Siemens 2007 Annual Report Download - page 121

Management’s discussion and analysis 121
Management’s discussion and analysis
Gross profi t for fi scal 2007 increased 20% year-over-year, as all Groups in
Operations increased gross profi t. Gross profi t margin increased to 28.8% from
26.1% a year earlier. This increase is due to improved gross profi t margins over all
groups, especially at SIS, benefi ting from an improved cost structure following
severance charges in the prior year.
Research and development expenses increased to €3.399 billion, led by higher
outlays at Med and A&D. Despite the increase in our revenue year-over-year, R&D
expenses as a percent of revenue increased slightly to 4.7% from 4.6% in fi scal
2006. For additional information with respect to R&D, see “Research and Develop-
ment” and “Notes to Consolidated Financial Statements.” Marketing, selling and
general administrative expenses declined as a percent of revenue, to 16.7% from
17.9% a year earlier, due to the substantial increase in our revenue year-over-year.
Other operating income was €680 million in fi scal 2007, compared to €629 mil-
lion a year earlier. Gains on sales of property, plant and equipment and intangi-
bles increased from €208 million in fi scal 2006 to €289 million in fi scal 2007. In
fi scal 2007, gains on disposals of businesses were €196 million, benefi ting from a
sale of a locomotive leasing business at TS, compared to €55 million in the prior
year. Fiscal 2006 included a gain of €70 million related to the settlement of an
arbitration proceeding.
Other operating expense increased signifi cantly from €260 million in fi scal
2006 to €1.053 billion in fi scal 2007. The change year-over-year is due to expenses
related to major legal and regulatory matters in the current period. This included
€440 million stemming from sanctions on major suppliers of gas-isolated switch-
gear, and €152 million in expenses for external advisors and consultants related
to legal and compliance issues, as well as €81 million in funding primarily for job
placement companies for former Siemens employees affected by the bankruptcy of
BenQ Mobile GmbH & Co. OHG (BenQ). Other operating expense in fi scal 2007 also
included €60 million for goodwill impairment.
Year ended
September 30,
(€ in millions) 2007 2006 % Change
Research and development expenses (3,399) (3,091) 10%
as percentage of revenue 4.7% 4.6% –
Marketing, selling and general administrative expenses (12,103) (11,897) 2%
as percentage of revenue 16.7% 17.9% –
Other operating income 680 629 8%
Other operating expense (1,053) (260) 305%
Income from investments accounted
for using the equity method, net 108 404 (73)%
Financial income (expense), net (8) 254 –