Support.com 2006 Annual Report Download - page 40

compensation expense. There were no comparable expenses in the prior years, because we adopted the provisions of SFAS 123R
effective January 1, 2006. We believe the decrease in research and development expense from 2005 to 2006 was temporary because
we expect to grow our research and development expense in 2007.
Sales and marketing. Sales and marketing expense consists primarily of compensation costs, including salaries, sales
commissions and related overhead costs for sales and marketing personnel; expenses for lead generation activities; and promotional
expenses, including public relations, advertising and marketing events. Sales and marketing expense was $23.3 million in 2006, $25.2
million in 2005, and $24.0 million in 2004. Sales and marketing expense decreased by $1.8 million, or 7%, in 2006 from 2005 due
primarily to a reduction in commission expenses as a result of lower revenue in 2006 and a workforce reduction during the third
quarter of 2006 designed to align staffing with our new initiatives. The increase in sales and marketing expense of $1.2 million, or 5%,
in 2005 from 2004 was primarily due to increased headcount and related compensation and travel expenses throughout the year, and
international marketing events in 2005. Included in sales and marketing expense for the year ended December 31, 2006 was $899,000
of stock−based compensation expense. There were no comparable expenses in the prior years, because we adopted the provisions of
SFAS 123R effective January 1, 2006. In 2007 we expect to substantially increase our sales and marketing expenses to continue to
develop and promote our consumer technology support offering and to fund other marketing and selling initiatives that we believe are
essential to creating sustainable revenue growth.
General and administrative. General and administrative expense consists primarily of compensation costs and related overhead
costs for administrative personnel and professional fees for legal, accounting and other professional services. General and
administrative expense was $10.2 million in 2006, $8.6 million in 2005, and $6.5 million in 2004. General and administrative expense
increased approximately $1.5 million, or 18%, in 2006 from 2005 and $2.2 million, or 34%, in 2005 from 2004. Included in general
and administrative expense for the year ended December 31, 2006 was $1,638,000 of stock−based compensation expense. There were
no comparable expenses in the prior years, because we adopted the provisions of SFAS 123R effective January 1, 2006. The increase
from 2004 to 2005 in general and administrative expense were primarily due to increases in salaries, consulting expenses and legal
fees related to the defense of the class action lawsuit.
In−process research and development. In−process research and development expense was zero in 2006 and 2005 and $1.6
million in 2004. The in−process research and development expense was a one−time expense related to our acquisition of substantially
all of the assets of Core Networks on September 2, 2004.
Interest income and other, net
($ in thousands)
2006 % Change 2005 to 2006 2005 % Change 2004 to 2005 2004
Interest income and other, net $ 6,383 76% $ 3,619 57% $ 2,298
Interest income and other, net. Interest income and other, net was $6.4 million in 2006, $3.6 million in 2005, and $2.3 million in
2004. Interest income and other, net increased approximately $2.8 million, or 76%, in 2006 from 2005 and increased by $1.3 million,
or 57%, in 2005 from 2004. The increases in interest income and other, net in 2006 from 2005 and in 2005 from 2004 were primarily
due to higher interest rates earned on our invested cash and marketable securities.
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Source: SUPPORTSOFT INC, 10−K, March 16, 2007