Symantec 2004 Annual Report Download - page 34

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«32»SYMANTEC CORPORATION
2004 Annual Report
GROSS MARGIN
Year Ended March 31, % Change % Change
Fiscal 2003 Fiscal 2002
($ in thousands) 2004 2003 2002 to 2004 to 2003
Gross profit $1,542,575 $1,156,830 $875,535 33% 32%
Gross margin 82% 82% 82%
Operating Expenses
RESEARCH AND DEVELOPMENT EXPENSES
Year Ended March 31, % Change % Change
Fiscal 2003 Fiscal 2002
($ in thousands) 2004 2003 2002 to 2004 to 2003
Expenses $252,284 $197,271 $163,979 28% 20%
Percentage of total net revenues 13% 14% 15%
The increase in research and development expenses in fiscal 2004
as compared to fiscal 2003 and fiscal 2003 as compared to fiscal
2002 was due primarily to increases in employee headcount and
related compensation and in overhead costs due to the growth of
the company, including business acquisitions, during fiscal 2004
and 2003.
Gross profit represents net revenues less cost of revenues. Cost of
revenues consists primarily of costs for producing manuals and CDs,
packaging costs, fee-based technical support costs, amortization
of acquired product rights, payments to original equipment man-
ufacturers under revenue sharing arrangements, costs of services,
royalties paid to third parties under technology licensing agreements,
and manufacturing expenses.
Gross margin remained flat at approximately 82% during fiscal year
2004, 2003 and 2002. We anticipate that our services revenues may
grow and comprise a higher percentage of our total revenues in
future periods, in which case our gross margin would likely decrease,
as our services typically have higher cost of revenues than our
software products.
Acquired Product Rights Acquired product rights are comprised
of purchased product rights, technologies, databases, and revenue-
related order backlog and contracts from acquired companies.
During fiscal 2004, we recorded $90 million in acquired product
rights as follows (in thousands):
Hilgraeve patent settlement $48,583
PowerQuest 19,600
Roxio, Inc.’s GoBack computer recovery system 12,583
ON Technology 7,410
Nexland 1,000
SafeWeb 1,000
Total $90,176
During fiscal 2003, we recorded $41 million in acquired product
rights as follows (in thousands):
Recourse $19,000
Riptech 12,700
SecurityFocus 6,840
Mountain Wave 2,000
Total $40,540
Amortization of acquired product rights was $42 million, $32 million
and $32 million in fiscal 2004, 2003 and 2002, respectively.
Amortization of acquired product rights was included in Cost of
revenues in the Consolidated Statements of Operations, except
for an immaterial amount related to the divested Web Access
Management product line, which was included in Income, net
of expense, from sale of technologies and product lines in the
Consolidated Statement of Operations.