SILC

[berloga]

SILC is trading above its uptrend support.

[David Randolph]

Riverbed (RVBD) is a company operating in the same area of SILC, the WAN optimization market, but I guess it isn't a competitor, it is more of a client or potential client for SILC (Silicom does not disclose its clients, so we don't know).

Check Riverbed's website to better understand its business, clearly something with very fast growth at this point in time.

Riverbed is already a $2.23 B market cap company, with 2006 revenue of $90 M. The company just became profitable, with operating income of $1.643 M in Q1 2007. For comparison, SILC had operating income of $1.206 M in Q1 2007. If SILC were to trade at the same operating income multiple as RVBD, it would then be a ($2,230,000,000/$1,643,000)*$1,206,000 = $1.64 B market cap company, or a $305 stock

You can see the market is prepared to pay a much higher multiple to participate in this "change the workplace, not the people" global trend.

No news or technical developments for SILC today, my valuation model tells me to keep on holding the stock through all ups and downs.

[David Randolph]

SILC will probably continue to consolidate the huge gains it had over the last 6 weeks or so. Perhaps it will wait for the 50 days moving average before making another bull run, nobody knows for sure.

It terms on a long term fundamental analysis, like the one that is described in this thread and my valuation model, SILC remains a very attractive stock that should only be sold at $74.97. I'll continue holding SILC.

[Garoh]

8:59AM Silicom Limited announces $17.9 mln private placement of ordinary shares (SILC) 23.12 : 


it's down premarket
are they starting to dilute shares ?? 

[eggman11]

David,

How does the new offering effect the potential. The dilution will probably be kept at a miniunm going forward. I can't find any comments to why the need this offering.

PS Please don't forget to update the 3 stocks on fire portfolio today.

[David Randolph]

• Silicom Ltd. Announces $17.9 Million Private Placement of Ordinary Shares
Business Wire (Fri 8:59am)

Unless they need capital for a big surge in production this private placement is hard to understand, there weren't any liquidity problems in the balance sheet, quite the opposite.

Oh my, I'm in a bad luck streak. Anyway, not a reason to sell in my view.

[eggman11]

• Silicom Ltd. Announces $17.9 Million Private Placement of Ordinary Shares
Business Wire (Fri 8:59am)

Unless they need capital for a big surge in production this private placement is hard to understand, there weren't any liquidity problems in the balance sheet, quite the opposite.

Oh my, I'm in a bad luck streak. Anyway, not a reason to sell in my view.

Would SILC still qualify to be included in the 3 Stocks on fire portfolio.?

[buddjas1]

• Silicom Ltd. Announces $17.9 Million Private Placement of Ordinary Shares
Business Wire (Fri 8:59am)

Unless they need capital for a big surge in production this private placement is hard to understand, there weren't any liquidity problems in the balance sheet, quite the opposite.

Oh my, I'm in a bad luck streak. Anyway, not a reason to sell in my view.

You are brave, David.  I do not understand why SILC did not disclose the reason for the private placement.  There is a big difference between using the money for current operations (i.e., cash flow problems) or using the money to expand or acquire another company (a good thing).  I was looking to get back in, but now I am not so sure.

By the way, you may want to take a look at ELP.  I'll post my own analysis today or tomorrow.

[DragonAMG]

I was looking to get back in, but now I am not so sure.

By the way, you may want to take a look at ELP.  I'll post my own analysis today or tomorrow.

I'm with you on this but unfortunately I had a GTC order to buy at $21.29.  Luckily it's up to $22 but I'm not sure I should stay in it? Thoughts?

[David Randolph]

This news was just out, let me think about this issue for a while. Let's see, we're talking about 875,000 new shares and 218,750 more if the share price surpasses $28.25. Since I believe the latter will happen, let's get on with this and consider 1,093,750 new shares.

Prior to this, the share count on a fully diluted basis was 5,653,000 shares. In my valuation model I considered a dilution factor of 1.0834. This means I was counting on the # of shares outstanding rising 1,535,619 over the next 3 years to 7.19 million.

