Adobe 2011 Annual Report Download - page 62

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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 decreased during fiscal 2011 as compared to fiscal 2010 primarily due to a decrease in
amortization expense related to certain intangible assets purchased through our acquisition of Omniture that were fully amortized
at the end of fiscal 2011 offset in part by increases in costs associated with compensation and related benefits driven by additional
headcount and increases in data center costs related to higher transaction volumes.
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.
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 2011 as compared to fiscal 2010, primarily due to increases
in costs associated with compensation and related benefits driven by additional headcount primarily from the Day acquisition.
Cost of services and support revenue increased during fiscal 2010 as compared to fiscal 2009, due to increases in costs
associated with compensation and related benefits driven by additional headcount as a result of our acquisition of Omniture.
Operating Expenses (dollars in millions)
Research and development
Percentage of total revenue
Sales and marketing
Percentage of total revenue
General and administrative
Percentage of total revenue
Restructuring and other charges
Percentage of total revenue
Amortization of purchased intangibles and
incomplete technology
Percentage of total revenue
Total operating expenses
Fiscal
2011
$ 738.1
18%
$ 1,385.8
33%
$ 414.6
10%
$ 97.8
2%
$ 42.8
1%
$ 2,679.1
Fiscal
2010
$ 680.3
18%
$ 1,244.2
33%
$ 383.5
10%
$ 23.3
1%
$ 72.1
2%
$ 2,403.4
Fiscal
2009
$ 565.1
19%
$ 981.9
33%
$ 298.7
10%
$ 41.3
1%
$ 71.6
2%
$ 1,958.6
% Change
2011-2010
8 %
11 %
8 %
*
(41)%
11 %
% Change
2010-2009
20 %
27 %
28 %
(44)%
1 %
23 %
_________________________________________
(*) Percentage is greater than 100%.
Research and Development, Sales and Marketing, and General and Administrative Expenses
The increase in research and development, sales and marketing and general and administrative expenses during fiscal 2011
as compared to fiscal 2010 was primarily driven by higher employee compensation due to additional headcount. The increase in
research and development, sales and marketing and general and administrative expenses during fiscal 2010 as compared to fiscal
2009 was primarily driven by increases in compensation expense due to additional headcount as a result of our acquisition of
Omniture and to higher employee compensation including bonuses based on company performance to date when compared to
fiscal 2009.
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