Support.com 2008 Annual Report Download - page 42

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Table of Contents
Amortization/write-down of intangible assets. Amortization expenses of intangible assets in 2008 and 2007 were $202,000 and $2.8 million,
respectively. The decrease in 2008 compared to 2007 is due to a write-down of the carrying value of the intangible assets during the fourth quarter of 2007.
Amortization expense in 2008 was based on the reduced carrying value of the intangible assets and therefore decreased for the year ended December 31, 2008.
The increase of $1.7 million in amortization expense of intangible assets in 2007 to $2.8 million from $1.1 million in 2006 was due to the write down of
intangible assets. Effective December 31, 2007, we ceased actively selling one of the products we had previously acquired from Core Networks in 2004. In
connection with this action and a reevaluation of all of the Core Network intangible assets, we recognized a non-cash impairment loss of approximately
$1.7 million in the fourth quarter of 2007. An impairment loss was recorded because the sum of the discounted future net cash flows expected to result from the
use of the assets and their eventual disposition was less than the carrying amounts of such assets. Such impairment loss was measured as the difference between
the carrying amounts of the assets and their then-current fair value.
Operating expenses
($ in thousands)
2008
% Change
2007 to 2008 2007
% Change
2006 to 2007 2006
Research and development $ 8,896 (6)% $ 9,441 2% $ 9,247
Sales and marketing 24,305 (20)% 30,410 30% 23,336
General and administrative 11,006 18% 9,296 (9)% 10,163
Total operating expenses $ 44,207 (10)% $ 49,147 15% $ 42,746
Research and development. Research and development costs are expensed as incurred. Research and development expense consists primarily of
compensation costs, third-party consulting expenses and related overhead costs for research and development personnel. Research and development costs were
$8.9 million for the year ended December 31, 2008, as compared to $9.4 million for the year ended December 31, 2007 and $9.2 million for the year ended
December 31, 2006. The decrease in research and development expense in 2008 from 2007 was primarily due to lower salary and related expenses due to fewer
research and development personnel. Research and development expense was relatively consistent between 2007 and 2006.
Sales and marketing. Sales and marketing expense consists primarily of compensation costs, including salaries, sales commissions and related overhead
costs for sales, business development and marketing personnel; expenses for lead generation activities; and promotional expenses, including public relations,
advertising and marketing events, in both the Enterprise and Consumer businesses. Sales and marketing expense was $24.3 million for the year ended
December 31, 2008, as compared to $30.4 million for the year ended December 31, 2007 and $23.3 million for the year ended December 31, 2006. The decrease
in sales and marketing expense in 2008 from 2007 was primarily due to lower salary and related employees costs and lower commission as a result of reduced
personnel and decreased consumer media expense and direct marketing expenses. Sales and marketing expense increased in 2007 from 2006 due primarily to
increases in salary and related employees costs as a result of added personnel and increased advertising expenses.
General and administrative. General and administrative expense consists primarily of compensation costs and related overhead costs for administrative
personnel and professional fees for legal, accounting and other professional services. General and administrative expense was $11.0 million for the year ended
December 31, 2008, $9.3 million for the year ended December 31, 2007, and $10.2 million for the year ended December 31, 2006. The increase in general and
administrative expenses in 2008, compared to 2007 was primarily due to increase in salaries and related employee costs and professional services fees associated
with increasing our general and administrative functions to support and grow our current business. General and administrative expense decreased in 2007 from
2006 due to a decrease in personnel.
39
Source: SUPPORTSOFT INC, 10-K, March 11, 2009