FORM 20-F - Check Point

amounts include stock-based compensation related to the acquisition of Zone Labs in the amount of $1.3 million
in 2005. In 2006 and 2007, these amounts include stock-based compensation of $9.4 million and $4.3 million,
respectively, resulting from the adoption of SFAS No. 123(R). Research and development expenses represented
9% of revenues in 2005 and 11% of revenues in 2006 and in 2007. In addition to the above-mentioned expenses
in 2006, the increase in research and development expenses was mainly due to an increase in our research and
development headcount, from 520 at the end of 2005 to 573 at the end of 2006, resulting in an additional expense
of approximately $3.3 million. In 2007, the research and development expenses was mainly due to growth in
headcount, from 573 at the end of 2006 to 673 at the end of 2007, of which 68 came from Protect Data
acquisition, resulting in an additional expense of approximately $15.5 million. The inclusion of Protect Data in
our financial results in 2007 contributed approximately $9.7 million to expenses. In addition, in 2006,
strengthening of the Israeli Shekel compared to the U.S. dollar contributed approximately $0.5 million to
expenses, and in 2007, the strengthening of the Israeli Shekel, Euro, British Pound and the Swedish Krona
compared to U.S dollar contributed approximately $1.8 million to expenses. The majority of our developers are
located in Israel, where compensation related expenses are paid in Israeli Shekels; additional development
expenses occur in Swedish Krona for our development center in Sweden, while our expenses are reported in U.S.
dollars. Therefore, changes to the exchange rate between the Israeli Shekel, the Swedish Krona and the U.S.
dollar, have affected and may in the future affect our expense level. We anticipate that research and development
expenses in 2008 will increase due to an expected increase in research and development personnel as a result of
hiring new employees, and due to an expected increase in payroll and related expenses.
Selling and Marketing
Selling and marketing expenses consist primarily of salaries, commissions, advertising, trade shows,
seminars, public relations, travel and other related expenses. Selling and marketing expenses were $142.3 million
in 2005, $157.1 million in 2006, and $217.5 million in 2007. These amounts include amortization of intangible
assets and stock-based compensation relating to the acquisition of Zone Labs in the amount of $2.1 million in
2005. In 2006, the amount includes amortization of intangible assets of $0.6 million, relating to the acquisition of
Zone Labs, and stock-based compensation of $8.0 million, resulting from SFAS No. 123(R). In 2007, the amount
included amortization of intangible assets of $12.3 million, relating to the acquisition of Zone Labs, NFR, and
Protect Data, and stock based compensation of $8.8 million, resulting from the adoption of SFAS No. 123(R).
Selling and marketing expenses represented 25% of revenues in 2005, 27% of revenues in 2006, and 30% of
revenues in 2007. In 2006, the increase in selling and marketing expenses was primarily due to an increase in our
sales and marketing headcount, from 536 at the end of 2005 to 580 at the end of 2006, resulting in an additional
expense of approximately $5.6 million. In 2007, the increase in selling and marketing expenses was primarily
due to an increase in our sales and marketing headcount, from 580 at the end of 2006 to 717 at the end of 2007,
and the associated increase in travel, entertainment and facilities expenses. Of those, 134 came from Protect Data,
resulting in an increase in expenses of approximately $27.9 million. In addition, strengthening of the Euro
compared to the U.S. dollar contributed approximately $0.6 million to the 2006 compensation expenses, and
approximately $2.2 million to the 2007 compensation expenses. Our expenses in Europe, which primarily relate
to compensation, travel, facilities and marketing, are paid in local currencies, while being reported in U.S. dollars.
Therefore, changes to the exchange rates between the Euro and the U.S. dollar have affected, and may in the
future affect, our expense level. We anticipate that selling and marketing expenses will increase in 2008 due to an
expected increase in marketing activities, headcount, payroll and related expenses.
50