cisco-annual-report-2021

Research and Development (“R&D”), Sales and Marketing, and General and Administrative (“G&A”) Expenses
R&D, sales and marketing, and G&A expenses are summarized in the following table (in millions, except percentages):
Years Ended 2021 vs. 2020
July 31, 2021 July 25, 2020 July 27, 2019
Variance in
Dollars
Variance in
Percent
Research and development . . . . . . . . . . . . . . . . $ 6,549 $ 6,347 $ 6,577 $ 202 3%
Percentage of revenue . . . . . . . . . . . . . . . . . . . 13.1% 12.9% 12.7%
Sales and marketing . . . . . . . . . . . . . . . . . . . . . 9,259 9,169 9,571 90 1%
Percentage of revenue . . . . . . . . . . . . . . . . . . . 18.6% 18.6% 18.4%
General and administrative . . . . . . . . . . . . . . . 2,152 1,925 1,827 227 12%
Percentage of revenue . . . . . . . . . . . . . . . . . . . 4.3% 3.9% 3.5%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,960 $ 17,441 $ 17,975 $ 519 3%
Percentage of revenue . . . . . . . . . . . . . . . . . 36.1% 35.4% 34.6%
Fiscal 2021 had an extra week compared to fiscal 2020. The extra week in fiscal 2021 contributed to the increase in headcountrelated
expenses in our R&D, sales and marketing, and G&A expenses.
R&D Expenses
R&D expenses increased due to higher headcount-related expenses, higher share-based compensation expense, higher
acquisition-related costs and higher contracted services spending, partially offset by lower discretionary spending.
We continue to invest in R&D in order to bring a broad range of products to market in a timely fashion. If we believe that we
are unable to enter a particular market in a timely manner with internally developed products, we may purchase or license
technology from other businesses, or we may partner with or acquire businesses as an alternative to internal R&D.
Sales and Marketing Expenses
Sales and marketing expenses increased primarily due to higher headcount-related expenses, higher contracted services spending
and higher share-based compensation expense, partially offset by lower discretionary spending.
G&A Expenses
G&A expenses increased due to the impact from the gain recognized on the sale of property in fiscal 2020 and higher headcountrelated
expenses.
Effect of Foreign Currency
In fiscal 2021, foreign currency fluctuations, net of hedging, increased the combined R&D, sales and marketing, and G&A
expenses by approximately $214 million, or 1.2%, compared with fiscal 2020.
Amortization of Purchased Intangible Assets
The following table presents the amortization of purchased intangible assets (in millions):
Years Ended July 31, 2021 July 25, 2020 July 27, 2019
Amortization of purchased intangible assets:
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 716 $ 659 $ 624
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 141 150
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 931 $ 800 $ 774
The increase in amortization of purchased intangible assets was due largely to the amortization of purchased intangibles from
our recent acquisitions.
41