Gross Margin Kings - Memory Chip Manufacturers

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 (%)
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%
MOSY	MoSys	06/30/06	$2.34	$1.96
83.7%
MU	Micron Technology	06/01/06	$1,312.30	$329.80
25.1%
RMBS	Rambus	03/31/06	$47.25	$40.48
85.7%
RMTR	Ramtron International	06/30/06	$10.25	$5.40
52.7%
SFUN	Saifun Semiconductors	06/30/06	$17.38	$13.93
80.1%
SNDK	Sandisk	07/02/06	$719.19	$289.01
40.2%
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%
STEC	Simpletech	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.