Israel-based semiconductor foundry Tower Semiconductor (Nasdaq: TSEM) -- also known as TowerJazz after its merger with Jazz Technologies -- crashed hard after its third-quarter report fell short of management guidance. But you know what? This could be exactly the wrong time to panic about Tower Semi. Taking a moment to assess the company's situation would be the correct reaction.

This was the first profitable quarter on a GAAP basis in nearly a decade, dating back to the gung-ho tech bubble days. Sales grew 69% year over year, to $135 million, which was a little bit less than expected but good enough to stay on track for a $500 million year in total sales.

If orders came in a bit slower than expected, there's a good reason for that: Tower lives and dies by the types of specialty chips you're likely to find in smartphones and other mobile devices. You've seen the timid reports from chip suppliers in the sector, and you know that the market is bracing for a slowdown. Tower's customer list is a veritable who's who of growth stocks in the chip sector, including RF Micro Devices (Nasdaq: RFMD), Skyworks Solutions (Nasdaq: SWKS), and Cypress Semiconductor (Nasdaq: CY).

Long term, this is a solid business with lots of room to grow. Tower picked the hottest niche available many years ago, when camera sensors and radio chips weren't quite so cool. If the end-market slowdown turns out to be temporary, you'll look back at buying shares back here with a happy tear in your eye.

Then again, there are no guarantees in this market. Tower has been around for a long time but is working with a low cash balance and a ton of debt hanging over its head. That shaky balance sheet is a remnant of the bad old days under previous management, and the current team has done a good job to refinance most of the long-term debt to lower rates and lengthier repayment periods. But still, if something terrible happens (such as a longer slowdown than projected with the commensurate cash burn), Tower's financial model is not very flexible and could get stretched to its breaking point.

So it's a win big or lose big situation. Do you believe in Tower as a long-term play or are you gnawing your fingernails to the bone over the thin cash supply? Discuss in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Cypress Semiconductor is a Motley Fool Rule Breakers selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.