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Table of Contents
Operating Expenses
Research and Development Expense
Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and
regulatory testing, product certification expenditures to qualify our products for sale into specific markets, prototypes and other consulting fees.
Research and development expenses are recognized as they are incurred. We have invested in building our research and development
organization to enhance our ability to introduce innovative and easy-to-use products. In the future, we believe that research and development
expenses will increase in absolute dollars as we expand into new networking product technologies and broaden our core competencies.
2011 Research and Development Expense Compared to 2010 Research and Development Expense
Research and development expenses increased $8.7 million, or 21.8%, to $48.7 million for the year ended December 31, 2011, from $40.0
million for the year ended December 31, 2010. The increase was primarily attributable to increased costs of $5.5 million related to an increase in
payroll and other employee expenses driven by additional headcount. Research and development headcount increased by 46 employees to 224
employees at December 31, 2011 compared to 178 employees at December 31, 2010. Furthermore, the increase was attributable to higher
outside service costs of $2.5 million, primarily related to our increased research and development projects.
2010 Research and Development Expense Compared to 2009 Research and Development Expense
Research and development expenses increased $9.9 million, or 33.0%, to $40.0 million for the year ended December 31, 2010, from $30.1
million for the year ended December 31, 2009. The increase was primarily attributable to increased costs of $7.2 million related to an increase in
payroll and other employee expenses principally resulting from increased variable compensation, as well as increased overall research and
development headcount. Research and development headcount increased by 29 employees to 178 employees at December 31, 2010, compared to
149 employees at December 31, 2009. We note there was minimal variable compensation expense in the year ended December 31, 2009. Also
included in the $9.9 million was an increase of $646,000 due to acquisition-related contingent compensation related to our May 2007 acquisition
of Infrant Technologies, Inc. earned during the year ended December 31, 2010 that did not occur during the year ended December 31, 2009.
Furthermore, the increase was attributable to higher outside service costs of $1.2 million, primarily related to our increased research and
development projects.
Sales and Marketing Expense
Sales and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses,
product marketing expenses, outbound freight costs, personnel expenses for sales and marketing staff and technical support expenses.
46
Year Ended December 31,
2011
Percentage
Change
2010
Percentage
Change
2009
(In thousands, except percentage data)
Research and development expense
$
48,699
21.8
%
$
39,972
33.0
%
$
30,056
Percentage of net revenue
4.1
%
4.5
%
4.4
%
Year Ended December 31,
2011
Percentage
Change
2010
Percentage
Change
2009
(In thousands, except percentage data)
Sales and marketing expense
$
154,562
17.5
%
$
131,570
23.9
%
$
106,162
Percentage of net revenue
13.1
%
14.6
%
15.4
%