Symantec 2008 Annual Report Download - page 125

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Gross margin increased in fiscal 2008 as compared to fiscal 2007 due primarily to an increase in revenue and
the fact that the terms of several of our OEM arrangements changed from revenue-sharing arrangements to
placement fee arrangements in late fiscal 2007. Placement fee arrangements are expensed on an estimated average
cost basis, while revenue-sharing arrangements are generally amortized ratably over a one-year period. In addition,
we realized year over year increases in services and technical support costs.
Cost of content, subscriptions, and maintenance
2008 2007 2006
Fiscal
($ in thousands)
Cost of content, subscriptions, and maintenance . . . ......... $826,339 $823,525 $621,636
As a percentage of related revenue ...................... 18% 21% 22%
Period over period change ............................ $ 2,814 $201,889
0% 32%
Cost of content, subscriptions, and maintenance consists primarily of fee-based technical support costs, costs
of billable services, and payments to OEMs under revenue-sharing agreements.
Cost of content, subscriptions, and maintenance decreased as a percentage of the related revenue in fiscal 2008
as compared to fiscal 2007. The year over year decrease in cost of content, subscriptions, and maintenance as a
percentage of the related revenue is primarily driven by higher revenues and lower OEM royalties as a percentage of
revenue more than offsetting increases in Services expenses.
We expect the impact of moving many of our OEM payments from Cost of revenues to Operating expenses to
be reduced in future periods as the change had been in effect for most of fiscal 2008. Our past OEM payments were
primarily revenue-sharing arrangements, which were generally amortized to Cost of revenues over a one-year
period. Several of the arrangements negotiated in late fiscal 2007 are placement fee arrangements, for which the
costs are expensed on an estimated average cost basis and classified as operating expenses.
Cost of licenses
2008 2007 2006
Fiscal
($ in thousands)
Cost of licenses ....................................... $44,664 $49,968 $45,943
As a percentage of related revenue ......................... 3% 4% 4%
Period over period change ............................... $(5,304) $ 4,025
(11)% 9%
Cost of licenses consists primarily of royalties paid to third parties under technology licensing agreements and
manufacturing and direct material costs.
Cost of licenses decreased as a percentage of the related revenue in fiscal 2008 as compared to fiscal 2007. The
year over year decrease in Cost of licenses as a percentage of the related revenue is primarily attributable to higher
revenues and to a lesser extent due to lower obsolescence reserves. Fiscal 2007 had relatively high obsolescence
reserves due to the Company’s decision to exit certain aspects of the appliance business.
43