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Research and Development
Research and development expenses for fiscal years 2007 and 2006 were as follows (in millions):
March 31,
2007
% of Net
Revenue
March 31,
2006
% of Net
Revenue $ Change % Change
$1,041 34% $758 26% $283 37%
Research and development expenses increased by $283 million, or 37 percent, in fiscal 2007 as compared to
fiscal 2006. The increase was primarily due to (1) an increase of $75 million in stock-based compensation
expense recognized as a result of our adoption of SFAS No. 123(R), (2) a $59 million increase in our annual
bonus expense, (3) $54 million in additional personnel-related costs, primarily due to a 14 percent increase in
headcount related in part to our acquisitions of JAMDAT and Mythic, and partially to support development of
games for the new generation of consoles, (4) an increase of $50 million in external development expenses
primarily due to a greater number of projects in development as compared to the prior year as well as
expenses in our cellular handset business resulting from our acquisition of JAMDAT, and (5) an increase of
$45 million in facilities-related expenses in support of our research and development functions worldwide.
Amortization of Intangibles
Amortization of intangibles for fiscal years 2007 and 2006 were as follows (in millions):
March 31,
2007
% of Net
Revenue
March 31,
2006
% of Net
Revenue $ Change % Change
$27 1% $7 — $20 286%
For fiscal 2007, amortization of intangibles resulted from our acquisitions of JAMDAT, Mythic and others. For
fiscal 2006, amortization of intangibles resulted from our acquisitions of JAMDAT, Criterion and others.
Amortization of intangibles increased by $20 million, or 286 percent, in fiscal 2007 as compared to fiscal
2006 primarily due to the amortization of intangibles related to our acquisitions of JAMDAT and Mythic. See
Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this report.
Acquired In-process Technology
Acquired in-process technology charges for fiscal years 2007 and 2006 were as follows (in millions):
March 31,
2007
% of Net
Revenue
March 31,
2006
% of Net
Revenue $ Change % Change
$3 — $8 — $(5) (63%)
The acquired in-process technology charge we incurred in fiscal 2007 resulted from our acquisitions of Mythic
and the remaining minority interest in DICE. The acquired in-process technology charge we incurred in fiscal
2006 resulted primarily from our acquisition of JAMDAT. Acquired in-process technology includes the value
of products in the development stage that are not considered to have reached technological feasibility or have
an alternative future use. Accordingly, upon consummation of these acquisitions, we incurred a charge for the
acquired in-process technology, as reflected in our Consolidated Statement of Operations. See Note 4 of the
Notes to Consolidated Financial Statements included in Item 8 of this report.
Restructuring Charges
Restructuring charges for fiscal years 2007 and 2006 were as follows (in millions):
March 31,
2007
% of Net
Revenue
March 31,
2006
% of Net
Revenue $ Change % Change
$15 — $26 1% $(11) (42%)
During the fourth quarter of fiscal 2006, we recorded a total pre-tax restructuring charge of $10 million,
consisting entirely of one-time benefits related to headcount reductions, which is included in restructuring
charges in our Consolidated Statement of Operations. These headcount reductions related to our decision in
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