Adobe 2000 Annual Report Download - page 33

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OPERATING EXPENSES
Research and Development
2000 CHANGE 1999 CHANGE 1998
Research and development $ 240.2 22% $ 197.5 5% $ 188.3
Percentage of total revenue 19.0% 19.4% 21.0%
Research and development expenses consist principally of salaries and benefits for
software developers, contracted development efforts, related facilities costs, and expenses
associated with computer equipment used in software development.
Research and development expenses increased $42.7 million, or 22%, in fiscal 2000 com-
pared to fiscal 1999, primarily due to higher incentive compensation expenses associated
with the improvement in our financial performance in fiscal 2000 over fiscal 1999 and
higher salaries as a result of headcount growth.
Research and development expenses increased $9.2 million, or 5%, in fiscal 1999
compared to fiscal 1998, due to higher incentive compensation expenses. This increase
was partially offset by a decline in salaries as a result of lower headcount and decreases in
general office expenses and professional fees as a result of our fiscal 1998 restructuring
program and other cost reduction efforts implemented at that time.
We believe that investments in research and development, including the recruiting and
hiring of software developers, are critical to remain competitive in the marketplace and
are directly related to continued timely development of new and enhanced products. We
will continue to make significant investments in the development of our application
software products, including those targeted for the growing Internet market. We expect
research and development expenses to increase in absolute dollars in fiscal 2001. We are
targeting research and development expenses in the first quarter of fiscal 2001 to be 18%
of revenue. For the remainder of fiscal 2001, we are targeting research and development
expenses to be 19% of revenue.
Sales and Marketing
2000 CHANGE 1999 CHANGE 1998
Sales and marketing $ 401.2 22% $ 328.5 4% $ 315.5
Percentage of total revenue 31.7% 32.3% 35.3%
Sales and marketing expenses include salaries and benefits, sales commissions, travel
expenses, and related facilities costs for our sales, marketing, customer support, and
distribution personnel. Sales and marketing expenses also include the costs of programs
aimed at increasing revenue, such as advertising, trade shows, public relations, and other
market development programs.
Sales and marketing expenses increased $72.7 million, or 22%, in fiscal 2000 compared to
fiscal 1999 as a result of higher incentive compensation expenses and higher outsourced
technical support and order management fees. In addition, sales and marketing expenses
increased in fiscal 2000 compared to fiscal 1999 due to our focus on general corporate
brand advertising, as well as higher marketing, public relations, and trade show activities
associated with new product releases.