Netgear 2012 Annual Report Download - page 47

Table of Contents
Operating Expenses
Research and Development Expense
Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory
testing, product certification expenditures to qualify our products for sale into specific markets, prototypes and other consulting fees. Research and
development expenses are recognized as they are incurred. We have invested in building our research and development organization to enhance our
ability to introduce innovative and easy-to-
use products. In the future, we expect research and development expenses will increase in absolute dollars
and as a percentage of revenue as we broaden our core competencies and expand into new software and networking product technologies. The
following table presents research and development expense, for the periods indicated:
2012 vs 2011
Research and development expenses increased $12.4 million , or 25.4% , to $61.1 million for the year ended December 31, 2012 , from
$48.7
million for the year ended December 31, 2011 . The increase was primarily attributable to higher personnel-
related expenses of $7.1 million
attributable to headcount growth and increased expenses of $6.0 million primarily related to our increased investment in research and development
projects for software development, and acquisition-
related research and development. These expenses were offset by a benefit of $3.0 million due to
a decrease in variable compensation. Research and development headcount increased by 27 employees to 251 employees at
December 31, 2012
compared to 224 employees at December 31, 2011
. Furthermore, the increase was attributable to higher facilities expenses of $2.1 million, primarily
related to our acquisition-related expansions.
2011 vs 2010
Research and development expenses increased $8.7 million, or 21.8%, to $48.7 million for the year ended December 31, 2011, from $40.0
million for the year ended December 31, 2010. The increase was primarily attributable to increased costs of $5.5 million related to an increase in
payroll and other employee expenses driven by additional headcount. Research and development headcount increased by 46 employees to 224
employees at December 31, 2011 compared to 178 employees at December 31, 2010. Furthermore, the increase was attributable to higher outside
service costs of $2.5 million, primarily related to our increased research and development projects.
Sales and Marketing Expense
Sales and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product
marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff and technical support expenses. The following table
presents sales and marketing expense, for the periods indicated:
2012 vs 2011
Sales and marketing expenses decreased $4.8 million , or 3.1% , to $149.8 million for the year ended December 31, 2012 , from $154.6 million
for
the year ended December 31, 2011
. The decrease was primarily due to a decrease in marketing costs of $3.1 million, as we shifted our marketing
efforts towards activities that were deemed to be a reduction in net revenue and away from
43
Year Ended December 31,
2012
% Change 2011 % Change 2010
(In thousands, except percentage data)
Research and development expense
$
61,066
25.4
%
$
48,699
21.8
%
$
39,972
Percentage of net revenue
4.8
%
4.1
%
4.5
%
Year Ended December 31,
2012
% Change 2011 % Change 2010
(In thousands, except percentage data)
Sales and marketing expense
$
149,766
(3.1
)%
$
154,562
17.5
%
$
131,570
Percentage of net revenue
11.9
%
13.1
%
14.6
%