Adobe 2007 Annual Report Download - page 53

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53
Cost of services and support revenue increased during fiscal 2007 as compared to fiscal 2006 due to increases in
compensation and related benefits primarily as a result of headcount increases and increases in costs to support consulting
engagements and product releases.
Cost of services and support revenue increased during fiscal 2006 as compared to fiscal 2005 due to compensation and
related benefits and travel expenses as a result of higher headcount related to increases in services and support activities.
Included in compensation costs for fiscal 2006 are compensation and related benefits, including stock-based compensation
costs as a result of adopting SFAS 123R at the beginning of fiscal 2006. See Note 11 of our Consolidated Financial
Statements for further information regarding the impact of SFAS 123R. Cost of services and support revenue also increased
due to costs associated with our Expert Support program.
Operating Expenses
Overview
Included in compensation costs for fiscal 2006 and 2007 are compensation and related benefits, including stock-based
compensation costs as a result of adopting SFAS 123R at the beginning of fiscal 2006. Percentage changes from fiscal 2005
to fiscal 2006 include the implementation of SFAS 123R. See Note 11 of our Consolidated Financial Statements for further
information regarding the impact of SFAS 123R. Additionally, compensation costs increased in fiscal 2006 as compared to
fiscal 2005 due to the Macromedia acquisition.
Research and Development
Fiscal
2007
% Change
2007 to 2006
Fiscal
2006
% Change
2006 to 2005
Fiscal
2005
Expenses ........................... $ 613.2 14% $ 539.7 48 % $ 365.3
Percentage of total revenue............. 19% 21% 19%
Research and development expenses consist primarily of salary and benefit expenses for software developers, contracted
development efforts, related facilities costs and expenses associated with computer equipment used in software development.
Research and development expenses fluctuated due to the following:
% Change
2007 to 2006
% Change
2006 to 2005
Increased compensation and related benefits associated with
headcount growth................................... 9% 21 %
Increased compensation associated with incentive
compensation and stock-based compensation............. 5 16
Increased facility costs related to acquisition of Macromedia . . — 5
Increased professional fees and contractor costs ............ — 1
Increased repairs and maintenance ....................... — 1
Increased purchases of equipment and software licenses...... — 1
Various individually insignificant items................... — 3
Total change ....................................... 14% 48 %
The increase in compensation for fiscal 2007 relates to higher expense for profit sharing and employee bonuses based on
company performance.
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 focus on long-term opportunities available in our end markets and make significant
investments in the development of our desktop application and server-based software products.