EMC 2007 Annual Report Download - page 32

Corporate reconciling items within R&D consist of stock-based compensation, intangible asset amortization and the capitalization of software
development costs. The benefit to R&D from the corporate reconciling items increased $43.4 in 2007 when compared to 2006 and decreased $51.4 in 2006
when compared to 2005. Stock-based compensation increased $0.6 and $76.7 for 2007 and 2006, respectively. Intangible asset amortization decreased $1.2 in
2007 and increased $0.2 in 2006. The capitalization of software development costs increased by $42.8 and $25.5 for 2007 and 2006, respectively. The 2007
increase in stock-based compensation expense consisted of a $15.9 decrease within EMC's Information Infrastructure business offset by a $16.5 increase
within the VMware Virtual Infrastructure business. The decrease in stock-based compensation within EMC's Information Infrastructure business in 2007 was
primarily attributable to higher valued options that became fully vested in 2006. The increase in stock-based compensation within the VMware Virtual
Infrastructure business was primarily attributable to grants of equity-based compensation made in conjunction with VMware's initial public offering. The
stock-based compensation increase in 2006 consisted of a $65.0 increase within EMC's Information Infrastructure business plus an $11.7 increase within the
VMware Virtual Infrastructure business. The 2006 increase in stock-based compensation within both the EMC Infrastructure and VMware Virtual
Infrastructure businesses is largely attributable to incremental stock-based compensation expense recognized as a result of adopting FAS No. 123R which was
$52.5. The change in intangible asset amortization in 2007 and 2006 was primarily attributable to the mix of intangible assets and their respective useful lives.
The increase in capitalized software development costs in 2007 and 2006 resulted from the timing of projects reaching technological feasibility and the costs
incurred subsequent to reaching technological feasibility. For segment reporting purposes, corporate reconciling items are not allocated to our various
operating segments.
R&D expenses within EMC's Information Infrastructure business, as a percent of EMC's Information Infrastructure business revenues, were 11.2% in
2007 and 11.3% in each of 2006 and 2005. R&D expenses increased by $162.9 in 2007 and $125.0 in 2006 primarily due to higher personnel-related costs
and higher costs of facilities to support new product development. Personnel-related costs increased by $148.0 and $97.1 in 2007 and 2006, respectively.
Costs of facilities, including depreciation increased by $15.9 and $12.1 in 2007 and 2006, respectively.
R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware's revenues, were 22.9%, 21.1% and 19.8% in 2007, 2006
and 2005, respectively. R&D expenses increased by $153.2 in 2007 and $72.9 in 2006 primarily due to increased salaries, benefits, and consulting resulting
from the deployment of additional resources to support new product development and other costs, including travel, facilities, expensed equipment and
depreciation. Salaries, benefits and consulting expenses increased by $98.2 and $50.9 in 2007 and 2006, respectively. The other costs increased by $31.4 and
$10.4 in 2007 and 2006, respectively.
Selling, General and Administrative
As a percentage of revenues, selling, general and administrative ("SG&A") expenses were 29.6%, 29.2% and 27.0% in 2007, 2006 and 2005,
respectively. SG&A expense increased $659.4 in 2007 and $647.3 in 2006 primarily due to increased personnel-related costs, commissions, depreciation,
travel and facilities costs to support the overall growth of the business. Personnel-related costs, including commissions increased by $420.5 and $474.6,
depreciation increased by $59.5 and $43.4, travel increased by $57.1 and $31.8 and facilities increased by $28.9 and $2.2 in 2007 and 2006, respectively,
when compared to the comparable prior year.
Corporate reconciling items within SG&A, which consist of stock-based compensation and intangible asset amortization increased $4.6 and $197.9 in
2007 and 2006, respectively. Stock-based compensation decreased $22.8 in 2007 when compared to 2006 and increased $179.3 in 2006 when compared to
2005. Intangible asset amortization increased $27.4 and $18.6 in 2007 and 2006, respectively. The decrease in stock-based compensation expense in 2007
consisted of a $43.0 decrease within EMC's Information Infrastructure business offset by a $20.2 increase within the VMware Virtual Infrastructure business.
The decrease in stock-based compensation within EMC's Information Infrastructure business in 2007 was primarily attributable to higher valued options that
became fully vested in 2006. The increase in stock-based compensation within the VMware Virtual Infrastructure business was primarily attributable to grants
of equity-based compensation made in conjunction with VMware's initial public offering. The increase in stock-based compensation expense of $179.3 in
2006 within both EMC Infrastructure and VMware Virtual Infrastructure was largely attributable to incremental stock-based compensation expense
recognized as a result of adopting FAS No. 123R which was $131.9. The increase in intangible asset amortization was primarily attributable to amortization
of intangible assets associated with the RSA acquisition by EMC's Information Infrastructure business in the third quarter of 2006. For segment reporting
purposes, corporate reconciling items are not allocated to our various operating segments.
SG&A expenses within EMC's Information Infrastructure business, as a percentage of EMC's Information Infrastructure business revenues were 26.0%,
25.9% and 25.8% for 2007, 2006 and 2005, respectively. SG&A expenses increased by $389.8 and $312.8 in 2007 and 2006, respectively, primarily due to
higher personnel-related costs, depreciation and travel costs to support the
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