Autodesk 2007 Annual Report Download - page 119

59
2007 Annual Report
Research and Development
Increase
compared to
prior
fiscal year
Increase
compared to
prior
fiscal year
Fiscal 2007 $ % Fiscal 2006 $ % Fiscal 2005
As Restated (1) As Restated (1)
(in millions)
Research and development . . . . . . . . . . . . . $406.3 $103.1 34% $303.2 $61.7 26% $241.5
As a percentage of net revenues . . . . . . . . 22% 20% 19%
(1) See the “Explanatory Note” immediately preceding Part I, Item 1 and Note 2, “Restatement of
Consolidated Financial Statements,” in the Notes to Consolidated Financial Statements of this
Form 10-K.
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. Research and development expense from the beginning of fiscal 2007 also includes stock-
based compensation expense under SFAS 123R for stock awards granted to research and development
employees.
The increase in research and development expenses during fiscal 2007, as compared to fiscal 2006,
resulted primarily from an increase in wages and salaries driven by an increase in headcount of $55.4
million, the recognition of $30.1 million of stock-based compensation expense under SFAS 123R and a
$7.3 million increase in consulting services and in-process technology purchases from Hanna Strategies.
During fiscal 2007, we incurred a total of approximately $34.3 for consulting services and in-process
technology purchases from Hanna Strategies compared to $27.0 million in the prior year. The cost of
the in-process technology acquired from Hanna Strategies was immediately recognized as an expense
because the technology had not yet reached technological feasibility and had no alternative future use.
During the first quarter of fiscal 2007, we also acquired a 28% ownership interest in Hanna Strategies
for cash consideration of $12.5 million. See Note 16, “Related Parties,” in Notes to Consolidated Financial
Statements for further discussion of this investment. Research and development expenses for fiscal 2007
also included $3.5 million in one-time ESPP bonus payments incurred in connection with our voluntary
stock option review.
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 compared
to $13.5 million in the prior year. 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.
We expect 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.