VMware 2009 Annual Report Download - page 56

Table of Contents
Cost of License Revenues
After taking into consideration the items in the table and discussed above, the increase was $6.7 or 28% in 2009 and $1.4 or 6% in 2008.
The increase between 2009 and 2008 was primarily due to additional royalty costs in connection with products licensed from third-party
providers. The change between 2008 and 2007 was relatively minor.
Cost of Services Revenues
After considering the effect of the items in the table and discussed above, the increase was $15.5 or 8% in 2009 and $70.5 or 54% in 2008.
The increase between 2009 and 2008 was primarily due to an increase in incremental costs associated with the increased services revenues, as
well as incremental headcount to support the services function. In addition, certain employee-related costs increased as we recognized expenses
related to relocating certain positions to lower-cost locations. These increases were partially offset by certain costs that were previously
categorized as cost of services revenues that are now recorded in other operating expense categories on our consolidated statement of income.
The increase between 2008 and 2007 was primarily due to increased direct support, professional services personnel and third-party professional
services costs to support the increased services revenues.
Research and Development Expenses
After considering the effect of the items in the table and discussed above, the increase was $8.9 or 2% in 2009 and $142.0 or 49% in 2008.
The change between 2009 and 2008 was relatively minor primarily due to increased salaries and benefits expenses resulting from incremental
headcount from strategic hiring, offset by decreased costs resulting from the austerity measures we implemented in the fourth quarter of 2008.
The increase between 2008 and 2007 was primarily due to increased facilities, salaries and benefits expenses resulting from incremental
headcount added in support of feature functionality development, sustainment of existing products, and new product development, which are
intended to grow our future business.
Sales and Marketing Expenses
After considering the effect of the items in the table and discussed above, the increase was $76.1 or 13% in 2009 and $178.2 or 42% in
2008. The increase between 2009 and 2008 consisted primarily of higher commission expense, increased salaries and benefits expenses resulting
from increased sales volumes and incremental headcount added in conjunction with our international expansion, as well as increased spending to
enhance the sales and marketing systems infrastructure of our business. These cost increases were partially offset by the benefit we received
from the movement of the U.S. Dollar, decreased travel and entertainment costs resulting from the austerity measures we implemented in the
fourth quarter of 2008, and decreased marketing program expenses as compared with our branding initiative in 2008. The increase between 2008
and 2007 consisted primarily of higher salaries and benefits expenses due to increases in sales and marketing personnel and higher commission
expense resulting from increased sales volumes. The increase was also due to marketing expenses related to our ongoing international market
expansion and marketing expenses related to our branding initiative in 2008.
A portion of our sales and marketing expenses is denominated in foreign currencies and thus exposed to foreign exchange rate fluctuations.
As exchange rates vary, the amount of sales and marketing expenses may fluctuate in response to changes in the exchange rate between the U.S.
Dollar and the foreign currencies in which the expenses are payable.
General and Administrative Expenses
After considering the effect of the items in the table and discussed above, the increase was $20.7 or 13% in 2009 and $36.7 or 31% in
2008. The increase between 2009 and 2008 was primarily as a result of increased salaries and benefits expenses resulting from additional
personnel employed to enhance the infrastructure of our
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