Avid 2009 Annual Report Download - page 35

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30
The increase in services gross margin for 2009 primarily resulted from improved efficiencies in our customer success
and professional services organizations related to our business transformation. The improved efficiencies were the result
of the reorganization and consolidation of services activities and the related reductions in headcount.
Comparison of 2008 to 2007
Years Ended December 31, 2008 and 2007
(dollars in thousands)
2008 Costs
Gross Margin
2007 Costs
Gross Margin
Change in
Gross Margin %
Cost of products revenues
$369,186
48.3%
$390,725
51.5%
(3.2%)
Cost of services revenues
73,888
43.5%
68,529
44.5%
(1.0%)
Amortization of intangible assets
7,526
—
16,895
—
—
Restructuring costs
1,876
—
4,278
—
—
Total
$452,476
46.4%
$480,427
48.3%
(1.9%)
Significant contributing factors for our decreased product gross margin percentages for 2008 were increased royalty
expenses, accrued duties related to an unfavorable tariff ruling in Europe and inventory write-downs largely related to
discontinued or divested products. The decrease in product gross margin attributable to these items was 3.2%, of which
approximately one-half was related to our divested Consumer Video products.
The decrease in services gross margin for 2008 primarily resulted from increased services infrastructure costs, primarily
for facilities and information technology, partially offset by the effect of an overall increase in services revenues.
Research and Development
Research and development expenses include costs associated with the development of new products and the
enhancement of existing products, and consist primarily of employee salaries and benefits, facilities costs, depreciation,
costs for consulting and temporary employees, and prototype and other development expenses.
Comparison of 2009 to 2008
Years Ended December 31, 2009 and 2008
(dollars in thousands)
2009 Expenses
2008 Expenses
Change
% Change
Research and development
$120,989
$148,598
(27,609)
(18.6%)
As a percentage of net revenues
19.2%
17.6%
1.6%
The decrease in research and development expenses during 2009 was primarily due to decreased personnel-related costs
of $23.3 million, resulting from reduced headcount. In addition, a $2.1 million decrease in computer hardware and
supplies expenses was a contributing factor to the decrease. The increase in research and development expenses as a
percentage of revenues in 2009 was the result of lower 2009 revenues.
Comparison of 2008 to 2007
Years Ended December 31, 2008 and 2007
(dollars in thousands)
2008 Expenses
2007 Expenses
Change
% Change
Research and development
$148,598
$150,707
(2,109)
(1.4%)
As a percentage of net revenues
17.6%
16.2%
1.4%