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Rob Zenilman submits: Within a specific sector, gross margins can differ dramatically, due to the different nature of their businesses. Among the memory chip manufacturers tracked here, gross margins ranged from 24.8% (STEC) up to 85.7% (RMBS). The companies that have drastically higher gross margin are what I like to call "gross margin kings".

What separates out the companies with the four highest gross margin rates is that they earn money by licensing out their technology. 88% of Rambus' revenue is from licensing, 100% for MoSys (MOSY), 56% for Saifun Semiconductors (SFUN), 100% for Virage Logic (VIRL) and 25% for Staktek Holdings (STAK).

Data in table version -- click on a ticker for opinion and analysis of the company:

Total Gross Gross
Quarter Revenue Profit Profit
Ticker Company Ending ($mm) ($mm) Margin (%)
CYCypress Semiconductor07/06/06$265.24$113.89
42.9%
IDTIIntegrated Device Technology07/02/06$185.54$84.24
45.4%
ISSIIntegrated Silicon Solution03/31/06$53.25$5.64
10.6%
MOSYMoSys06/30/06$2.34$1.96
83.7%
MUMicron Technology06/01/06$1,312.30$329.80
25.1%
RMBSRambus03/31/06$47.25$40.48
85.7%
RMTRRamtron International06/30/06$10.25$5.40
52.7%
SFUNSaifun Semiconductors06/30/06$17.38$13.93
80.1%
SNDKSandisk07/02/06$719.19$289.01
40.2%
SSTISilicon Storage Technology06/30/06$107.73$27.37
25.4%
STAKStaktek Holdings06/30/06$14.42$5.72
39.7%
STECSimpletech 06/30/06$79.52$19.70
24.8%

However, having high gross margins is no guarantee of profitability. Of the four companies here with gross margins over 70% (and that derive most of their revenue from licensing) - only Rambus has a positive P/E of 62.84.

Source: Gross Margin Kings - Memory Chip Manufacturers