EMC 2010 Annual Report Download - page 29

Table of Contents
increased by $9.4. Capitalized software development costs, which reduce R&D expense, increased by $66.3. R&D expenses decreased by $93.8 in 2009
primarily due to a decrease in personnel-related costs, depreciation expense, materials costs and facilities costs. Personnel-related costs decreased by $19.9,
depreciation expense decreased by $19.1, the cost of materials to support new product development decreased by $14.0 and the cost of facilities decreased by
$11.9. Capitalized software development costs, which reduce R&D expense, increased by $9.5.
Corporate reconciling items within R&D, which consist of stock-based compensation, acquisition-related intangible asset amortization and transition
costs increased $51.6 and $60.4 to $287.4 and $235.8 in 2010 and 2009, respectively. Stock-based compensation expense increased $44.2 and $52.2 in 2010
and 2009, respectively. Acquisition-related intangible asset amortization increased $10.7 in 2010 and decreased $0.2 in 2009 and transition costs decreased
$3.3 and increased $8.4 in 2010 and 2009, respectively. Intangible asset amortization increased primarily due to VMware acquisitions and to the Data Domain
acquisition, which was consummated in the third quarter of 2009. The increase in stock-based compensation expense in 2010 was attributable to the
incremental expense associated with VMware's equity grants and the full year impact of options exchanged in the acquisition of Data Domain. The increase in
stock-based compensation expense in 2009 was primarily attributable to expense associated with options exchanged in the acquisition of Data Domain.
R&D expenses within EMC's Information Infrastructure business, as a percentage of EMC's Information Infrastructure business revenues, were 7.9%,
8.5% and 9.3% in 2010, 2009 and 2008, respectively. R&D expenses increased $100.7 in 2010 primarily due to increases in personnel-related costs,
depreciation expense, cost of facilities and travel costs. Personnel-related costs increased by $122.4, depreciation expense increased by $14.7, cost of facilities
increased by $14.3 and travel costs increased $6.1. Partially offsetting these increased costs was an increase in capitalized software development costs of
$74.2. R&D expenses decreased $181.6 in 2009 primarily due to a reduction in personnel-related costs, facilities costs, materials costs and depreciation
expense. Personnel-related costs decreased by $99.0, the cost of facilities decreased by $18.2, the cost of materials to support new product development
decreased by $14.0 and depreciation expense decreased by $13.4. In 2009, the cost reductions were primarily due to savings achieved as a result of our 2008
restructuring programs, our cost savings initiatives and greater levels of capitalized software development. Capitalized software development costs, which
reduce R&D expense, increased by $31.8. The increase in capitalized software development costs is attributable to the timing of efforts associated with new
product development.
R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware's revenues, were 16.8%, 18.3% and 18.2% in 2010,
2009 and 2008, respectively. R&D expenses increased $108.3 in 2010 largely due to increases in personnel-related costs of $87.3, primarily due to increased
salaries and benefits expenses resulting from incremental headcount from strategic hiring and acquisitions. Additionally, capitalized software development
costs decreased $7.9 in 2010 primarily due to lower costs capitalized on products that build on the VMware vSphere foundation in 2010. R&D expenses
increased $27.3 in 2009 primarily due to an increase in personnel-related costs, including salaries and benefits which increased $18.4 due to incremental
headcount from strategic hiring and a decrease in capitalized software development costs, partially offset by decreased costs resulting from the austerity
measures implemented in the fourth quarter of 2008. Capitalized software development costs, which reduce R&D expense, decreased by $22.3 in 2009 when
compared to 2008 as VMware vSphere became generally available in 2009.
Selling, General and Administrative
As a percentage of revenues, selling, general and administrative ("SG&A") expenses were 31.6%, 32.8% and 30.9% in 2010, 2009 and 2008,
respectively. SG&A expenses increased by $779.7 in 2010 primarily due to increases in personnel-related costs, commissions, travel costs, business
development costs, cost of facilities and depreciation expense. Personnel-related costs increased by $439.4, commissions increased by $168.1, travel costs
increased by $73.3, business development costs increased by $43.7, cost of facilities increased by $35.6 and depreciation expense increased by $28.5 in 2010.
SG&A expenses decreased by $6.0 in 2009 driven by the cost reduction efforts implemented in the fourth quarter of 2008. Personnel-related costs, travel,
supplies and other administrative costs declined by $103.3. Additionally, our provisions for bad debts decreased by $20.3. Partially offsetting these decreased
costs were $57.5 for a provision for litigation, increased commissions of $53.3 and increased depreciation of $26.6.
Corporate reconciling items within SG&A, which consist of stock-based compensation, acquisition-related intangible asset amortization, provision for
litigation and transition costs decreased $18.0 to $477.5 in 2010 and increased $128.3 to $495.5 in 2009. Intangible asset amortization increased $26.8, stock-
based compensation expense increased $25.9 and transition costs decreased $13.2 in 2010. Additionally, the provision for litigation of $57.5 in 2009 did not
recur in 2010. Intangible asset amortization increased primarily due to VMware acquisitions and to the Data Domain acquisition, which was consummated in
the third quarter of 2009. Stock-based compensation expense increased in 2010 due to the incremental expense associated with VMware's equity grants and
the full year impact of options exchanged in the acquisition of Data Domain. In 2009, we incurred $57.5 for a provision for litigation, stock-based
compensation expense increased $32.8 and transition costs increased $43.1.
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