8x8 2011 Annual Report Download - page 35

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The increase in the cost of product revenues for fiscal 2010 from fiscal 2009 was primarily due to a $0.6 million increase in the
shipment of equipment to our business customers. The increase in cost of product revenues was partially offset by a $0.3
million decrease in shipments of equipment to residential customers, a $0.1 million reduction in payroll and related expenses,
and a $0.1 million reduction in freight costs. Thecostofproductrevenuesasapercentageofproductrevenuesincreased
duetoanincreaseindiscountingofproductsalesbyoursalesforceinfiscal.
RESEARCH AND DEVELOPMENT EXPENSES
2011 2010 2009
Research and development $ 4,819 $ 5,049 $ 5,212 $ (230) -4.6% $ (163) -3.1%
Percentage of total revenues 6.9% 8.0% 8.1%
(dollar amounts in thousands)
Years Ended March 31, Year-over-Year Change
2010 to 2011 2009 to 2010
Historically, our research and development expenses have consisted primarily of personnel, system prototype design, and
equipment costs necessary for us to conduct our development and engineering efforts. We expense research and development
costs, including software development costs, as they are incurred.
The decrease in research and development expenses for fiscal 2011 from fiscal 2010 was primarily attributable to the sale of
our French research and development subsidiary in April 2010 offset by an increase in payroll and related expenses in the
United States.
The decrease in research and development expenses for fiscal 2010 from fiscal 2009 was primarily attributable to a decrease in
overall expenses partially offset by an increase in personnel and contractor headcount expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
2011 2010 2009
Selling, general and administrative $ 36,477 $ 33,516 $ 39,680 $ 2,961 8.8% $ (6,164) -15.5%
Percentage of total revenues 52.0% 52.9% 61.4%
(dollar amounts in thousands)
Year-over-Year ChangeYears Ended March 31,
2010 to 2011 2009 to 2010
Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing,
customer service, finance, human resources and general management. Such costs also include outsourced customer service call
center operations, sales commissions, as well as trade show, advertising and other marketing and promotional expenses.
The increase in selling, general and administrative expenses for fiscal 2011 from fiscal 2010 was primarily due to a $2.3
million increase in payroll and related expenses, a $0.8 million increase in advertising expenses, a $0.8 million increase in legal
expenses, including a $0.6 million accrual related to the memorandum of understanding to settle a lawsuit against us, a $0.1
million increase in recruiting expenses, a $0.1 million increase in amortization of customer relationship intangible asset and a
$0.1 million increase in bad debt expense. This increase was partially offset by a $0.7 million reduction in consulting and
outside service expenses primarily due to reduction in third party customer service fees, reduction or conversion of temporary
personnel, and reduction of outside service expense due to one time project completed in fiscal 2010, a $0.4 million reduction
in indirect channel commission expenses, a $0.1 million reduction in printing expenses and a $0.1 million reduction in
telephone expenses.
The decrease in selling, general and administrative expenses for fiscal 2010 from fiscal 2009 was due to a $2.3 million
decrease in employee and temporary personnel costs, primarily due to a decrease in ASC 718 stock-based compensation
expense as a result of accelerating the vesting period of stock options in fiscal 2009, $1.9 million decrease in advertising,
public relations and other marketing and promotional expenses, a $1.7 million decrease in sales agent and retailer commissions,
a $0.2 million decrease in credit card processing fees, $0.1 million decrease in travel and meal expenses, a $0.1 million
decrease in telephone expenses. This decrease was partially offset by a $0.1 million increase in facility expenses.
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