by a decrease in stock-based compensation expense. Research and development costs increased during fiscal year 2006 primarily due to increased development costs associated with upcoming offerings and corporate research activities. Headcount-related costs increased 3% during fiscal year 2006, driven by a 17% increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based compensation expense. 

 

Sales and Marketing 

 

 

Sales and marketing expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related costs associated with sales and marketing personnel and advertising, promotions, trade shows, seminars, and other programs. Sales and marketing expenses increased during fiscal year 2007 primarily because of increased headcount-related costs and increased marketing costs related to recent product launches. Headcount-related costs increased 22% during fiscal year 2007, driven by an 11% increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based compensation expense. Sales and marketing expenses increased during fiscal year 2006 primarily because of increased headcount-related costs, investments in partner marketing and product launch-related spending. Headcount-related costs increased 13% during fiscal year 2006, driven by a 20% increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based compensation expense. 

 

General and Administrative 

 

 

General and administrative costs include payroll, employee benefits, stock-based compensation expense and other headcount-related costs associated with finance, legal, facilities, certain human resources, other administrative headcount, and legal and other administrative fees. General and administrative costs decreased during fiscal year 2007 primarily reflecting decreased costs for legal settlements and legal contingencies, partially offset by increased 



headcount-related costs. During fiscal year 2007, we incurred $511 million of legal charges primarily related to antitrust and unfair competition consumer class actions, intellectual property claims, and extension payment to Sun Microsystems, Inc. as compared to $1.32 billion of legal charges in fiscal year 2006. Headcount-related costs increased 15% during fiscal year 2007, driven by a 12% increase in headcount and an increase in salaries and benefits for existing headcount. General and administrative costs decreased in fiscal year 2006 primarily reflecting decreased costs for legal settlements and legal contingencies. During fiscal year 2006, we incurred $1.32 billion of legal charges primarily related to antitrust and unfair competition consumer class actions, intellectual property claims, and an extension payment to Sun Microsystems, Inc. Legal charges in fiscal year 2006 also included settlement expense of $361 million related to our settlement with RealNetworks, Inc. and the €281 million ($351 million) European Commission fine. Headcount-related costs increased 7% during fiscal year