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SETAC is Ahead of Schedule

Zacks Equity Research

Ken Nagy, CFA

SETAC is Ahead of Schedule

Silicom (SILC) engages in the design, manufacture, marketing, and support of connectivity solutions for a range of servers and server based systems. The firm has several growth engines including Information Technology’s return to growth, the march to 10GB per second technology, a large and growing base of OEM customers includes most of the market-leading players, staged launch of new products, and a strong OEM business model which limits operating expenses. SETAC, the firms new Server to Appliance Converter, which combines the best of standard servers with hardware appliances should allow the firm to push its revenues to the 100 million run rate level in coming years. Silicom announced earnings this morning for Q2 2011 and SETAC remains ahead of schedule.  

Silicom’s cost competitive SETAC (Server To Appliance Converter) product family, offers a distinctive growth opportunity that enables the Company to offer a full network appliance platform solution.  This new product line permits Silicom to address new market segments as well as obtain nearly unlimited potential with the Company’s existing customer base.

The new product family has the potential to push the Company’s revenues to $100 million per year run rate in the long-term. The Security market remains the most dominant area for the technology.

SETAC, which is Silicom’s new patent pending product family that was introduced in 2009, converts standard servers to network appliances and is designed for systems that require front I/O ports, I/O ports replaceable without opening the system chassis, high quantity of I/O ports and flexibility to provide high quantity of different configurations.

While orders for SETAC products were placed throughout 2010, more recently in May 2011, SILC announced it achieved two important Design Wins for Networking Modules which is part of the Company’s SETAC Server-to-Appliance Converter strategy.  SETAC was selected by one of its major customers that is a dominant player in the global security industry as well as a leading company in the Traffic Management and Policy Enforcement industry. Silicom estimates that sales to the two customers will total approximately $3 million per year.

For a free copy of the full research report, please email scr@zacks.com with SILC as the subject.

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