Blackberry 2006 Annual Report Download - page 27

Research In Motion Limited • Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated)
Annual Report 2006 25
For the years ended March 4, 2006, February 26, 2005 and February 28, 2004
Research and Development
Research and development expenditures consist primarily of salaries for technical personnel, engineering
materials, certication and tooling expense, outsourcing and consulting services, software tools and
related information technology infrastructure support and travel.
Research and development expenditures increased by $56.4 million to $157.6 million, or 7.6% of revenue,
in scal 2006 compared to $101.2 million, or 7.5% of revenue, in the previous year. The majority of the
increases during the current scal year, compared to scal 2005, were attributable to salaries and benets
(primarily as a result of increased personnel to accommodate the Company’s growth), third party new
product development costs, travel, recruiting, and materials, certication and tooling expenses.
Selling, Marketing and Administration
Selling, marketing and administrative expenses consist primarily of salaries and benets, marketing,
advertising and promotion, travel and entertainment, legal, audit and other professional fees, related
information technology and ofce infrastructure support, recruiting and foreign exchange gain or loss.
Selling, marketing and administrative expenses increased by $120.7 million to $311.4 million for scal
2006 compared to $190.7 million for scal 2005. As a percentage of revenue, selling, marketing and
administrative expenses increased to 15.1% in the current year compared to 14.1% in scal 2005. Sales
and marketing costs continue to increase as the number of carrier partners grow and as efforts into
the prosumer market and retail channels continue to build.
The net increase of $120.7 million in Selling, marketing and administrative expenses was primarily
attributable to increased expenditures for marketing, advertising and promotion expenses, compensation
expense as well as increases in consulting and external advisory costs. Other increases were attributable
to recruiting, travel and legal fees.
Amortization
Amortization expense relating to certain capital and all intangible assets other than licenses increased by
$14.1 million to $50.0 million for scal 2006 compared to $35.9 million for scal 2005. The increased
amortization expense in scal 2006 reects the impact of a full year’s amortization expense with respect
to capital and certain intangible asset expenditures incurred during scal 2005 and also incremental
amortization with respect to capital and certain intangible asset expenditures incurred during scal 2006.
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Amortization expense with respect to capital assets employed in the Company’s manufacturing operations
and BlackBerry service operations increased to $18.5 million in scal 2006 compared to $14.3 million in
scal 2005 and is charged to Cost of sales in the Consolidated Statements of Operations. The increased
amortization expense in scal 2006 reects the impact of a full year’s amortization expense with respect
to these capital asset expenditures incurred during scal 2005 and also incremental amortization with
respect to capital asset expenditures incurred during scal 2006. See also note 6 to the Consolidated
Financial Statements.