Avid 2011 Annual Report Download - page 36

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31
resulting from our 2010 acquisitions. The decrease in maintenance revenues was largely the result of declining renewal rates for
previously discontinued product lines. Services revenues decreased in the Americas and Europe and increased in the Asia-Pacific
region during 2010, compared to 2009.
COST OF REVENUES, GROSS PROFIT AND GROSS MARGIN PERCENTAGE
Cost of revenues consists primarily of costs associated with:
• the procurement of components;
• the assembly, testing and distribution of finished products;
• warehousing;
• customer support costs related to maintenance contract revenues and other services;
• royalties for third-party software and hardware included in our products
• amortization of technology; and
• providing professional services and training.
Amortization of technology represents the amortization of developed technology assets acquired as part of acquisitions and is
described further in the Amortization of Intangible Assets section below. For 2009, cost of revenues also included restructuring
charges of $0.8 million related to the write-down of inventory resulting from our decision to exit the PCTV product line.
Costs of Revenues for the Year Ended December 31, 2011 and 2010
(dollars in thousands)
Cost of products revenues
Cost of services revenues
Amortization of intangible assets
Total cost of revenues
Gross profit
2011
Costs
$ 255,735
62,482
2,693
320,910
$ 357,026
Change
$
$(12,250)
5,992
(606)
(6,864)
$ 6,278
%
(4.6)%
10.6%
(18.4)%
(2.1)%
1.8%
2010
Costs
$ 267,985
56,490
3,299
327,774
$ 350,748
Costs of Revenues for the Year Ended December 31, 2010 and 2009
(dollars in thousands)
Cost of products revenues
Cost of services revenues
Amortization of intangible assets
Restructuring costs
Total cost of revenues
Gross profit
2010
Costs
$ 267,985
56,490
3,299
—
327,774
$ 350,748
Change
$
$ 24,623
(3,264)
1,266
(799)
21,826
$ 27,726
%
10.1%
(5.5)%
62.3%
(100.0)%
7.1%
8.6%
2009
Costs
$ 243,362
59,754
2,033
799
305,948
$ 323,022
Gross Margin Percentage
Gross margin percentage fluctuates based on factors such as the mix of products sold, the cost and proportion of third-party
hardware and software included in the systems sold, the offering of product upgrades, price discounts and other sales-promotion
programs, the distribution channels through which products are sold, the timing of new product introductions, sales of aftermarket
hardware products such as disk drives, and currency exchange-rate fluctuations. We expect our gross margins to show continued
improvement in 2012.