SanDisk 2008 Annual Report Download - page 52

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Research and Development.
FY 2008
Percent
Change FY 2007
Percent
Change FY 2006
(in millions, except percentages)
Research and development ............................... $429.9 3% $418.1 36% $306.9
Percent of revenue ...................................... 12.8% 10.7% 9.4%
Our fiscal year 2008 research and development expense growth was primarily due to an increase in payroll,
payroll-related expenses and headcount-related expenses of approximately $21 million, an increase in consulting
and material and equipment costs of $6 million, partially offset by lower share-based compensation expense of
($10) million and lower Flash Venture related costs of ($7) million. The growth in fiscal year 2008 research and
development expense reflects parallel investment in NAND X2, X3 and X4 storage technologies, and 3D Read/
Write memory architecture technology.
Our fiscal year 2007 research and development expense growth was primarily due to an increase in payroll
and payroll-related expenses of $43 million associated with headcount growth and our acquisition of msystems,
higher consultant and outside service costs of $17 million, higher non-recurring engineering and material costs of
$11 million and share-based compensation expense of $8 million related to increased headcount. In addition, in
fiscal year 2007 we recognized Flash Alliance start-up costs of $18 million.
Sales and Marketing.
FY 2008
Percent
Change FY 2007
Percent
Change FY 2006
(in millions, except percentages)
Sales and marketing ..................................... $328.1 11% $294.6 45% $203.4
Percent of revenue ...................................... 9.8% 7.6% 6.3%
Our fiscal year 2008 sales and marketing expense growth over the comparable period in fiscal year 2007
was primarily due to increased branding and merchandising costs of $34 million and increased employee-related
costs of $13 million, partially offset by lower share-based compensation expense of ($12) million. The growth in
branding and merchandising and employee-related costs primarily reflected expansion of our international sales
channels. Due to our restructuring activities in the fourth quarter of fiscal year 2008, we anticipate that our sales
and marketing expenses will be lower in fiscal year 2009 than in fiscal year 2008. For further discussion, see
“Restructuring Charges and Other” below.
Our fiscal year 2007 sales and marketing expense growth included increased advertising and promotional
costs on a worldwide basis of approximately $41 million. In addition, payroll and payroll-related expenses
increased $31 million and share-based compensation expense increased $9 million, both related to full-year
increased headcount and our acquisition of msystems in November 2006.
48