27-July-2009

SILICOM REPORTS FINANCIAL
RESULTS FOR Q2 2009

- Continued Profitability & Strong Cash Flow Despite Difficult Markets -
- Signs Indicate a Return to Growth in H2 -

KFAR SAVA, Israel, July 27, 2009 -- Silicom Ltd. (NASDAQ and TASE: SILC ), today reported its financial results for the second quarter and first six months ended June 30, 2009.

Revenues for the second quarter of 2009 were $4.0 million, a decrease of 22% compared with $5.2 million in the second quarter of 2008. The reduction reflects the factors reported in the previous quarter, including the significant reduction in ongoing purchase orders received from our customers as a result of the difficult global IT market environment. Despite the lower sales, the Company delivered net income for the period of $256,000, or $0.04 per share (basic and diluted), compared with $323,000, or $0.05 per share (basic and diluted) for the second quarter of 2008.

Revenues for the first half of 2009 were $9.1 million compared with $12.9 million for the first half of 2008. Net income for the six-month period was $1.1 million, or $0.16 per diluted share ($0.17 per basic share), compared with $2.1 million, or $0.30 per diluted share ($0.31 per basic share), for the first six months of 2008.

As of June 30, 2009, the Company’s cash, cash equivalents and marketable securities totaled $41.1 million, up $1.1 million compared with the end of the first quarter of 2009, and up $1.9 million compared with the end of 2008.

Commenting on the results, Shaike Orbach, President and CEO, said, “We are pleased to report another profitable quarter of cash generation and strategic progress despite the global economic challenges of the past year, and see a number of signs that point towards a return of our business to growth in the second half of the year and beyond.”

Mr. Orbach continued, “We continue to be very optimistic regarding our long-term prospects, based primarily on three encouraging factors. First, the underlying trends that built our business over the past several years have not weakened during the market crisis of the last year – in fact, the industry has become even more reliant on servers and network appliances, implying an even greater need for our products. This assertion has been validated by our success in securing additional customers even during the downturn, and the fact that we have not lost a single customer of our 50+ customer base.

“Second, the major customers that have been drawing down their inventories over the past few quarters are now nearing the depletion level of their stocks, a status that we expect to lead soon to a renewed flow of purchase orders.

“Last but not least, we have recently introduced an exciting new product family that will take our portfolio to a whole new level, extending our offerings for existing customers, while - even more importantly - opening the door to promising new customers and market segments. Our SETAC SErver To Appliance Converter product line is based on a patent-pending concept that eliminates a painful trade-off currently faced by network appliance providers. We have already secured its first customer, and initial market feedback has been extremely encouraging. As such, we expect the SETAC to become a new driver for our long-term revenues, and, eventually, to allow us to offer full Network Appliance Platform products for the first time.”

Mr. Orbach concluded, “Overall, we are proud of our continued profitability in today’s difficult reality, and look forward to a return to growth before the end of 2009.”

Conference Call Details :

Silicom’s Management will host an interactive conference today, July 27th, at 9am EDT (6am Pacific Time, 4pm Israel Time) to review and discuss the results. To participate, please call one of the following numbers approximately 10 minutes before that time.

US: 1 888 668 9141 (toll free)

ISRAEL: 03 918 0609 (not toll free)

UK: 0 800 917 5108 (toll free)

INTERNATIONAL:  +972 3 918 0609 (not toll free)

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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.

- FINANCIAL TABLES FOLLOW -

Silicom Ltd. Consolidated
Statements of Income

(US$ thousands, except for share and per share data)