VMware 2015 Annual Report Download - page 38
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Costoflicenserevenuesdecreasedin2014comparedto2013primarilyduetoadecreaseof$34millioninamortizationofcapitalizedsoftwaredevelopment
costs,whichwaspartiallyoffsetbyanincreaseof$17millioninamortizationofintangibleassets.
NoamortizationexpenseswasrecordedduringtheyearsendedDecember31,2015and2014,asallpreviouslycapitalizedsoftwaredevelopmentcostshad
beenfullyamortizedasofDecember31,2013.Wedonotexpectsignificantamortizationofcapitalizedsoftwaredevelopmentcostsinfutureyearsasthecosts
incurredsubsequenttotechnologicalfeasibilityarenotexpectedtobematerial.
Cost of Services Revenues
Ourcostofservicesrevenuesprimarilyincludesthecostsofpersonnelandrelatedoverheadtophysicallyandelectronicallydelivertechnicalsupportforour
productsandtoprovideprofessionalservices.Additionally,ourcostsofservicesrevenuesincludeddepreciationonequipmentsupportingourserviceofferings.
OurcostofservicesrevenuesduringtheyearsendedDecember31,2015,2014and2013wereasfollows(dollarsinmillions):
For the Year Ended December 31,
2015 vs. 2014
2014 vs. 2013
2015
2014
2013
$ Change
% Change
$ Change
% Change
Costofservicesrevenues $ 788
$ 683
$ 491
$ 106
15%
$ 192
39%
Stock-basedcompensation 44
42
29
2
4
13
43
Totalexpenses $ 832
$ 725
$ 520
$ 107
15
$ 204
39
%ofServicesrevenues 21%
21%
18%
Costofservicesrevenuesincreasedin2015comparedto2014.Theincreasewasprimarilyduetogrowthincash-basedemployee-relatedexpensesof$96
million,duetoincrementalgrowthinheadcount,andanincreaseinequipment,depreciationandfacilities-relatedcostsof$42million.Additionally,third-party
professionalservicescostsincreased$23millionduetoanincreaseindemandfortechnicalsupportandservices.Theseincreaseswerepartiallyoffsetbythe
favorableimpactof$47millionresultingfromfluctuationsintheexchangeratebetweentheU.S.dollarandtheforeigncurrenciesinwhichweincurexpenses.
Costofservicesrevenuesincreasedin2014comparedto2013primarilydrivenbytheinvestmentandgrowthinourSaaSandprofessionalservicesofferings,
whichledtohighercosts.Theincreaseincludedgrowthincash-basedemployee-relatedexpensesof$124millionduetoincrementalgrowthinheadcount,both
organicandthroughacquisitions,andanincreaseintechnicalsupportcostsof$21million.Additionally,increasesof$25millioninequipmentanddepreciation
costsalsocontributedtotheincreasesincostofservicesrevenues.Theincreasein2014waspartiallyoffsetbyadecreaseof$10millioninoperatingexpenses
relatedtoPivotal.
Research and Development Expenses
Ourresearchanddevelopmentexpensesincludethepersonnelandrelatedoverheadassociatedwiththedevelopmentofourproductsoftwareandservice
offerings.
OurresearchanddevelopmentexpensesduringtheyearsendedDecember31,2015,2014and2013wereasfollows(dollarsinmillions):
For the Year Ended December 31,
2015 vs. 2014
2014 vs. 2013
2015
2014
2013
$ Change
% Change
$ Change
% Change
Researchanddevelopment $ 1,074
$ 995
$ 855
$ 80
8%
$ 141
16%
Stock-basedcompensation 226
244
227
(18)
(7)
17
7
Totalexpenses $ 1,300
$ 1,239
$ 1,082
$ 61
5
$ 157
15
%ofTotalrevenues 20%
21%
21%
Researchanddevelopmentexpensesincreasedin2015comparedto2014.Theincreasewasprimarilyduetogrowthincash-basedemployee-relatedexpenses
of$90million,drivenbyincrementalgrowthinheadcount.Inaddition,facilities-relatedcostsincreased$7million.Theseincreaseswerepartiallyoffsetbya
decreaseinstock-basedcompensationof$18million,primarilyasaresultofcertainawardsbecomingfullyvestedin2014,andthefavorableimpactof$16
millionresultingfromfluctuationsintheexchangeratebetweentheU.S.dollarandtheforeigncurrenciesinwhichweincurexpenses.
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