Adobe 1998 Annual Report Download - page 18

third quarter of fiscal 1998. The Company also experienced reduced outside labor costs and professional
fees as certain research and development programs were discontinued (see Management’s Discussion and
Analysis of Restructuring and other charges).
The Company believes that investments in research and development, including the recruiting and
hiring of software developers, are critical to remain competitive in the marketplace and are directly related
to continued timely development of new and enhanced products. The Company will continue to make
significant investments in the development of its application software products, including those targeted
for the growing Internet market. While the Company expects that research and development expenditures
in fiscal 1999 will increase in absolute dollars, such expenditures as a percentage of revenue are expected
to remain approximately the same or lower than fiscal 1998.
1998 Change 1997 Change 1996
Sales and marketing ............................. $316.7 4% $303.3 19% $255.0
Percentage of total revenue ....................... 35.4% 33.3% 32.4%
Sales and marketing expenses include salaries and benefits, sales commissions, travel expenses, and
related facilities costs for the Company’s sales, marketing, customer support, and distribution personnel.
Sales and marketing expenses also include the costs of programs aimed at increasing revenue, such as
advertising, trade shows, and other market development programs.
Sales and marketing expenses increased $13.4 million, or 4%, in fiscal 1998 compared to fiscal 1997,
due to higher employee costs related to increased staffing, increased customer support costs to support
new products and customers, and increased marketing and advertising activities. As a result of the increase
in sales and marketing staff, as well as the growth in application products revenue, higher commissions
were paid in fiscal 1998 compared to fiscal 1997. Additionally, sales and marketing expenses included
higher outside labor costs to support user education related to new product releases and for the
development of the Company’s Web site, as well as new public relations activities in connection with the
employment of a national public relations agency. These increased expenses were partially offset by cost
reduction initiatives related to the restructuring program implemented during the third quarter of fiscal
1998 that eliminated certain advertising campaigns and other marketing activities related to the divestiture
of a business unit (see Management’s Discussion and Analysis of Restructuring and other charges).
Sales and marketing expenses increased in fiscal 1997 compared to fiscal 1996 due to increased
advertising and promotional expenditures for upgrades of existing products and further development of
customer and technical support services to support a growing installed base of customers.
While the Company expects that sales and marketing expenditures will increase in absolute dollars in
fiscal 1999, such expenditures as a percentage of revenue are expected to remain approximately the same
or lower than fiscal 1998.
1998 Change 1997 Change 1996
General and administrative .......................... $95.7 27% $75.4 21% $62.0
Percentage of total revenue .......................... 10.7% 8.3% 7.9%
General and administrative expenses consist principally of salaries and benefits, travel expenses, and
related facilities costs for the finance, human resources, legal, information services, and executive person-
nel of the Company. General and administrative expenses also include outside legal and accounting fees,
provision for bad debts, amortization of goodwill, and expenses associated with computer equipment and
software used in the administration of the business.
General and administrative expenses increased $20.4 million, or 27%, in fiscal 1998 compared to fiscal
1997, due to increased expenses for outside legal and investment banking services associated with
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