said.

TowerJazz is increasing output, almost doubling capacity at its California plant for silicon germanium used in high-speed data transfer.

“This won’t generate a huge revenue increase but revenue created will be at a substantially higher margin,” he said.

Rather than building new plants, TowerJazz has tended to expand output by looking for partners with idle capacity or excess capacity in new plants that it can utilize.

TowerJazz has linked up with Tacoma Semiconductor Technology to establish a plant in China, offering technological expertise rather than cash in exchange for half the annual capacity.

Ellwanger said a definitive agreement could be signed in the second or third quarter.

“We have strong demand for that factory from one very large customer that wants a presence in China,” he said.