SanDisk 2006 Annual Report Download - page 90

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Sales and Marketing.
FY 2006
Percent
Change FY 2005
Percent
Change FY 2004
(In millions, except percentages)
Salesandmarketing ...................... $203.4 66% $122.2 34% $91.3
Percent of revenue........................ 6.2% 5.3% 5.1%
Our 2006 sales and marketing expense growth was primarily related to increased payroll and payroll-related
expenses of approximately $22 million associated with headcount growth, share-based compensation expense
related to implementation of FAS 123(R) of $21.6 million, increased merchandising on a worldwide basis of
approximately $17 million and increased marketing efforts, all in support of our higher revenue base.
Our 2005 sales and marketing expense growth was primarily related to increased tradeshow, advertising and
branding on a worldwide basis of $15.5 million, and payroll and payroll-related expenses of $7.3 million, all in
support of our higher revenue base.
General and Administrative.
FY 2006
Percent
Change FY 2005
Percent
Change FY 2004
(In millions, except percentages)
General and administrative ................. $159.8 102% $79.1 56% $50.8
Percent of revenue........................ 4.9% 3.4% 2.9%
Our 2006 general and administrative expense increases were primarily related to increased payroll and payroll-
related expenses of approximately $22 million associated with headcount increases, share-based compensation
expense related to implementation of FAS 123(R) of $30.0 million, higher legal expenses associated with litigation
to defend our intellectual property and consulting expenses related to our acquisition of Matrix and msystems.
Our 2005 general and administrative expense growth was primarily related to increased legal expenses
associated with litigation to defend our intellectual property of $17.3 million, increased payroll and payroll related
expenses of $6.0 million and consulting expenses of $5.0 million to support our expanded business. Our 2005
general and administrative expenses also included significant consulting expenses associated with establishing new
legal entities and modifying our corporate organization to reflect our global business.
Write-off of Acquired In-process Technology.
FY 2006
Percent
Change FY 2005
Percent
Change FY 2004
(In millions, except percentages)
Write-off of acquired in-process technology . . . . . $225.6 — n/a — n/a
Percent of revenue........................ 6.9% — n/a — n/a
As part of the Matrix and msystems acquisitions, a portion of the purchase price was allocated to acquired in-
process technology, which was determined through established valuation techniques in the high-technology
industry and written-off at the date of acquisition in the first quarter and fourth quarter of fiscal 2006 because
technological feasibility had not been established and no alternative future uses existed. The value was determined
by estimating the net cash flows and discounting forecasted net cash flows to their present values. As of
December 31, 2006, it was estimated that these in-process projects would be completed over the next one to
three years at an estimated total cost of approximately $27 million. See Note 10, “Business Acquisitions,” to our
consolidated financial statements included in Item 8 of this report.
41
Annual Report