Shaike Orbach – Chief Executive Officer Eran Gilad – Chief Financial Officer Kenny Green – G.K. Investor Relations

Thank you. I would like to welcome all of you to Silicom’s first quarter 2009 results conference call.

Before we start, I would just like to draw your attention to the following safe harbour statement. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the Company.

These statements are only predictions and may change as time passes. Silicom does not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced demand for our products, the timely development of our new products and their adoption by the market, increased competition in the industry and price reductions, as well as due to risks identified in the documents filed by the Company with the SEC. With us on the line today are: Mr.

Shaike Orbach, CEO; and Mr. Eran Gilad, CFO As usual, Shaike will begin with an overview of the results, followed by Eran who will provide the analysis of the financials.

We will then turn over the call to the question and answer session. And with that, I would like to hand over the call to Shaike…Shaike please?

Thank you, Kenny. Good morning everyone.

Welcome to our conference call.

Our revenues this quarter were heavily impacted by the severe global economic slowdown. Although we have maintained our list of existing customers intact, and even added new customers during the recent quarter, it did not compensate for the generally lower demand.

This was particularly as a result of inventory level adjustments by customers. However, even in the face of such strong economic headwinds, we are particularly pleased with our good bottom line performance, achieving an impressive net profit margin of 17.3% despite the lower revenue level in the quarter.

This continues an unbroken profitability trend since 2005. We also increased our cash position to beyond the $40 million mark with positive operating cash flow in the quarter of $900 thousand dollars.

These achievements are a testament to the efficiency of our operations and the stability of our business model in a very volatile macro environment. The lower revenues were caused by a significantly reduced volume of ongoing purchase orders, particularly from a number of our customers, which are in the process of drawing down their inventory stock.

While this obviously does affect our results in the short-term, it does not affect our ability to maintain our profitability, or impact the long-term positive trends in our business. In fact, as I believe that our current customers will deplete their now reduced stocks soon, and given that we continue adding new customers, I would expect that we will resume our growth at some point during the second half of this year.

I would like to stress as I did last quarter, that our very strong cash position is especially important in the current macro-environment. Many of our customers only purchase from companies which are financially stable, since they need guaranteed customer support over the long haul.

Our financial strength is now a significant asset and we are leveraging this strength to acquire new customers, while retaining and further penetrating existing ones. In fact, it is poignant that not a single customer has left us.

Our strong cash levels also place us in a particularly good position to preserve the strength of our business and our first-rate customer support. It enables us to maintain and even build on the investments in our technological and product leadership, enhancing our competitive advantages.

Finally, it also provides us with an ability to swiftly take advantage of any potential opportunities that may arise.

With regard to our customers, the sharp global slowdown has negatively affected their markets, and subsequently affects us. As I mentioned, our results this quarter were strongly impacted by a number of our customers that made lower purchases from us in the quarter, especially when compared with previous quarters' levels.

It is important to note that our customers did not cease selling server products to their end-customers, which includes our cards. Their sales continued but they drew our cards from their existing stocks of inventory without making new purchase orders with us.

This was in order to lower their inventory levels of our products. However, based on their forecasts, we believe purchase volumes from these customers will pick up in the second half of the year, and will again reflect their level of sales to end-users.

While we cannot pinpoint the exact timing, this is part of our optimism underlying our growth expectations in the second half of the year. I would also like to point out that our globally diverse customer base as well as new customers that we add continuously, partly cushioned the revenue short-fall, bringing a reasonably good and diverse level of orders, especially considering the state of the global economy.

This forms the basis of my confidence that the underlying trends in our business are positive and bodes well for the long-term. Part of the reason for the strength and breadth of our customer-base, is our continuing innovation of new products to the market, combined with our ability to successfully penetrate new customers as well as up-sell additional products to current customers.

This is enabling us to continually increase the diversification and growth in our customer base, and helping us weather some of the effects of the downturn.

In fact, a clear demonstration was today’s announcement of a new customer. We were selected and received initial purchase orders for our multi-port cards from one of the world's largest manufacturers of application acceleration solutions.

