Sun Microsystems' 1st-Quarter Net Loss Narrowed, to Cut 11% of Work Force

SANTA CLARA, Calif., Oct. 17 /PRNewswire-FirstCall/ -- Sun Microsystems, Inc. (Nasdaq: SUNW) a leader in systems and solutions that make the Net work, reported results today for its fiscal first quarter which ended September 29, 2002.

Revenues for the first quarter of fiscal year 2003 were $2.7 billion, down 4 percent as compared with $2.9 billion for the first quarter of fiscal year 2002. GAAP net loss for the first quarter of fiscal year 2003 was $111 million and net loss per share was $.04 as compared with a net loss of $180 million and net loss per share of $.06 for the first quarter of fiscal year 2002. For the first quarter of fiscal year 2003, excluding a $31 million loss on equity investments, a $24 million charge in connection with previous restructuring charges, and a $22 million benefit for related tax effects, net loss was $78 million and net loss per share was $.02.

Sun plans to reduce its workforce by approximately 11% from its Q1 fiscal year 2003 beginning headcount level and consolidate and eliminate excess space. As a result of these reductions, Sun expects to record a charge of approximately $300 million in the second quarter of fiscal year 2003.

Steve McGowan, Sun's Chief Financial Officer and Executive Vice President of Corporate Resources said, "Sun has done an outstanding job in maintaining fiscal discipline but it hasn't been enough to counterbalance revenue shortfalls caused by the protracted economic downturn. We believe the actions announced today are necessary to return Sun to profitability and are in the best interest of our long-term stakeholders."

McGowan added, "Sun continued to remain cash flow positive from operations this quarter. We paid off $200 million of debt and, as a demonstration of faith in our company, we repurchased nearly $500 million dollars of stock. We ended the quarter with a cash and marketable securities position of over $5.2 billion and total debt of $1.5 billion."

Sun's Chairman, President, and CEO Scott McNealy stated, "Despite the challenging economic environment, we continue to broaden our industry footprint and win customers in new markets such as life sciences, healthcare and retail. At the same time, we are protecting our investments in research and development, aggressively managing cash balances, and gaining market share from competitors."

McNealy added, "We continue to deliver on our product roadmap and R&D investments with the goal of lowering both acquisition costs and total cost of ownership for our customers. In the last 90 days, we have announced the secure Linux desktop client, Solaris(TM) on x86, the Sun(TM) ONE software stack for Linux, and the Liberty-enabled Sun ONE Platform for Network Identity. In addition, we announced further advances in our UltraSPARC® processor-based technology and N1 architecture."

McNealy concluded, "We are doing our best to manage the company responsibly for our long-term stakeholders. Tough times require tough decisions and everyone at Sun is dedicated to returning the company to profitability as soon as possible."

Sun has scheduled a conference call today to discuss its earnings for the first quarter of fiscal year 2003 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 statements regarding Sun's plans to reduce its workforce by 11% and consolidate and eliminate excess space; Sun's expectations to record a charge of approximately $300 million in the second quarter of fiscal 2003; Sun's belief that the workforce and facilities reductions are necessary to return the company to profitability; statements that Sun continues to broaden its industry footprint and win customers in new markets; statements regarding protecting its investments in research and development, aggressively managing cash balances and gaining market share from competitors; Sun's belief that it continues to deliver on its product roadmap and R&D investments; Sun's goal of lowering both acquisition costs and total cost of ownership for our customers; Sun's belief that it is doing its best to manage the company responsibly for long-term stakeholders; and that everyone at Sun is dedicated to returning the company to profitability as soon as possible. Such statements are just predictions and involve 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, the failure to reduce costs or improve operating efficiencies, 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, 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 make the Net work. Sun can be found in more than 100 countries and on the World Wide Web at http://www.sun.com .

NOTE: Sun, Sun Microsystems, the Sun logo, Solaris, 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.

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


                                                      Three Months Ended
                                                          (Unaudited)
                                                 September 29,   September 30,
                                                     2002              2001
             Net revenues                           $2,747            $2,861
             Costs and expenses:
                                       Cost  of  sales                                        1,615                          1,805
                                        Research  and  development                      437                              473
                                        Selling,  general  and
                                          administrative                                        882                              961
                                        Restructuring  charges                              24                                14
                                        In-process  research
                                          and  development                                        --                                  3
                                                  Total  costs  and  expenses        2,958                          3,256
                          Operating  loss                                                      (211)                          (395)
                          Interest  income,  net                                              39                              107
                          Loss  on  equity  investments                                (31)                            (19)
                          Loss  before  income  taxes                                  (203)                          (307)
                          Income  tax  benefit                                                (92)                          (127)
                          Net  loss                                                                ($111)                        ($180)

                          Calculation  of  net  loss
                            excluding  special  items:
                              Net  loss  per  above                                        ($111)                        ($180)
                                  In-process  research  and
                                    development                                                      --                                  3
                                  Restructuring  charges                                    24                                14
                                  Loss  on  equity  investments                          31                                19
                                  Related  tax  effects                                      (22)                            (14)
                          Net  loss  excluding  special  items                  ($78)                        ($158)


                          Per  share  data:

                          Shares  used  in  the  per
                            common  share  calculations  -
                            basic  and  diluted                                            3,168                          3,240

                          Net  loss  per  common  share  -
                            basic  and  diluted                                          ($0.04)                      ($0.06)

                          Net  loss  excluding  special
                            items  per  common  share  -
                            basic  and  diluted                                          ($0.02)                      ($0.05)


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


                                                                                                  September  29,              June  30,
                                                                                                          2002                            2002*
                          ASSETS                                                            (Unaudited)

                          Current  assets:

                                      Cash,  cash  equivalents
                                        and  short-term
                                        investments                                          $2,632                        $2,885

                                      Accounts  receivable,  net                    2,133                          2,745

                                      Inventories                                                  509                              591

                                      Other  current  assets                            1,629                          1,556

                                              Total  current  assets                    6,903                          7,777

                          Property,  plant  and  equipment,  net            2,408                          2,453

                          Goodwill                                                                2,182                          2,182

                          Long-term  marketable  debt  securities        2,612                          2,979

                          Other  non-current  assets,  net                      1,271                          1,131

                                                                                                      $15,376                      $16,522


                          LIABILITIES  AND  STOCKHOLDERS'  EQUITY

                          Current  liabilities:

                                      Short-term  borrowings                              $--                            $205

                                      Accounts  payable                                        798                          1,044

                                      Accrued  liabilities                              1,873                          2,023

                                      Deferred  revenues  and
                                        customer  deposits                                1,643                          1,785

                                                Total  current  liabilities        4,314                          5,057

                          Long-term  debt                                                    1,500                          1,449

                          Other  non-current  obligations                          253                              215

                          Stockholders'  equity                                        9,309                          9,801

                                                                                                      $15,376                      $16,522

                          *Derived  from  audited  financial  statements

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Source: Sun Microsystems, Inc.
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