Adobe 2010 Annual Report Download - page 67

Download and view the complete annual report

Please find page 67 of the 2010 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 144

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144

67
The decrease in amortization of acquired rights to use technology during fiscal 2009 as compared to fiscal 2008
primarily related to a charge for historical use of licensing rights associated with certain technology licensing arrangements
entered into in fiscal 2008 that did not recur in fiscal 2009. In fiscal 2008 we entered into certain technology licensing
arrangements totaling $100.4 million. Of this cost, an estimated $56.4 million was related to future licensing rights that were
capitalized and amortized on a straight-line basis over the estimated useful lives up to fifteen years. Of the remaining costs,
we estimated that approximately $27.2 million was related to historical use of licensing rights which was expensed as cost of
sales and the residual of $16.8 million for fiscal 2008 was expensed as general and administrative costs. In connection with
these licensing arrangements, we have the ability to acquire additional rights to use technology in the future.
The decrease in localization costs during fiscal 2010 as compared to fiscal 2009 was primarily due to CS4 products
becoming fully amortized at the end of fiscal 2009, offset in part by the launch of CS5 products during fiscal 2010.
The decrease in royalty costs during fiscal 2010 as compared to fiscal 2009 primarily related to obligations to certain
key vendors that were incurred during fiscal 2009 and did not recur during fiscal 2010.
Cost of sales increased during fiscal 2010 as compared to fiscal 2009 primarily due to the associated increase in shrink-
wrap shipments as a result of the launch of our CS5 products during fiscal 2010.
Subscription
Cost of subscription revenue consists of expenses related to operating our network infrastructure, including depreciation
expenses and operating lease payments associated with computer equipment, data center costs, salaries and related expenses
of network operations, implementation, account management and technical support personnel, amortization of intangible
assets and allocated overhead. We enter into contracts with third-parties for the use of their data center facilities and our data
center costs largely consist of the amounts we pay to these third-parties for rack space, power and similar items.
Cost of subscription revenue increased in fiscal 2010 as compared to fiscal 2009 as a result of our acquisition of
Omniture in the fourth quarter of fiscal 2009 and the addition of its related data center costs. Also included in cost of
subscription revenue for fiscal 2010 is $58.4 million of amortization expense related to intangible assets acquired in
conjunction with this acquisition.
Cost of subscription revenue increased in fiscal 2009 as compared to fiscal 2008 as a result of our acquisition of
Omniture in the fourth quarter of fiscal 2009 and the addition of its related data center costs.
Services and Support
Cost of services and support revenue is primarily comprised of employee-related costs and associated costs incurred to
provide consulting services, training and product support.
Cost of services and support revenue increased during fiscal 2010 as compared to fiscal 2009, due to increases in
compensation and related benefits driven by additional headcount as a result of our acquisition of Omniture.
Cost of services and support revenue decreased during fiscal 2009 as compared to fiscal 2008, due to decreases in
compensation and related benefits driven by headcount reductions as well as increased consulting support provided by third-
party systems integrators resulting in the downsizing of our consulting organization.
Operating Expenses (dollars in millions)
Fiscal
2010
Fiscal
2009
Fiscal
2008
% Change
2010-2009
% Change
2009-2008
Research and development ...........................
680.3
565.1
662.1
20
%
(15
)%
Percentage of total revenue .......................
18
%
19
%
18
%
Sales and marketing ......................................
1,244.2
981.9
1,089.3
27
%
(10
)%
Percentage of total revenue .......................
33
%
33
%
30
%
General and administrative ...........................
383.5
298.7
337.3
28
%
(11
)%
Percentage of total revenue .......................
10
%
10
%
9
%
Restructuring charges....................................
23.3
41.3
32.1
(44
)%
29
%
Percentage of total revenue .......................
1
%
1
%
1
%
Amortization of purchased intangibles and
incomplete technology .........................
72.1
71.6
68.2
1
%
5
%
Percentage of total revenue .......................
2
%
2
%
2
%
Total operating expenses ..............................
2,403.4
1,958.6
2,189.0
23
%
(11
)%