While we expect to start delivering more significant orders in the second half of the year, we see significant long-term potential from this customer for our business. We are delivering multi-port gigabit Ethernet adapters for their newest application acceleration appliances, and all of these appliances will include at least one of our cards as standard, with an option for additional cards.

In fact, based on the customer’s forecast, we believe that we will eventually see revenues from this particular customer running at a level of around $3 million dollars per year. There is also additional upside to this.

Now that we have penetrated this client, we are discussing additional projects and other specialized products, and we hope to be able to increase the scope of our cooperation and develop our relationship further. We are also in evaluation and qualification with several other customers, including some leading names, offering additional upside potential for us.

While the sales cycle is typically long and has lengthened in the current environment, we believe that at least some of these opportunities will likely materialise into significant accounts in the coming quarters.

Overall, we are proud of our continued profitability, especially against the backdrop of the severe global economic crisis. Looking ahead, we expect to continue to show profitability in 2009 despite the current environment.

Just as importantly, despite our lower level of orders in the current quarter, we see very promising and solid signs for renewed growth in the second half of the year. In summary, the combination of our global and diverse customer base, our strong balance sheet, our continuous offering and development of new products, as well as our pipeline of new and potential customers; all provides us with confidence in our ability to emerge the current market downturn as a better and more diversified Company.

Our Company remains strong, our structure is sound and we believe our expense footprint is at the right level for continued execution of our goals. With that, I will now hand over the call to Eran Gilad, our CFO, for a more detailed review of the quarter’s results after which we will open the floor for questions.

Eran?

Thank you Shaike and hello everyone. Revenues for the first quarter of 2009 were at 5 million dollars, compared with revenues of $7.7 million recorded in the first quarter of 2008 and $6.5 million as recorded in the fourth quarter of 2008.

Our geographical revenue breakdown for the quarter was as follows – North America – 32 percent Asia-Pacific – 39 percent Europe and Israel – 29 percent The breakdown of revenue between BYPASS and non-BYPASS for the quarter was: Bypass – approximately 40 percent Non Bypass – approximately 60 percent Gross profit for the first quarter of 2009 was 1.9 million dollars, representing a gross margin of 38.7 percent, and in our normal range. This is compared to 3.3 million dollars or 42.3 percent in the first quarter of last year, and 2.5 million dollars or 38.2 percent last quarter.

Operating expenses in the first quarter was 1.3 million dollars, compared with 1.8 million dollars in the first quarter of last year and 1.2 million dollars last quarter. The main reason for the improved level of expenses compared with the first quarter of last year was primarily due to the increase in value of the US dollar against the Israeli shekel in which most of our expenses are denominated.

Operating income in the first quarter of 2009 was 649 thousand dollars, or 12.9 percent of revenues. This is compared with 1.5 million dollars, or 18.8 percent of revenues, reported in the first quarter of last year, and 1.3 million dollars or 19.8 percent of revenues in the prior quarter.

First quarter 2009 net income was 867 thousand dollars or 17.3% of revenues. This is compared with a net income of 1.7 million dollars, or 22.5% of revenues in the first quarter of 2008 and a net income of 1.6 million dollars, or 25.1% of revenues in the prior quarter.

Earnings per diluted share were 13 cents in the quarter compared with 26 cents in the first quarter of last year and 24 cents in the prior quarter. Now turning to the balance sheet, our net cash and equivalents at the end of the first quarter totalled 40.1 million dollars.

This represents an increase of 0.9 million dollars, attributed to positive operating cash flow, compared with the end of the fourth quarter of 2008, which totalled 39.2 million dollars. Our current strong cash position represents a level of 5 dollars and 98 cents per basic share.

That ends my summary, and we would be happy to take any questions. Operator?

Thank you operator. Thank you everybody for joining the call.

I’d like to conclude by saying that we will continue to work hard, with our ultimate goal of increasing value for our shareholders over the long-term. If you do have any questions or need information, please feel free to contact our investor relations team, GK Investor Relations.

We look forward to hosting you on our next call in three months time. Good day.