EMC 2009 Annual Report Download - page 29

Table of Contents
Corporate reconciling items within R&D, which consist of stock-based compensation, acquisition-related intangible asset amortization and transition
costs increased $60.4 and $56.0 to $235.8 and $175.4 in 2009 and 2008, respectively. Stock-based compensation expense increased $52.2 and $54.4 in 2009
and 2008, respectively. Acquisition-related intangible asset amortization decreased $0.2 in 2009 and increased $1.6 in 2008 and transition costs were $8.4 and
$0.0 in 2009 and 2008, respectively. The increase in stock-based compensation expense in 2009 was primarily attributable to incremental expense associated
with VMware's equity grants and expense associated with options exchanged in the acquisition of Data Domain. The increase in stock-based compensation
expense in 2008 was primarily attributable to incremental VMware equity grants made in 2007 and 2008. 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 percentage of EMC's Information Infrastructure business revenues, were 8.5%,
9.3% and 9.7% in 2009, 2008 and 2007, respectively. R&D expenses decreased $181.6 in 2009 primarily due to a reduction in personnel-related costs,
facilities costs, materials costs and depreciation expense. Personnel-related costs decreased by $99.0, the cost of facilities decreased by $18.2, the cost of
materials to support new product development decreased by $14.0 and depreciation expense decreased by $13.4. In 2009, the cost reductions were primarily
due to savings achieved as a result of our 2008 restructuring programs, our cost savings initiatives and greater levels of capitalized software development.
Capitalized software development costs, which reduce R&D expense, increased by $31.8. The increase in capitalized software development costs is
attributable to efforts associated with new product development. R&D expenses increased $51.5 in 2008 primarily due to higher personnel-related costs and
increased facilities costs which increased by $74.7 and $6.2, respectively. Partially offsetting these increases was a decrease in the cost of materials to support
new product development of $14.4 and a $16.6 increase in capitalized software development costs, which reduces R&D expense.
R&D expenses within the VMware Virtual Infrastructure business, as a percentage of VMware's revenues, were 18.3%, 18.2% and 19.3% in 2009,
2008 and 2007, respectively. R&D expenses increased $27.3 in 2009 primarily due to an increase in personnel-related costs, including salaries and benefits
which increased $18.4 due to incremental headcount from strategic hiring and a decrease in capitalized software development costs, partially offset by
decreased costs resulting from the austerity measure implemented in the fourth quarter of 2008. Capitalized software development costs, which reduce R&D
expense, decreased by $22.3 in 2009 when compared to 2008 as VMware vSphere became generally available in 2009. R&D expenses increased $86.9 in
2008 primarily due to incremental headcount to support the growth of the business, resulting in increased salaries and benefits expense of $91.2. Partially
offsetting these increases was an increase in software capitalization costs of $43.3 which reduced R&D costs.
Selling, General and Administrative
As a percentage of revenues, SG&A expenses were 32.8%, 30.9% and 29.6% in 2009, 2008 and 2007, respectively. SG&A expenses decreased by $6.0
in 2009 driven by the cost reduction efforts implemented in the fourth quarter of 2008. Personnel-related costs, travel, supplies and other administrative costs
declined by $103.3. Additionally, our provisions for bad debts decreased by $20.3. Partially offsetting these decreased costs were $57.5 for a provision for
litigation, increased commissions of $53.3 and increased depreciation of $26.6. SG&A expenses increased by $688.9 in 2008 primarily due to higher
personnel-related costs, depreciation, facilities costs, bad debt provisions and travel costs. Personnel-related costs increased by $468.2, depreciation increased
by $49.4, facilities costs increased $28.3, bad debt provisions increased $25.8 and travel costs increased by $6.1.
Corporate reconciling items within SG&A, which consist of stock-based compensation, acquisition-related intangible asset amortization, provision for
litigation and transition costs increased $128.3 and $91.5 to $495.5 and $367.2 in 2009 and 2008, respectively. In 2009, we incurred $57.5 for a provision for
litigation, stock-based compensation expense increased $32.8 and transition costs increased $43.1. Partially offsetting these increases was a decrease in
acquisition-related intangible asset amortization expense of $5.1. The increase in stock-based compensation expense in 2009 was primarily attributable to
incremental expense associated with VMware's equity grants and expense associated with options exchanged in the acquisition of Data Domain. In 2008,
stock-based compensation increased $56.8 and acquisition-related intangible asset amortization increased $34.7. The increase in stock-based compensation
expense consisted of a $31.3 increase within the VMware Virtual Infrastructure business and a $25.5 increase within EMC's Information Infrastructure
business. The increase in stock-based compensation expense was attributable to equity grants made in 2007 and 2008. The increase in acquisition-related
intangible amortization expense was attributable to amortization of intangible assets associated with acquisitions by both EMC's Information Infrastructure
business and the VMware Virtual Infrastructure business. 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
27.1%, 26.8% and 26.0% in 2009, 2008 and 2007, respectively. SG&A expenses decreased by $228.8 in
28