TiVo 2006 Annual Report Download - page 58

Table of Contents
The hardware gross margin loss, as a percentage of hardware revenue, for the fiscal year ended January 31, 2006 had increased as compared to the prior
fiscal year due largely to our pricing programs during fiscal year 2006 as compared to the same prior year period. The number of DVRs sold to our retailers
and through our direct channel decreased by approximately 35% compared to the fiscal year ended January 31, 2005, due to increased competition from
DIRECTV's TiVo products, as well as from other DVR distributors. The combination of (1) lower overall hardware revenues and (2) a greater percentage of
our hardware revenues sold through our direct sales channel, which received $150 instant rebates, resulted in an increased gross margin loss, in terms of
absolute dollars, for the fiscal year ended January 31, 2006.
Research and development expenses.
Fiscal Year Ended January 31,
2007 2006 2005
(In thousands, except percentages)
Research and development expenses $ 50,728 $ 41,087 $ 37,634
Change from same prior-year period 23% 9% 70%
Percentage of net revenues 20% 21% 22%
Our research and development expenses consist primarily of employee salaries, related expenses, and consulting expenses. Research and development
expenses, as a percentage of net revenue decreased 1%, for the fiscal year ended January 31, 2007, as compared to the prior fiscal year. However, in terms of
absolute dollars, research and development increased 23% for the fiscal year ended January 31, 2007, as compared to the prior fiscal year. The absolute dollar
increase in expenses for fiscal year ended January 31, 2007 was due to an increase of $7.6 million in headcount related costs associated with an increase in
engineering headcount, $5.7 million in additional stock based compensation in connection with the adoption of FAS 123R, offset by $6.2 million in
engineering expenses allocated to cost of technology revenues.
Research and development expenses, as a percentage of net revenue decreased 1%, for the fiscal year ended January 31, 2006, as compared to the prior
fiscal year. However, in terms of absolute dollars, research and development increased 9% for the fiscal year ended January 31, 2006, as compared to the prior
fiscal year. The absolute dollar increase in expenses for fiscal year ended January 31, 2006 was due largely to a $2.8 million decrease in engineering expenses
allocated to cost of technology revenues.
Sales and marketing expenses.
Fiscal Year Ended January 31,
2007 2006 2005
(In thousands, except percentages)
Sales and marketing expenses $ 42,955 $ 35,047 $ 37,367
Change from same prior-year period 23% -6% 97%
Percentage of net revenues 17% 18% 22%
Sales and marketing expenses consist primarily of employee salaries and related expenses, media advertising (including print, online, radio, and
television), public relations activities, special promotions, trade shows, and the production of product related items, including collateral and videos. Sales and
marketing expenses, as a percentage of net revenue, decreased by 1% for the fiscal year ended January 31, 2007, as compared to the prior fiscal year and, in
terms of absolute dollars increased by 23% for the fiscal year ended January 31, 2007, as compared to the prior fiscal year. The largest contributors in terms of
absolute dollars, to the increased sales and marketing expenses for the fiscal year ended January 31, 2007 from the prior fiscal year, was advertising expense
that increased by 30% or by $5.3 million, coupled with an increase in stock-based compensation expense
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