Sun Microsystems Turns Profitable in Fourth Quarter

Delivers $.01 EPS and Posts 10% Sequential Revenue Gain

SANTA CLARA, Calif., July 18 /PRNewswire-FirstCall/ -- Sun Microsystems, Inc. (Nasdaq: SUNW - News) a leader in systems and solutions that make the Net work, reported results today for its fiscal fourth quarter which ended June 30, 2002.

Revenues for the fourth quarter were $3.4 billion, up 10 percent, as compared with $3.1 billion in revenues reported for the third quarter of fiscal year 2002. Net income for the fourth quarter was $28 million and the net income per common share was $.01 (excluding an $18 million loss on equity investments, a $4 million credit for adjustments to restructuring charges, and a $6 million benefit for the related tax effects). Including these amounts, GAAP net income was $20 million and GAAP earnings per share was $.01.

For the full 2002 fiscal year, Sun reported revenues of $12.5 billion, down 32 percent from record high revenues of the prior year. Net loss for the 2002 fiscal year was $255 million and the net loss per common share was $.08 (excluding a $517 million restructuring charge, a $99 million loss on equity investments, a $3 million charge for in-process research and development, and a $246 million benefit for the related tax effects). Including these amounts, GAAP net loss was $628 million and GAAP loss per share was $.19.

Sun's Chairman, CEO, and President Scott McNealy said, "We stated a goal of reporting a profit this quarter and we achieved that goal. I'm immensely proud of my team. They have integrity. They have talent. They have tenacity. And, they achieved this goal while protecting investments in research and development, aggressively managing cash balances, and gaining market share from competitors."

McNealy continued, "We achieved gains in low-end server sales through the continued success of our UltraSPARC® III processor-based products such as the Sun Fire(TM) V880 2-way, 4-way, and 8-way servers and the Sun Fire(TM) 280R, rack-mountable 2-way server. We also increased sales of our high-end UltraSPARC III processor-based products such as the Sun Fire 6800 and Sun Fire 15K mainframe replacement servers. These gains were augmented by strong market acceptance of our newest products such as the Sun Fire V480 4-way server in the low-end space and the Sun Fire 12K server in the high-end space. The Sun Fire 12K server has been particularly well received as it is taking sales from the competition while strengthening and enhancing sales of other Sun high-end products."

McNealy concluded, "We're also pleased that our storage revenues grew with products such as the Sun StorEdge(TM) T3 and Sun StorEdge 3900, 6900, and 9900 families. Finally, we continued to roll-out ground-breaking software offerings such as the Solaris(TM) 9 Operating Environment, StarOffice(TM) 6.0 Office Suite, Sun(TM) ONE Portal Server 6, Sun(TM) Grid Engine, Enterprise Edition 5.3, and a new Sun ONE Application Server 7 product line that will make the core version of the Java(TM) platform-based application server free to enterprises and ISVs on all leading platforms. Along with Sun services, these products continued to reinforce Sun's position as one of the few systems companies capable of developing and integrating hardware, software, and services for enterprise customers."

Steve McGowan, Executive Vice President of Corporate Resources and Chief Financial Officer said, "We were particularly pleased with our strong performance in the U.S. geography which reported 20% revenue growth over the prior quarter. In addition, we continued to generate positive cash flow from operations and ended the quarter with a cash and marketable securities balance of approximately $5.9 billion after repurchasing $226 million in stock during the quarter."

Sun has scheduled a conference call today to discuss its earnings for the fourth quarter of fiscal year 2002 at 1:30 p.m. (PDT), which is being broadcast live at www.sun.com/investors.

This news release contains projections and other forward-looking statements regarding future results and the future performance of Sun Microsystems, Inc., including a statement that the Sun Fire 12K is taking sales from the competition while strengthening and enhancing sales of other Sun high-end products. Such statement is just a prediction about Sun's ability to continue such sales performance and involves risks and uncertainties such that actual results and performance may differ materially. Factors that might cause such a difference include risks associated with increased competition, continued adverse macroeconomic conditions in the U.S. and internationally, including adverse business conditions in the specific markets for Sun's products, lack of success in the timely development, production and acceptance of new products and services, lack of success in technological advancements, and our ability to attract, hire and retain key and qualified employees. These and other risks are detailed from time-to-time in Sun's periodic reports that are filed with the Securities and Exchange Commission, including Sun's annual report on Form 10-K for the fiscal year ended June 30, 2001, and its quarterly reports on Form 10-Q for the fiscal quarters ended September 30, 2001, December 30, 2001 and March 31, 2002.

About Sun Microsystems, Inc.

Since its inception in 1982, a singular vision -- The Network Is The Computer(TM) -- has propelled Sun Microsystems, Inc. to its position as a leading provider of industrial-strength hardware, software and services that power the Internet and allow companies worldwide to take their businesses to the nth. Sun can be found in more than 170 countries and on the World Wide Web at http://www.sun.com .

NOTE: Sun, Sun Microsystems, the Sun logo, Sun Fire, Sun StorEdge, StarOffice, Java, and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and in other countries. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. in the United States and other countries. Products bearing SPARC trademarks are based upon an architecture developed by Sun Microsystems, Inc.

