8x8 1999 Annual Report Download - page 34

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Research and Development Expenses
Research and development expenses consist primarily of personnel, system prototype design and fabrication, mask, prototype wafer and
equipment costs necessary for the Company to conduct its development efforts. Research and development costs, including software
development costs, are expensed as incurred. Research and development expenses were $9.9 million, $12.3 million and $10.5 million for fiscal
1999, 1998 and 1997, respectively. During fiscal 1999, 1998 and 1997, research and development expenses were concentrated on multimedia
communication semiconductors and ViaTV and Video Monitoring systems products. In addition, in fiscal 1999 the Company's research and
development costs also included costs associated with the development of the Audacity Internet telephony processor, and the Symphony VoIP
module. Lower research and development expenses during fiscal 1999 were due to decreases in profit sharing and incentive bonuses, non-
recurring ViaTV and Video Monitoring system design costs, and costs associated with materials and tooling used in prototype builds of the
that certain research and development personnel performed non-recurring engineering services under a revenue-generating contract. The costs
associated with this contract were included in the cost of license and other revenues. Higher research and development costs as a percentage of
total revenues for fiscal 1999 were due to lower revenues as compared to fiscal 1998. The non-cash compensation expense recognized on
certain stock option grants and charged to research and development decreased to $194,000 in fiscal 1999 from $416,000 in fiscal 1998, and
$1.1 million in fiscal 1997.
The Company expects to continue to allocate substantial resources to research and development.* However, future research and development
costs may vary both in absolute dollars and as a percentage of total revenues.*
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human
resources and general management. Such costs also include advertising, sales commissions, trade show and other marketing and promotional
expenses. Selling, general and administrative expenses were $17.7 million, $17.4 million and $10.1 million in fiscal 1999, 1998 and 1997,
of a new enterprise-
wide database and information management system. These increases were substantially offset by decreases in profit sharing
and incentive bonuses, and commission expenses. Compared to fiscal 1997, in fiscal 1998 selling general and administrative
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 15, "Competition" commencing on
page 13 and "Factors That May Affect Future Results" commencing on page 17 for a discussion of certain factors that could affect future
performance.
30
YEAR ENDED MARCH 31,
--------------------------
1999 1998 1997
---- ----- -----
(IN MILLIONS)
Research and development................................. $9.9 $12.3 $10.5
As a percentage of total revenues........................ 31% 25% 55%
YEAR ENDED MARCH 31,
---------------------------
1999 1998 1997
----- ----- -----
(IN MILLIONS)
Selling, general and administrative..................... $17.7 $17.4 $10.1
As a percentage of total revenues....................... 56% 35% 53%