Electronic Arts 2006 Annual Report Download - page 117

We expect general and administrative expenses to increase in absolute dollars in Ñscal 2007 primarily due
to our adoption of SFAS No. 123R, which will require us to expense stock-based compensation.
Research and Development
Research and development expenses consist of expenses incurred by our production studios for personnel-
related costs, consulting, equipment depreciation and any impairment of prepaid royalties for pre-launch
products. Research and development expenses for our online business include expenses incurred by our
studios consisting of direct development and related overhead costs in connection with the development
and production of our online games. Research and development expenses also include expenses associated
with the development of web site content, network infrastructure direct expenses, software licenses and
maintenance, and network and management overhead.
Research and development expenses for Ñscal years 2006 and 2005 were as follows (in millions):
March 31, % of Net March 31, % of Net
2006 Revenue 2005 Revenue $ Change % Change
$758 26% $633 20% $125 20%
Research and development expenses increased by $125 million, or 20 percent, in Ñscal 2006 as compared
to Ñscal 2005. The increase is primarily due to an increase of $124 million in personnel-related costs
resulting from an increase in employee headcount in our Canadian and European studios as we increased
our internal development eÅorts and invested in next-generation tools, technologies and titles, as well as
consolidation of DICE. To a lesser extent, these increases were also due to higher facilities-related costs
oÅset by lower third-party development costs.
We expect research and development expenses to increase in absolute dollars in Ñscal 2007 primarily as a
result of (1) our recognition of stock-based compensation, and (2) our investment in next-generation
consoles, online and mobile platforms.
Amortization of Intangibles
Amortization of intangibles for Ñscal years 2006 and 2005 were as follows (in millions):
March 31, % of Net March 31, % of Net
2006 Revenue 2005 Revenue $ Change % Change
$7 Ì $3 Ì $4 133%
For Ñscal 2006, amortization of intangibles resulted from our acquisitions of JAMDAT, Criterion and
Annual Report
others. For Ñscal 2005, amortization of intangibles resulted from our acquisition of Criterion and others.
See Note 4 of the Notes to Consolidated Financial Statements included in Item 8 of this report.
We expect amortization of intangible expenses to increase in Ñscal 2007 primarily due to the amortization
of intangibles related to JAMDAT.
Acquired In-process Technology
Acquired in-process technology charges for Ñscal years 2006 and 2005 were as follows (in millions):
March 31, % of Net March 31, % of Net
2006 Revenue 2005 Revenue $ Change % Change
$8 Ì $13 1% $(5) (38%)
The acquired in-process technology charge we incurred in Ñscal 2006 was primarily the result of our
acquisition of JAMDAT. The acquired in-process technology charge we incurred in Ñscal 2005 was the
result of our acquisitions of Criterion, and a majority stake of the outstanding shares of DICE. Acquired
in-process technology includes the value of products in the development stage that are not considered to
have reached technological feasibility or have an alternative future use. Accordingly, upon consummation
of these acquisitions, we incurred a charge for the acquired in-process technology, as reÖected in our
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