Apple 2009 Annual Report Download - page 50

Table of Contents
Research and Development (
“R&D”)
R&D expenditures increased 20% or $224 million to $1.3 billion in 2009 compared to 2008. These increases were due primarily to an increase in
headcount and higher stock-
based compensation expenses in the current year to support expanded R&D activities. In addition, $71 million of
software development costs were capitalized related to Mac OS X Snow Leopard and excluded from R&D expense during 2009, compared to
$11 million of software development costs capitalized during 2008. Although total R&D expense increased 20% during 2009, it remained
relatively flat as a percentage of net sales given the 12% increase in revenue in 2009. The Company continues to believe that focused
investments in R&D are critical to its future growth and competitive position in the marketplace and are directly related to timely development
of new and enhanced products that are central to the Company’
s core business strategy. As such, the Company expects to make further
investments in R&D to remain competitive.
Expenditures for R&D increased 42% or $327 million to $1.1 billion in 2008 compared to 2007. These increases were due primarily to an
increase in headcount in 2008 and higher stock-
based compensation expenses. In 2008, $11 million of software development costs were
capitalized related to Mac OS X Snow Leopard and excluded from R&D expense, while R&D expense for 2007 excluded $75 million of
capitalized software development costs related to Mac OS X Leopard and iPhone software. Although total R&D expense increased 42% during
2008, it remained relatively flat as a percentage of net sales given the 35% increase in revenue during 2008.
Selling, General and Administrative Expense (“SG&A”)
SG&A expenditures increased $388 million or 10% to $4.1 billion in 2009 compared to 2008. These increases are due primarily to the
Company’s continued expansion of its Retail segment in both domestic and international markets, higher stock-
based compensation expenses
and higher spending on marketing and advertising.
Expenditures for SG&A increased $798 million or 27% to $3.8 billion in 2008 compared to 2007. These increases are due primarily to higher
stock-based compensation expenses, higher variable selling expenses resulting from the significant year-over-
year increase in total net sales and
the Company’
s continued expansion of its Retail segment in both domestic and international markets. In addition, the Company incurred higher
spending on marketing and advertising during 2008 compared to 2007.
Other Income and Expense
Other income and expense for the three years ended September 26, 2009, are as follows (in millions):
Total other income and expense decreased $294 million or 47% to $326 million during 2009 compared to $620 million and $599 million in 2008
and 2007, respectively. The overall decrease in other income and expense is attributable to the significant decline in interest rates during 2009
compared to 2008 and 2007, partially offset by the Company’
s higher cash, cash equivalents and marketable securities balances. The weighted
average interest rate earned by the Company on its cash, cash equivalents and marketable securities was 1.43%, 3.44% and 5.27% during 2009,
2008 and 2007, respectively. During 2009, 2008 and 2007, the Company had no debt outstanding and accordingly did not incur any related
interest expense.
The Company’
s investment portfolio had gross unrealized losses of $16 million and $121 million as of September 26, 2009 and September 27,
2008, respectively, which were offset by gross unrealized gains of $73 million and $4 million as of September 26, 2009 and September 27, 2008,
respectively. The net unrealized gains
47
2009 2008 2007
Interest income
$
407
$
653
$
647
Other income (expense), net
(81
)
(33
)
(48
)
Total other income and expense
$
326
$
620
$
599