Adobe 2015 Annual Report Download - page 46

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Table of Contents
46
Fluctuations in cost of product revenue are due to the following:
% Change
2015-2014 % Change
2014-2013
Cost of sales (3)% (4)%
Excess and obsolete inventory (4) 1
Amortization of purchased intangibles and technology license arrangements (2) (20)
Royalty cost 3 (2)
Various individually insignificant items (1) (5)
Total change (7)% (30)%
Cost of product revenue decreased during fiscal 2015 as compared to fiscal 2014 primarily due to decreases in excess and
obsolete inventory, cost of sales and amortization of purchased intangibles, partially offset by an increase in royalty cost. The
increase in royalty cost was driven by royalty payments related to our stock photography perpetual offering from our acquisition
of Fotolia in fiscal 2015.
Cost of product revenue decreased during fiscal 2014 as compared to fiscal 2013 primarily due to decreases in amortization
of purchased intangibles and technology license arrangements, cost of sales and royalty cost, slightly offset by an increase in
excess and obsolete inventory. Amortization of purchased intangibles and technology license arrangements decreased as we entered
into certain technology licensing arrangements for which payments of $26.5 million related to historical use of certain technology
licensing arrangements were expensed as cost of product revenue during fiscal 2013. Cost of sales decreased due to decreases in
the number of perpetual units sold and associated packaging costs as we continued to focus our development and sales efforts on
Creative Cloud. Royalty cost decreased primarily due to decreases in revenue from our perpetual offerings. Excess and obsolete
inventory increased as a result of changes in reserve requirements for CS6 shrink boxes as we discontinued the general availability
of CS6 on a perpetual licensing basis.
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 in all periods presented due to increases in compensation and related benefits
driven by additional headcount and third-party fees to support the increase in our professional services business.
Operating Expenses (dollars in millions)
Fiscal
2015 Fiscal
2014 Fiscal
2013 % Change
2015-2014 % Change
2014-2013
Research and development $ 862.7 $ 844.4 $ 826.6 2 % 2 %
Percentage of total revenue 18% 20% 20%
Sales and marketing 1,683.2 1,652.3 1,620.5 2 % 2 %
Percentage of total revenue 35% 40% 40%
General and administrative 531.9 543.3 520.1 (2)% 4 %
Percentage of total revenue 11% 13% 13%
Restructuring and other charges 1.6 19.9 26.5 * (25)%
Percentage of total revenue ** ** 1%
Amortization of purchased intangibles 68.7 52.4 52.3 31 % — %
Percentage of total revenue 1% 1% 1%
Total operating expenses $ 3,148.1 $ 3,112.3 $ 3,046.0 1 % 2 %
_________________________________________
(*) Percentage is not meaningful.
(**) Percentage is less than 1%.