If you look at enough companies, you will find good ones, make money, and cruise towards financial freedom. But every so often, you'll stumble across an investment that could really move your needle. A game changer, a wealth builder, dare I say a Rule Breaker? Silicom Ltd. (NASDAQ:SILC) is a low cost business, operating in a growing space, run by smart management.
For a business to be truly great, it needs to spot trends, develop solutions to capitalize on those trends, and sell the bejesus out of its product portfolio. And Silicom has been doing that for years. It doesn't matter if its rising internet traffic, big data, virtualization, or the cloud, Silicom Ltd. (NASDAQ:SILC) has an answer for just about everything. You need a flux capicitor? Forward the request to these guys, they can probably build it.
The product portfolio
Whether it's a multiport or bypass server adapter, intelligent switches, security acceleration, or wire speed software, Silicom Ltd. (NASDAQ:SILC) has computer connectivity covered. Its also developed a patented server to appliance converter, or SETAC for short. SETAC rocks because it takes a standard reliable server and modifies it so you can more easily connect to the front of the machine. Prior to SETAC, you could only get this flexibility from hardware appliances that weren't as well made.
Just this year, Silicom Ltd. (NASDAQ:SILC) developed a best in class, patent pending, time stamp solution that's projected to add around 30% to its top line. Time stamping is important for companies who use electronic document signing, as it helps to authenticate signatures, transactions, and other legal stuff. And since there are digital records for just about everything, time stamping is becoming more and more necessary. Simply put, this added level of security is going to be a huge market and Silicom is there, at the ground floor, ready to rake in the bucks.
But don't take it from me, here's what CEO Shaike Orbach had to say,
"Initial market reaction to our unique Nano Time-Stampers has been overwhelming, demonstrating how hot the networking monitoring arena has become in the Big Data era and how outstanding our solution is."
Here's how this business works. Management spots the next big thing. It then tasks its engineers to build something fresh and innovative, to meet a customer's evolving needs. Once Silicom Ltd. (NASDAQ:SILC) gets its foot in the door, it cross sells other solutions. The best part? It has never lost a customer. Ever. Capiche?
Silicom services more than 90 original equipment manufacturers, most of which, are industry leaders. And while management won't say who those customers are, there's no harm in speculating on the types of businesses that may be attracted to Silicom Ltd. (NASDAQ:SILC). In fact, all these heavyweights could potentially eat Silicom for lunch.
1. Cisco Systems, Inc. (NASDAQ:CSCO) is a $120 billion tech titan that offers everything from data center management to security to hardware like routers and servers. Essentially it wants to be a jack of all trades for everything tech. Don't laugh, Cisco has the cash and industry presence to make it happen.
Now it wouldn't be surprising to see Cisco Systems, Inc. (NASDAQ:CSCO) buy Silicom Ltd. (NASDAQ:SILC) at a premium to todays price, as its cloud and virtualization solutions could benefit from many of Silicom's products. If Cisco were to acquire Silicom, just the seamless integration of SETAC onto a Cisco server would generate significant cost efficiencies. Think about it, adding the Silicom hustle to Cisco's muscle could be transformative for both.
2. Riverbed Technology, Inc. (NASDAQ:RVBD) is a $2.65 billion market leader in WAN optimization. In networks that span wide areas, it's important to get efficiencies in data transfer. The key here is Riverbed is always looking for ways to increase connectivity and bandwidth.
Since 2009, Riverbed has acquired 7 tech firms whose specialities range from software that analyzes the performance of networks to a satellite optimization provider. For Riverbed Technology, Inc. (NASDAQ:RVBD), Silicom Ltd. (NASDAQ:SILC)'s best in class network appliances and lesser known wire speed software could be on its wish list.
3. Symantec Corporation (NASDAQ:SYMC) books nearly $7 billion a year in revenue and provides security solutions to businesses and companies all over the globe. It's getting more and more into code signing which makes the software between a provider and customer tamper proof. It also provides a time stamp option that helps indicate when the code was signed.
Look further downstream. What if Symantec Corporation (NASDAQ:SYMC) were to offer big data and network monitoring customers a best in class, state of the art, nano second time stamper? In five years, time stamping may become synonymous with Symantec. When you think security, you should be thinking of time stamping. When you think about time stamping, think Silicom Ltd. (NASDAQ:SILC).
4. Dell Inc. (NASDAQ:DELL) is a mess right now. Whether it's Michael Dell looking to take the company private or Carl Icahn attempting to force a leveraged recapitalization, there's not a lot of visibility regarding the future. But one thing is for certain, Dell will continue to exist, it will continue to provide tech solutions, and it will probably make money doing it. We're just not sure who'll be cashing the checks.
It's also a safe bet that Dell Inc. (NASDAQ:DELL) is a Silicom Ltd. (NASDAQ:SILC) customer. How do I know? Go to the Silicom website, look up its products, and you will see a Dell server outfitted with SETAC technology. Once possession of the company is settled, it's possible Dell may look into building better machines by getting a little more familiar with Silicom.