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Silicom Ltd. Message Board

  • magicdiscovery magicdiscovery Oct 26, 2012 12:37 PM Flag

    SILC and RDCM

    SILC has been one of the best investment that I made so far. I bought SILC in 2006 and in early 2009, both at around $5/$6 levels. Based on SILC's recent announcements and earning report, the company's future looks very bright. Israeli companies are very innovative and usually have the most advanced technology. I encourage people with extra money also take a look at SILC's sister company RDCM (both part of Rad-Group). RDCM develops mobile traffic test and monitoring solutions. Their GEARX8 technology announced in May 2011 is the most advanced in their field. In the last couple of years, they started with Tier 3 customers, then gained more and more Tier 2 customers. Now they are gaining more and more Tier 1 customers. Their earning reports for the last few quarters were not good. There are two reasons for that. The first reason is that there was slowdown in the entire telecom industry. The second reason is that their recent deals are with more and more Tier 1 customers, and for Tier 1 customers, it takes longer time to recognize revenues so a lot of them are still in their backlog. However, if you listen to this week's earning conference call from the front page of their website, you will see right now is exactly the turning point. "We are emerging from the slowdown that has impacted the telecom industry. This is evidenced in our Q3 bookings which have almost doubled compared to the previous quarter," Also, for the first 3 weeks of Q4 alone, they already got $3.5M new bookings. In addition, they have been cutting cost the last few quarters . Now they are running at $3.5M quarterly expense and they said the breakeven revenue is $5.2M. They said Q3 was the bottom and they will break even or do even better in Q4. They said cash flow will be around breakeven in Q4 and will be positive in Q1/13, so Q1/13 will be even better. All these things tell me they are exactly at the turning point right now. If they report a profitable Q4 in January, I think the stock will be back to $5+. Next year they will have easy comparison to this year ($5.6M for Q1/12, $3.3M for Q2/12, $3.0M for Q3/12). Based on their strong backlog ($18.5M), new booking momentum, and cost-cutting efforts, I think they will have strong revenue and earning growth and the stock will have chance to become double digit. I bought SILC when the company was around break-even levels in both 2006 and early 2009, the stock quadrupled in both times because of SILC's strong revenue and earning growth. It won't be too late if you buy RDCM in January when it reports a breakeven or profitable quarter and the stock rises to $5. But if you are an early bird, you should look at the stock right now right at its turning point.

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