Autodesk 2006 Annual Report Download - page 83

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expenses also include costs of programs aimed at increasing revenues, such as advertising, trade shows and
expositions, and various sales and promotional programs designed for specific sales channels and end users.
The increase of marketing and sales expenses during fiscal 2006, as compared to fiscal 2005, was
due primarily to $56.5 million of increased marketing and promotion costs related to product launches,
trade shows and branding and $14.3 million of higher employee-related costs reflecting increased headcount,
which were partially offset by a reduction in commissions and bonus accruals, and an increase in information
technology costs.
Marketing and sales expenses increased during fiscal 2005, as compared to fiscal 2004, due primarily to
approximately $40.2 million of increased commission, bonus and other incentive compensation expenses related
to the increased sales volume, approximately $23.3 million of higher advertising, branding and promotion costs
as well as costs related to a customer information and customer support software project, offset in part by
restructuring-related cost savings.
We expect to continue to invest in marketing and sales of our products to develop market opportunities,
to promote our competitive position and to strengthen our channel support. In addition, as a result of recording
stock-based compensation expense beginning in fiscal 2007, as required by SFAS 123R, we expect marketing and
sales expenses to increase both in absolute dollars and as a percentage of net revenues.
Research and Development
Increase
compared to
prior
fiscal year
Increase
compared to
prior
fiscal year
Fiscal 2006 $ percent Fiscal 2005 $ percent Fiscal 2004
(in millions)
Research and development ............. $301.6 $62.2 26% $239.4 $30.0 14% $209.4
As a percentage of net revenues ........ 20% 19% 22%
Research and development expenses consist primarily of salaries, benefits, and bonuses for software
engineers, fees paid to software development firms and independent contractors, purchased in-process
technology, depreciation of computer equipment used in software development and overhead charges.
The increase in research and development expenses during fiscal 2006, as compared to fiscal 2005, resulted
primarily from efforts to invest additional resources in certain research and development-related growth
initiatives. Employee-related costs increased approximately $19.4 million, reflecting increased headcount, and
professional fees increased approximately $18.3 million in fiscal 2006 as compared to the prior fiscal year. During
fiscal 2006, we incurred approximately $27.0 million for consulting services and purchased in-process technology
from Hanna Strategies for our Design Solutions Segment. The in-process technology is intended for future
releases of various products that have not yet reached technological feasibility and have no alternative future
use. Also contributing to the year-over-year increase was an increase in information technology costs. In addition,
we recognized $7.9 million of in-process research and development costs in connection with our acquisition of
Alias and $1.2 million related to our acquisition of Colorfront Ltd.
The increase in research and development expenses between fiscal years 2005 and 2004 was due primarily
from efforts to invest additional resources, made available through restructuring-related savings, in certain
growth initiatives. Employee-related costs increased approximately $14.0 million in fiscal 2005 as compared to
prior year, of which approximately $10.9 million related to higher bonus accruals and benefits based on financial
performance. In addition, we incurred $1.4 million related to localization of new product releases and
approximately $13.5 million for consulting services and purchased in-process technology from Hanna Strategies
for our Design Solutions Segment.
We expect that research and development spending will continue to increase in absolute dollars in future
periods as we continue to invest in product development and continue to acquire new technology. In addition,
we expect that research and development spending will continue to increase in absolute dollars and as a
percentage of net revenues in the future as a result of recording stock-based compensation expense beginning
in fiscal 2007, as required by SFAS 123R.
2006 Annual Report
37