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Silicon Motion Technology Corp. (SIMO) is “One to Watch”

Silicon Motion Technology Corp. is a leading provider of flash memory drives and semiconductors for MP3 players and other mobile entertainment devices such as digital cameras and multimedia players. The Taiwan-based company, whose shares are available as American Depositary Shares (ADS) on the Nasdaq, is a truly global way for investors to play the burgeoning digital music and entertainment markets. Silicon Motion sells its products in developed markets such as the U.S., Canada and western Europe, as well as emerging growth markets such as China, Singapore and South Korea.

Silicon Motion’s primary business lines include: mobile storage, mobile communications and multimedia, all of which are expected to be high-growth areas going forward. Market intelligence firm iSuppli expects global sales of MP3 players to quadruple by 2009 to almost 133 million units, from 36.8 million units just four years ago. The Gartner Group expects worldwide cell phone sales to exceed 1 billion handsets in 2009, which could be a boon for Silicon Motion as users crave more ways to use their phones beyond a simple phone call.

Silicon Motion enjoys surging demand for its products on a global scale, and the company’s presence in emerging markets, where cell phone and MP3 player demand is expected to increase in the coming years, has the potential to reward investors. The company initiated a $40 million share buyback plan in March 2008, showing management confidence in the stock, and it expects sales to climb as high as $205 million in 2008.

In addition, Silicon Motion enjoys a debt-free balance sheet and its share price has prompted some investors to call it a “value” play, while others speculate the company’s excellent market position and pristine financials make it a possible take-over target.

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