SanDisk 2007 Annual Report Download - page 88

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Sales and Marketing.
FY 2007
Percent
Change FY 2006
Percent
Change FY 2005
(In millions, except percentages)
Sales and marketing ...................... $294.6 45% $203.4 66% $122.2
Percent of revenue........................ 7.6% 6.3% 5.3%
Our fiscal year 2007 sales and marketing expense growth included increased advertising and promotional costs
on a worldwide basis of approximately $41 million. In addition, payroll and payroll-related expenses increased
$31 million and share-based compensation expense increased $9 million, both related to full-year increased
headcount and our acquisition of msystems.
Our fiscal year 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 compen-
sation expense related to implementation of SFAS 123(R) of $22 million, increased merchandising on a worldwide
basis of approximately $17 million and increased marketing efforts, all in support of our higher revenue base.
General and Administrative.
FY 2007
Percent
Change FY 2006
Percent
Change FY 2005
(In millions, except percentages)
General and administrative ................. $181.5 14% $159.8 102% $79.1
Percent of revenue........................ 4.7% 4.9% 3.4%
Our fiscal year 2007 general and administrative expense increases were primarily related to increased payroll,
payroll-related expenses and share-based compensation expense associated with headcount increases including our
acquisition of msystems in November 2006.
Our fiscal year 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 SFAS 123(R) of $30 million, higher legal expenses associated with litigation to
defend our intellectual property and consulting expenses related to our acquisition of Matrix and msystems.
Write-off of Acquired In-process Technology.
FY 2007
Percent
Change FY 2006
Percent
Change FY 2005
(In millions, except percentages)
Write-off of acquired in-process technology . . . . . n/a — $225.6 — n/a
Percent of revenue........................ n/a 6.9% n/a
As part of the Matrix acquisition in the first quarter of fiscal year 2006 and the msystems acquisition in the
fourth quarter of fiscal year 2006, a portion of each 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 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 30, 2007, it was estimated that the remaining in-process projects related to the
msystems acquisition would be completed over the next three years at an estimated total cost of $14 million. For
further discussion on write-off of acquired in-process technology, please refer to Note 14, “Business Acquisitions”
to our consolidated financial statements included in Item 8 of this report.
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