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% (NASDAQ:STEC) up to 85.7% (NASDAQ: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 (NASDAQ:MOSY), 56% for Saifun Semiconductors (NYSE: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:
|CY||Cypress Semiconductor||07/06/06||$265.24||$113.89||42.9% |
|IDTI||Integrated Device Technology||07/02/06||$185.54||$84.24||45.4% |
|ISSI||Integrated Silicon Solution||03/31/06||$53.25||$5.64||10.6% |
|MU||Micron Technology||06/01/06||$1,312.30||$329.80||25.1% |
|RMTR||Ramtron International||06/30/06||$10.25||$5.40||52.7% |
|SFUN||Saifun Semiconductors||06/30/06||$17.38||$13.93||80.1% |
|SSTI||Silicon Storage Technology||06/30/06||$107.73||$27.37||25.4% |
|STAK||Staktek Holdings||06/30/06||$14.42||$5.72||39.7% |
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.