                    INVESTOR CONTACT:
                    Mark Paisley 408-404-8415
                    mark.paisley@sun.com

                    MEDIA CONTACT:
                    Penelope Bruce 650-786-7220
                    penelope.bruce@sun.com

                    INDUSTRY ANALYST CONTACT:
                    Angela Grady  415-972-0522
                    angela.grady@sun.com


                                SUN MICROSYSTEMS, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                       (In millions, except per share amounts)


                                           Three Months
                                              Ended      Fiscal Year Ended
                                           (Unaudited)      (Unaudited)
                                         June 30, June 30, June 30, June 30,
                                           2002*    2001    2002*     2001

           Net revenues                            $3,420    $3,995    $12,496    $18,250
                      Costs  and  expenses:
                                    Cost  of  sales                        2,014      2,352        7,588      10,041
                                    Research  and
                                      development                              467          543        1,836        2,016
                                    Selling,  general  and
                                      administrative                        950      1,074        3,868        4,445
                                    Restructuring  charges              (4)          75            517              75
                                    Goodwill  amortization                0          125                0            285
                                    In-process  research  and
                                      development                                  0              5                3              77
                                              Total  costs  and
                                                expenses                      3,427      4,174      13,812      16,939
                      Operating  income  (loss)                        (7)      (179)    (1,316)      1,311
                      Interest  income,  net                              47            87            299            363
                      Loss  on  equity  investments                (18)        (78)          (99)          (90)
                      Income  (loss)  before  income
                        taxes  and  cumulative  effect
                        of  change  in
                                accounting  principle                    22        (170)    (1,116)      1,584
                      Provision  (benefit)  for  income
                        taxes                                                            2          (82)        (488)          603
                      Income  (loss)  before
                        cumulative  effect  of  change
                        in  accounting  principle                      20          (88)        (628)          981
                      Cumulative  effect  of  change  in
                        accounting  principle                              0              0                0            (54)
                      Net  income  (loss)                                  $20        ($88)      ($628)        $927

                      Calculation  of  net  income
                        (loss)  excluding  special
                        items:
                          Net  income  (loss)  per  above          $20        ($88)      ($628)        $927
                              In-process  research  and
                                development                                        0              5                3              77
                              Restructuring  charges                    (4)          75            517              75
                              Loss  on  equity  investments          18            78              99              90
                              Related  tax  effects                        (6)        (60)        (246)          (64)
                      Net  income  (loss)  excluding
                        special  items                                        $28          $10        ($255)    $1,105


                      Per  share  data:

                      Shares  used  in  the  per  common
                        share  calculations  -  basic          3,245      3,248        3,242        3,234

                      Net  income  (loss)  per  common
                        share  -  basic:
                      Income  (loss)  before
                        cumulative  effect  of  change
                        in  accounting  principle                  0.01      (0.03)      (0.19)        0.30
                      Cumulative  effect  of  change  in
                        accounting  principle                              0              0                0        (0.02)
                      Net  income  (loss)  per  common
                        share  -  basic                                    $0.01    ($0.03)    ($0.19)      $0.28

                      Net  income  (loss)  excluding
                        special  items  per  common
                        share  -  basic                                    $0.01      $0.00      ($0.08)      $0.34


                      Shares  used  in  the  per  common
                        share  calculations  -
                        diluted**                                            3,309      3,248        3,242        3,417

                      Net  income  (loss)  per  common
                        share  -  diluted:
                      Income  (loss)  before
                        cumulative  effect  of  change
                        in  accounting  principle                $0.01    ($0.03)    ($0.19)      $0.29
                      Cumulative  effect  of  change  in
                        accounting  principle                              0              0                0        (0.02)
                      Net  income  (loss)  per  common
                        share  -  diluted                                $0.01    ($0.03)    ($0.19)      $0.27

                      Net  income  (loss)  excluding
                        special  items  per  common
                        share  -  diluted**                            $0.01      $0.00      ($0.08)      $0.32

                            *  Excludes  amortization  of  goodwill  in  accordance  with  the
                                Company's  adoption  of  Statement  of  Financial  Accounting
                                Standards  (SFAS)  No.  142  "Goodwill  and  Other  Intangible
                                Assets."
                            **For  the  quarter  ended  June  30,  2001,  Sun  used  3,383  shares
                                to  calculate  the  "Net  income  (loss)  excluding  special  items
                                per  common  share-diluted".    For  all  other  periods,  the  number
                                of  shares  used  to  calculate  "Net  income  (loss)  per  common
                                share-diluted"  and  "Net  income  (loss)  excluding  special  items
                                per  common  share-diluted"  were  the  same.


                                                                    SUN  MICROSYSTEMS,  INC.
                                                    CONDENSED  CONSOLIDATED  BALANCE  SHEETS
                                                                            (In  millions)


                                                                                                      June  30,                    June  30,
                                                                                                          2002                            2001*
                          ASSETS                                                            (Unaudited)

                          Current  assets:

                                      Cash,  cash  equivalents
                                        and  short-term
                                        investments                                          $2,885                        $1,859

                                      Accounts  receivable,
                                        net                                                            2,745                          2,955

                                      Inventories                                                  584                          1,049

                                      Other  current  assets                            1,556                          2,071

                                              Total  current
                                                assets                                              7,770                          7,934

                          Property,  plant  and
                            equipment,  net                                                  2,453                          2,697

                          Goodwill                                                                2,182                          2,126

                          Long-term  marketable  debt
                            securities                                                          2,979                          4,312

                          Other  non-current  assets,
                            net                                                                        1,158                          1,112

                                                                                                      $16,542                      $18,181


                          LIABILITIES  AND
                            STOCKHOLDERS'  EQUITY

                          Current  liabilities:

                                      Short-term  borrowings                            $205                                $3

                                      Accounts  payable                                    1,044                          1,050

                                      Accrued  liabilities                              2,084                          2,266

                                      Deferred  revenues  and
                                        customer  deposits                                1,785                          1,827

                                                Total  current
                                                  liabilities                                  5,118                          5,146

                          Long-term  debt                                                    1,449                          1,565

                          Other  non-current
                            obligations                                                            215                              884

                          Stockholders'  equity                                        9,760                        10,586

                                                                                                      $16,542                      $18,181

                          *  Derived  from  audited  financial  statements
 
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