Silicom (SILC) Reports Strong Q2 with Significant Growth across All Parameters

KFAR SAVA, Israel–(BUSINESS WIRE)–Silicom Ltd. (NASDAQ:SILC)(TASE:SILC) today reported financial results for the second quarter ended June 30, 2010.

Financial Results

Revenues for the second quarter of 2010 were $6.7 million, an increase of 66% compared with $4.0 million for the second quarter of 2009 and 5% compared with $6.4 million for the first quarter of 2010.

Operating income for the quarter was $1.4 million, a nine-fold increase compared with $152,000 in the second quarter of 2009. Net income for the quarter was $1.4 million, or $0.20 per share (basic and diluted), a five-fold increase compared with $256,000, or $0.04 per share (basic and diluted), for the second quarter of 2009.

For the six-month period, revenues were $13.1 million, a 45% increase compared with $9.1 million for the first half of 2009. Operating income for the first half of 2010 increased by 201% to $2.4 million from $801,000 in the prior-year period, and net income for the period increased by 107% to $2.3 million, or $0.33 per diluted share ($0.34 per basic share) compared with $1.1 million, or $0.16 per diluted share ($0.17 per basic share), for the first half of 2009.

As of June 30, 2010, the Company’s cash, cash equivalents, bank deposits and marketable securities totaled $43.9 million, or $6.44 per outstanding share.

Comments of Management

Commenting on the results, Shaike Orbach, President and CEO, said, “We are very pleased to report another strong quarter for Silicom – a period during which we achieved 66% growth in revenues, 84% increase in gross profit, 822% increase in operating income and 440% increase in net income as compared year-over-year to the second quarter of 2009.

“These satisfying results reflect the IT market’s bottomless need for faster response times and increased bandwidth in an era of cloud computing, virtualization and Internet-based applications, and the industry’s growing awareness of our products and technologies as effective solutions to bottleneck challenges. This reputation, combined with our continued investment in sales, marketing and R&D, is paying off with a steady increase in our sales and profits.”

Mr. Orbach continued, “The positive factors that have been driving our results for the last few quarters make us optimistic regarding our future potential. For our traditional product lines, our growth is being driven in three ways. First, many of our existing customers continue to increase the size of their ongoing orders. Second, some of our larger customers have begun integrating additional Silicom products into their product lines. Third, we continue to add new companies to our customer base, and this expands our platform for ongoing repeat orders. In parallel, we are also seeing the beginning of market traction for our External Bypass Switches, encryption products and Redirector cards, as demonstrated by an increased flow of orders within all of our growth areas.

“As to SETAC, the newest and an exciting part of our strategy, we are increasingly confident regarding the market need as well as our marketing approach. During the quarter, we announced another SETAC win with a very important customer, while also continuing to build out the pipeline of customers who are evaluating and/or considering it for their next generation appliances. The size and depth of this pipeline leads us to believe that the SETAC will succeed in generating significant, growing sales over the long term.”

Mr. Orbach concluded, “Taken as a whole, the results we have achieved so far, the strengthening of the growth factors driving our business and the potential of our new product lines make us feel well-positioned to generate additional growth as we enter the second half of 2010.”

Conference Call Details:

Silicom’s Management will host an interactive conference today, July 26^th, at 9am EDT (6am Pacific Time, 4pm Israel Time) to review and discuss the results. To participate, please call one of the following teleconferencing numbers. Please begin placing your calls at least 10 minutes before the conference call commences. If you are unable to connect using the toll-free numbers, try the international dial-in number.

US: 1 888 668 9141

UK: 0 800 917 5108

ISRAEL: 03 918 0609

INTERNATIONAL: +972 3 918 0609

At: 9:00am Eastern Time, 6:00am Pacific Time, 4:00pm Israel Time

For those unable to listen to the live call, a replay of the call will be available for three months from the day after the call under the investor relations section of Silicom’s website, at: www.silicom.co.il

About Silicom

Silicom Ltd. is an industry-leading provider of high-performance server/appliances networking solutions. The Company’s flagship products include a variety of multi-port Gigabit Ethernet, copper and fiber-optic, server adapters and innovative BYPASS adapters designed to increase throughput and availability of server-based systems, WAN Optimization and security appliances and other mission-critical gateway applications. For more information, please visit: www.silicom.co.il.

Statements in this press release which are not historical data are forward-looking statements which involve known and unknown risks, uncertainties, or other factors not under the Company’s control, which may cause actual results, performance, or achievements of the Company to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include, but are not limited to, those detailed in the Company’s periodic filings with the Securities and Exchange Commission. The Company disclaims any duty to update such statements.

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