SILC – Silicom Limited (NASDAQ) – (Closing Price – $5.82)

Silicom Limited reported Q2 results on July 28 and reported very disappointing results.

The company reported revenue of 5.17 million and diluted EPS of 0.05. Revenue was down 22% year over year and down 33% from the prior quarter. EPS was also down substantially from 0.25 last year and 0.26 in the prior quarter.

The weak quarter was blamed on the decline in the shekel/dollar exchange rate, the difficult market environment, and a significant reduction in orders from Silicom’s largest customer.

The CEO did voice some optimism by stating that one customer intends to make Silicom’s BYPASS cards a standard rather than an optional feature and that discussions have nearly concluded with several new accounts.

The stock price took a big dive after earnings were announced but has currently found support. Silicom’s stock price is trading below book value so I don’t see much, if any, downside left.

I think a lot of the weakness with tech stocks in general is cautious spending by companies due to the uncertain economic climate. I think economic conditions will start to improve in the coming quarters so I think it would be unwise to sell Silicom at the current price. I am going to recommend to continue to hold.

Disclaimer: I currently own shares in SILC.