Microsoft 2007 Annual Report Download - page 24

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PAGE 23
Research and Development
(In millions, except percentages) 2007 2006 2005
Percent
Change 2007
versus 2006
Percent
Change 2006
versus 2005
Research and development $7,121 $6,584 $6,097 8% 8%
As a percent of revenue 14% 15% 15% (1)ppt –
Research and development expenses include payroll, employee benefits, stock-based compensation expense,
and other headcount-related costs associated with product development. Research and development expenses
also include third-party development and programming costs, localization costs incurred to translate software for
international markets, and the amortization of purchased software code and services content. Research and
development costs increased during fiscal year 2007 primarily due to increased headcount-related costs which
grew 8%, reflecting a 9% growth in headcount and an increase in salaries and benefits for existing headcount,
partially offset by a decrease in stock-based compensation expense. Research and development costs increased
during fiscal year 2006 primarily due to increased development costs associated with upcoming offerings and
corporate research activities. Headcount-related costs increased 3% during fiscal year 2006, driven by a 17%
increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a
decrease in stock-based compensation expense.
Sales and Marketing
(In millions, except percentages) 2007 2006 2005
Percent
Change 2007
versus 2006
Percent
Change 2006
versus 2005
Sales and marketing $11,455 $9,818 $8,563 17% 15%
As a percent of revenue 22% 22% 22% – –
Sales and marketing expenses include payroll, employee benefits, stock-based compensation expense, and other
headcount-related costs associated with sales and marketing personnel and advertising, promotions, trade
shows, seminars, and other programs. Sales and marketing expenses increased during fiscal year 2007 primarily
because of increased headcount-related costs and increased marketing costs related to recent product launches.
Headcount-related costs increased 22% during fiscal year 2007, driven by an 11% increase in headcount and an
increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based
compensation expense. Sales and marketing expenses increased during fiscal year 2006 primarily because of
increased headcount-related costs, investments in partner marketing and product launch-related spending.
Headcount-related costs increased 13% during fiscal year 2006, driven by a 20% increase in headcount and an
increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based
compensation expense.
General and Administrative
(In millions, except percentages) 2007 2006 2005
Percent
Change 2007
versus 2006
Percent
Change 2006
versus 2005
General and administrative $3,329 $3,758 $4,536 (11)% (17)%
As a percent of revenue 7% 8% 11% (1)ppt (3)ppt
General and administrative costs include payroll, employee benefits, stock-based compensation expense and
other headcount-related costs associated with finance, legal, facilities, certain human resources, other
administrative headcount, and legal and other administrative fees. General and administrative costs decreased
during fiscal year 2007 primarily reflecting decreased costs for legal settlements and legal contingencies, partially
offset by increased