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Cisco Systems Inc (NAS:CSCO)
Gross Margin
59.93% (As of Jul. 2014)

Gross Margin is calculated as gross profit divided by its revenue. Cisco Systems Inc's gross profit for the three months ended in Jul. 2014 was $7,405 Mil. Cisco Systems Inc's revenue for the three months ended in Jul. 2014 was $12,357 Mil. Therefore, Cisco Systems Inc's Gross Margin for the quarter that ended in Jul. 2014 was 59.93%.

Warning Sign:

Cisco Systems Inc gross margin has been in long term decline. The average rate of decline per year is -1.6%.

CSCO' s 10-Year Gross Margin Range
Min: 49.67   Max: 70.1
Current: 58.91

49.67
70.1

During the past 13 years, the highest Gross Margin of Cisco Systems Inc was 70.10%. The lowest was 49.67%. And the median was 64.23%.

CSCO's Gross Marginis ranked lower than
100% of the Companies
in the Global Communication Equipment industry.

( Industry Median: vs. CSCO: 58.91 )

Cisco Systems Inc had a gross margin of 59.93% for the quarter that ended in Jul. 2014 => Durable competitive advantage

The 3-Year average Growth Rate of Gross Margin for Cisco Systems Inc was -1.60% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Cisco Systems Inc's Gross Margin for the fiscal year that ended in Jul. 2014 is calculated as

Gross Margin (A: Jul. 2014 )=Gross Profit (A: Jul. 2014 ) / Revenue (A: Jul. 2014 )
=27769 / 47142
=(Revenue - Cost of Goods Sold) / Revenue
=(47142 - 19373) / 47142
=58.91 %

Cisco Systems Inc's Gross Margin for the quarter that ended in Jul. 2014 is calculated as

Gross Margin (Q: Jul. 2014 )=Gross Profit (Q: Jul. 2014 ) / Revenue (Q: Jul. 2014 )
=7405 / 12357
=(Revenue - Cost of Goods Sold) / Revenue
=(12357 - 4952) / 12357
=59.93 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Cisco Systems Inc had a gross margin of 59.93% for the quarter that ended in Jul. 2014 => Durable competitive advantage


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Cisco Systems Inc Annual Data

Jul05Jul06Jul07Jul08Jul09Jul10Jul11Jul12Jul13Jul14
Gross Margin 67.2265.8263.9664.1063.9464.0461.4061.2460.5758.91

Cisco Systems Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
Gross Margin 61.8760.6160.9560.7061.4859.1761.2953.3560.6859.93
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