Symantec 2007 Annual Report Download - page 50

and antispam products in our Security and Data Management segment also contributed to the increase in net revenue
in the international regions in fiscal 2006, while the change to ratable revenue recognition with the release of the
2006 consumer products that include content updates partially offset this increase. Weakness in most major foreign
currencies negatively impacted our international revenue growth by $48 million in fiscal 2006 as compared to fiscal
2005.
We are unable to predict the extent to which revenues in future periods will be impacted by changes in foreign
currency exchange rates. If international sales become a greater portion of our total sales in the future, changes in
foreign currency exchange rates may have a potentially greater impact on our revenues and operating results.
Cost of Revenues
2007 2006 2005
Year Ended March 31,
($ in thousands)
Cost of revenues ................................... 1,215,826 $981,869 $452,109
Gross margin ..................................... 77% 76% 82%
Period over period increase ........................... 233,957 $529,760
24%
*
*
Percentage not meaningful
Cost of revenues consists primarily of amortization of acquired product rights, fee-based technical support
costs, costs of billable services, payments to OEMs under revenue-sharing arrangements, manufacturing and direct
material costs, and royalties paid to third parties under technology licensing agreements.
Gross margin increased in fiscal 2007 as compared to fiscal 2006 due primarily to higher revenues more than
offsetting year over year increases in services and technical support costs. We anticipate that our net revenues from
our Services segment may grow to comprise a higher percentage of our total net revenues, which would have a
negative impact on our gross margin, as our services typically have a higher cost of revenues than our software
products. Gross margin was also impacted as the terms of several of our OEM arrangements changed from revenue-
sharing arrangements to placement fee arrangements during fiscal 2007. Placement fee arrangements are expensed
on an estimated average cost basis, while revenue-sharing arrangements are amortized ratably over a one-year
period.
Gross margin decreased in fiscal 2006 as compared to fiscal 2005 due primarily to increased amortization of
acquired product rights resulting from certain identifiable intangible assets acquired through the Veritas acquisition.
Costs for services and technical support also increased in fiscal 2006 as compared to fiscal 2005. These increases
were partially offset by ratable recognition of costs for 2006 consumer products that include content updates, which
are recognized ratably over the term of the license beginning in the December 2005 quarter.
Cost of content, subscriptions, and maintenance
2007 2006 2005
Year Ended March 31,
($ in thousands)
Cost of content, subscriptions, and maintenance . . . ......... $823,525 $621,636 $351,077
As a % of related revenue ............................ 21% 22% 18%
Period over period increase............................ $201,889 $270,559
32% 77%
Cost of content, subscriptions, and maintenance consists primarily of fee-based technical support costs, costs
of billable services, and payments to OEMs under revenue-sharing agreements.
Cost of content, subscriptions, and maintenance remained relatively constant as a percentage of the related
revenue in fiscal 2007 as compared to fiscal 2006. The year over year increase in costs is primarily driven by sales of
products acquired through the Veritas acquisition, which contributed $98 million of incremental costs in fiscal 2007
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