(Reuters) — Dialog Semiconductor forecast revenues will drop this year as it completes a $600 million transfer of programmers and patents to iPhone maker Apple, but still won market plaudits as it said its remaining business would grow strongly.

Shares in the Anglo-German chip designer rose by 6.6 percent after its forecast of a single-digit percentage revenue drop this year proved marginally more optimistic than a consensus view among analysts of a 9 percent fall.

The Anglo-German chip designer struck a deal in October to reduce its exposure to Apple, which accounts for three-quarters of revenue, helping it weather a downturn in iPhone sales better than other suppliers to the smartphone maker.

The transaction is expected to close in the first half of the year, handing Dialog a cash windfall to back its transition to a smaller, more diversified business.

“We find this transformation of Dialog’s business compelling, and think its current valuation overly discounts the risk associated with the company’s evolving business model,” Barclays analyst Andrew Gardiner said in a note.

Gardiner holds an “overweight/neutral” rating on the stock.

Dialog expects its business with Apple to decline in the coming years as the smartphone maker puts its own main power management integrated circuits (PMICs) into future smartphone models.

To tap new growth opportunities, Dialog is pushing into the consumer Internet of Things (IoT) that spans wearable and household devices. It is also ramping up mixed-signal integrated circuits, rapid smartphone charging and low-energy bluetooth products.

While its operations with Apple will shrink dramatically, it still forecasts annual growth rates of 30-35 percent in its remaining business with the company, which includes so-called sub-PMICs that are used to manage the power supply in, for example, a smartphone’s onboard cameras.

“We are entering a new chapter from a position of strength,” chief executive Jalal Bagherli told analysts on a conference call.

He declined to give revenue guidance for 2020, but said Dialog had “a lot of engines of growth” that would have an impact going forward.

Growth in new business lines

Dialog earlier reported a 7 percent decline in fourth-quarter revenue, at the lower end of its guidance.

Based on its divisional performance, mobile sales fell 13 percent in the fourth quarter, mainly due to a decline in sales of main PMICs to Apple.

Taken together, other divisions showed a 20 percent rise in sales, although this was buoyed by the contribution of mixed-signal integrated circuit specialist Silego which was taken over by Dialog in late 2017.

Dialog expects the smaller business that will remain after the Apple deal to show strong growth in 2019, weighted toward the second half.

It had said after the Apple deal that it expected overall revenue to be “broadly stable” in 2019, implying a range of between minus 5 and plus 5 percent. The guidance is at the lower end of that band, a company spokesman said.

Gross margins this year should be roughly in line with last year’s 47.9 percent.

Apple shocked the sector in November by warning of slow year-end sales and did so again on Jan. 3 when it issued its first sales warning in 12 years, blaming weaker iPhone sales in China.

Those warnings hammered shares in other European suppliers, like Austria’s AMS, while a malaise in automotive markets also weighed on larger players like Infineon and STMicroelectronics.

Some industry players have forecast a quick, V-shaped rebound although continuing weakness in measures of industrial activity such as purchasing managers indexes and inventory builds suggest recovery may be slower in coming.

Dialog expects first-quarter revenue of $270-$310 million, representing a more pronounced than usual seasonal slowdown, with gross margins broadly in line with the 2018 figure.

Chief financial officer Wissam Jabre said that inventories, measured in terms of days’ forward cover, would rise in the first quarter after they fell by three days to 61 days in the fourth quarter.

Inventory build-ups typically occur in the supply chain when demand is not keeping pace with production.

(Reporting by Douglas Busvine; Editing by Riham Alkousaa, Jason Neely and Jan Harvey)