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Sycamore Networks Inc  (OTCPK:SCMR) Gross Margin %: 57.54% (As of Jan. 2013)

Gross Margin % is calculated as gross profit divided by its revenue. Sycamore Networks Inc's Gross Profit for the three months ended in Jan. 2013 was $5.45 Mil. Sycamore Networks Inc's Revenue for the three months ended in Jan. 2013 was $9.47 Mil. Therefore, Sycamore Networks Inc's Gross Margin % for the quarter that ended in Jan. 2013 was 57.54%.




Sycamore Networks Inc had a gross margin of 57.54% for the quarter that ended in Jan. 2013 => Durable competitive advantage

The 5-Year average Growth Rate of Gross Margin for Sycamore Networks Inc was 0.00% per year.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Sycamore Networks Inc Annual Data

Jul03 Jul04 Jul05 Jul06 Jul07 Jul08 Jul09 Jul10 Jul11 Jul12
Gross Margin % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 45.83 42.89 54.89 53.77 57.53

Sycamore Networks Inc Quarterly Data

Apr08 Jul08 Oct08 Jan09 Apr09 Jul09 Oct09 Jan10 Apr10 Jul10 Oct10 Jan11 Apr11 Jul11 Oct11 Jan12 Apr12 Jul12 Oct12 Jan13
Gross Margin % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 58.78 54.24 57.27 59.36 57.54

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

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

Sycamore Networks Inc's Gross Margin for the fiscal year that ended in Jul. 2012 is calculated as

Gross Margin % (A: Jul. 2012 )=Gross Profit (A: Jul. 2012 ) / Revenue (A: Jul. 2012 )
=33 / 57.285
=(Revenue - Cost of Goods Sold) / Revenue
=(57.285 - 24.331) / 57.285
=57.53 %

Sycamore Networks Inc's Gross Margin for the quarter that ended in Jan. 2013 is calculated as


Gross Margin % (Q: Jan. 2013 )=Gross Profit (Q: Jan. 2013 ) / Revenue (Q: Jan. 2013 )
=-4 / 9.47
=(Revenue - Cost of Goods Sold) / Revenue
=(9.47 - 4.021) / 9.47
=57.54 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's 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

Sycamore Networks Inc had a gross margin of 57.54% for the quarter that ended in Jan. 2013 => 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.


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