due to the sale of our GeForce 8-series GPUs and increased sales of our GeForce 7 series GPUs, which collectively accounted for approximately 70% of our GPU Business revenue. Our GeForce 8 and our GeForce 7 series GPUs generally have higher gross margins than our previous generations of GPUs.

 

PSB. The gross margin of our PSB increased during fiscal year 2007 as compared to fiscal year 2006.  This increase was primarily due to increased sales of our GeForce 7-based NVIDIA Quadro products, which began to ramp up in sales during fiscal year 2007 and generally have higher gross margins than our previous generations of NVIDIA Quadro products.



MCP Business. The gross margin of our MCP Business decreased during fiscal year 2007 as compared to fiscal year 2006, primarily due to a shift in product mix to higher volumes of integrated AMD-based desktop products which have experienced lower gross margins than our discrete MCP products, and inventory reserves that we recorded as a charge to cost of revenue that primarily related to purchase commitments that we believed had exceeded future demand.



CPB. The gross margin of our CPB increased during fiscal year 2007 as compared to fiscal year 2006, primarily due to an increase in unit sales of high-end feature cellular phone and PDA products which generally have higher gross margins than our previous mobile products.  In addition, license and royalty revenue from our contractual development arrangements that have higher gross margins compared to the gross margin of Xbox products shipped in fiscal year 2006. 



    Research and Development

 

Fiscal Year 2008 vs. Fiscal Year 2007 

 

    Research and development expenses were $691.6 million and $553.5 million during fiscal years 2008 and 2007, respectively, an increase of $138.1 million, or 25%.  The increase is primarily related to an increase in salaries and benefits by approximately $95.3 million as a result of personnel growth in departments related to research and development functions by approximately 600 additional personnel in fiscal year 2008.  Additionally, salaries and benefits expenses also increased due to the increase in our variable compensation expense as a result of our financial performance for fiscal year 2008. Facilities expenses and expenses related to computer software and equipment also increased as a result of the personnel growth. 

 

Fiscal Year 2007 vs. Fiscal Year 2006 

 

    Research and development expenses were $553.5 million and $357.1 million during fiscal years 2007 and 2006, respectively, an increase of $196.4 million, or 55%. The increase was primarily due to increase in salaries and benefits by approximately $75.2 million as a result of personnel growth by approximately 1,000 additional personnel.  Additionally, stock-based compensation increased by $64.2 million due to our adoption of SFAS No. 123(R) during the first quarter of fiscal year 2007. Facilities expenses and expenses related to computer software and equipment increased as a result of the increase in personnel. In-process Research and development, or IPR&D increased by $14.0 million as a result of our acquisitions of PortalPlayer and Hybrid