Q3 FY 2005 Earnings Press Release

SUN MICROSYSTEMS REPORTS RESULTS FOR FISCAL 2005 THIRD QUARTER

SANTA CLARA, Calif. - April 14, 2005 - Sun Microsystems, Inc., (NASDAQ: SUNW) reported results today for its fiscal third quarter, which ended March 27, 2005.

Revenues for the third quarter were $2.625 billion, a decrease of 1.0 percent as compared with $2.651 billion for the third quarter of fiscal 2004. Total gross margin as a percent of revenues was 41.3 percent, an increase of 1.0 percentage points as compared with the third quarter of fiscal 2004. Net loss for the third quarter of fiscal 2005 on a GAAP basis was $9 million or a net loss of $0.00 per share. This net loss included the favorable impact of $54 million in additional settlement income from Microsoft, a $69 million benefit related to the impact of a change in foreign withholding tax legislation, and a $23 million net beneficial correction to the valuation allowance on deferred tax assets and foreign tax provisions. This compared with a net loss of $760 million or a net loss of $0.23 per share for the third quarter of fiscal 2004.

Excluding a charge of $45 million for workforce and real estate restructuring, a $2 million gain on equity investments, $54 million in additional settlement income from Microsoft (recorded in other income), a $34 million beneficial correcting adjustment to the valuation allowance on deferred tax assets, and a tax benefit of $7 million for related tax effects, net loss for Q3 fiscal 2005 on a non-GAAP basis was $61 million or a net loss of $0.02 per share. This compared with a net loss, on a non-GAAP basis, in Q3 fiscal 2004 of $260 million or a net loss of $0.08 per share.

The cash and marketable debt securities balance at the end of the quarter was $7.357 billion.

"We made good progress in the third fiscal quarter, but more importantly we're seeing a marked improvement over the first nine months of fiscal 2004," said Scott McNealy, chairman and chief executive officer, Sun Microsystems, Inc. "Break even is a huge move forward from the loss we experienced a year ago. We've made over a $1 billion improvement in Net Income on a year to date three quarter comparison," McNealy continued, "Revenue was stable for the first three quarters of fiscal 2005 as compared with the same period in fiscal 2004, while margins have improved and we've made tremendous strides in reducing our R&D and SG&A by over $400 million dollars. On top of that, in the third quarter we experienced growth in Sun x86 server unit shipments, good traction in Netra servers, Sun Fire 4-8 way and 12-24 way SPARC® processor-based servers, and SolarisTM10 registrations exceeded expectations. All of these results, combined with a solid new product pipeline, point to real improvements in the business."

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

About Sun Microsystems, Inc.

Since its inception in 1982, a singular vision -- "The Network Is The Computer" -- has propelled Sun Microsystems, Inc. (Nasdaq: SUNW) 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 .

The company believes that presentation of results including items such as net income (loss) on a non-GAAP basis provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods.

Sun, Sun Microsystems, the Sun logo, Sun Fire, Netra, 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 US and other countries. Products bearing SPARC trademarks are based upon an architecture developed by Sun Microsystems, Inc.

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