This looks to me like the company is getting the money all at once to expand capacity right away. After this private placement probably there won't be much dilution going forward, so I should increase the initial share count accordingly and at the same time lower my dilution factor.

The way I see it this doesn't change anything to SILC's long term potential, I'll make the necessary changes to my estimates when I update the analysis after the close, but the end result will be similar. Let's see how the market interprets the news (what would be super is if the insider that has been buying shares picks up some more today).

[realcoolhead]

I don't think the news is all that negative: some one with big money is willing to buy at $20.50, that's likely putting a floor on the stock.

Now the key question is, why does the company need cash at this point?

[buddjas1]

I'm with you on this but unfortunately I had a GTC order to buy at $21.29.  Luckily it's up to $22 but I'm not sure I should stay in it? Thoughts?

Well, net income = $1,245,548
New number of shares, fully diluted = 5,653,000 + 875,000 = 6,528,000 (I'm not including the warrants here)

EPS = $0.19; so, the dilution takes 3 cents off of the bottom line.

0.19*4*25 = $19.00. 

I would consider buying now only in the 18-19 range.

[yukiii]

Still waiting for $17 LoL

[David Randolph]

Would SILC still qualify to be included in the 3 Stocks on fire portfolio?

Yes eggman11, SILC still is one of the top 3 holdings of the Main Portfolio, therefore it belongs to the 3 Stocks on Fire Portfolio.

I don't think the news is all that negative: some one with big money is willing to buy at $20.50, that's likely putting a floor on the stock.

Now the key question is, why does the company need cash at this point?

I agree realcoolhead, I don't think the idea of someone investing $17.9 M in SILC should be viewed as negative, even though there's going to be dilution from this.

It's hard to know why SILC needs cash at this point, but my best guess is they're ramping up production to meet demand, and that costs money. As I was on the search to know if SILC is the manufacturer of its products, I found another interesting thing:

http://www.silicom.co.il/pgx.php?p2=36

Silicom Connectivity Solutions, a part of Israel's RAD group ...

RAD Group? This is news to me

So SILC belongs to the same guys that own RDCM, a stock that is being clobbered by the market? But they also own RVSN, a $460 M market cap very lucrative business. And other companies. Gee, there's a lot of information to extract from this, I'll have to check it out over the upcoming updates.

Well, net income = $1,245,548
New number of shares, fully diluted = 5,653,000 + 875,000 = 6,528,000 (I'm not including the warrants here)

EPS = $0.19; so, the dilution takes 3 cents off of the bottom line.

0.19*4*25 = $19.00.

I would consider buying now only in the 18-19 range.

I wouldn't mind much if the stock were to go down to that point, if one year from now it is at $40. Again, you're not considering growth potential, I don't think it is realistic to expect just $0.19 a quarter for the remainder of the year. And yes, after that there would be more growth, so you need to attach the 25 EPS multiple (why not more? The industry average is 33.5 and SILC is growing a lot more than the industry) to a reasonably expected 2007 EPS number, not to $0.19 multiplied by 4. Just my opinion.

Still waiting for $17 LoL

I don't see you laughing at the TCHC thread in the Member's Corner. I'm not laughing either. Be careful with what you wish for others, it may happen to you. I was going to pass this one, but your wishing for my stocks to go down isn't right. Your results won't be better if my results are worse, this isn't a competitive game, it's not you against other traders, not even you against the market, it is just you against you.

You take care.

I'll keep holding SILC.

[rickjust]

I don't see you laughing at the TCHC thread in the Member's Corner. I'm not laughing either. Be careful with what you wish for others, it may happen to you. I was going to pass this one, but your wishing for my stocks to go down isn't right. Your results won't be better if my results are worse, this isn't a competitive game, it's not you against other traders, not even you against the market, it is just you against you.

You take care.

I'll keep holding SILC.

here, here,
well said . i don't understand the yahoo board mentallity.  it is very schoolyardish. as if in the end someone will end up with something more than someone else. ( of course we all end up the same)
to yukki,
you make some good points . don't spoil your expertise with smugness. you only look foolish rather than informed
in the end we all end up the same so let's enjoy and help eachother.
maxi