Symantec 2007 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2007 Symantec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

relative to fiscal 2006 and contributed 28% of the related Content, subscriptions, and maintenance revenue in fiscal
2007. In addition, costs related to our security services consulting and consumer products increased $34 million and
$37 million, respectively.
We expect our gross margin and operating expenses to be affected in future periods as a result of recent changes
in the terms of some of our key OEM relationships. We have negotiated new contract terms with some of our OEM
partners which will have the effect of moving our OEM payments from Cost of revenues to Operating expenses. Our
past OEM payments were primarily revenue-sharing arrangements, which were amortized to Cost of revenues over
a one-year period. Several of the arrangements negotiated in late fiscal 2007 are placement fee arrangements, for
which the costs are expensed on an estimated average cost basis.
Cost of content, subscriptions, and maintenance increased as a percentage of the related revenue in fiscal 2006
as compared to fiscal 2005 due primarily to sales of products acquired through the Veritas acquisition, which
contributed $228 million of additional costs and contributed 43% of the related Content, subscriptions, and
maintenance revenue in fiscal 2006. In addition, costs related to our security services consulting segment and
enterprise security products increased $21 million and $13 million, respectively.
Cost of licenses
2007 2006 2005
Year Ended March 31,
($ in thousands)
Cost of licenses ....................................... $49,968 $45,943 $52,138
As a % of related revenue ............................... 4% 4% 8%
Period over period increase (decrease) ...................... $ 4,025 $ (6,195)
9% (12)%
Cost of licenses consists primarily of royalties paid to third parties under technology licensing agreements and
manufacturing and direct material costs. Cost of licenses remained constant as a percentage of the related revenue in
fiscal 2007 as compared to fiscal 2006. The year over year increase in absolute dollars is primarily due to
amortization of stock-based compensation expense, offset in part by lower costs associated with products acquired
through the Veritas acquisition, which added $9 million of costs in fiscal 2007 and $13 million in fiscal 2006.
Cost of licenses decreased as a percentage of the related revenue in fiscal 2006 as compared to fiscal 2005 due
primarily to lower costs associated with products acquired through the Veritas acquisition. The Veritas acquisition
added $13 million of costs in fiscal 2006, which was offset by a $17 million decrease in consumer products license
costs as compared to fiscal 2005. These costs and the associated revenue are reported as Content, subscriptions, and
maintenance beginning with the release of our 2006 consumer products in the December 2005 quarter that include
content updates, as we now recognize the revenue and related costs ratably over the content update period.
Amortization of acquired product rights
2007 2006 2005
Year Ended March 31,
($ in thousands)
Amortization of acquired product rights ................... $342,333 $314,290 $48,894
Percentage of total net revenues ......................... 7% 8% 2%
Period over period increase ............................ $ 28,043 $265,396
9%
*
*
Percentage not meaningful
Acquired product rights are comprised of developed technologies, revenue-related order backlog and con-
tracts, and patents from acquired companies.
The amortization in fiscal 2007 and 2006 is primarily associated with the Veritas acquisition, for which
amortization began in July 2005. In connection with the Veritas acquisition, we recorded $1.3 billion in acquired
45