Q3 FY 2006 Earnings Press Release

SUN MICROSYSTEMS REPORTS RESULTS FOR THIRD QUARTER FISCAL YEAR 2006

--Revenues up 21%

SANTA CLARA, Calif. - April 24, 2006 - Sun Microsystems, Inc., (NASDAQ: SUNW) reported results today for its fiscal third quarter, which ended March 26, 2006.

Revenues for the third quarter of fiscal 2006 were $3.177 billion, an increase of 21 percent as compared with $2.627 billion for the third quarter of fiscal 2005. The year over year revenue increase was driven by recent acquisitions and by growth in traditional products. Total gross margin as a percent of revenues was 43.0 percent, an increase of 1.6 percentage points, as compared with the third quarter of fiscal 2005.

Net loss for the third quarter of fiscal 2006 on a GAAP basis was $217 million or a net loss of ($0.06) per share, as compared with a net loss of $28 million, or a net loss per share of ($0.01), for the third quarter of fiscal 2005.

GAAP net loss for the third quarter of fiscal 2006 includes: $87 million principally related to intangible asset amortization associated with our recent acquisitions, $57 million of stock-based compensation charges relating to the implementation of SFAS 123R, $36 million of restructuring charges, a $4 million gain on equity investments, and a $4 million benefit for related tax effects. The net impact of these five items is approximately ($0.05) per share.

Cash generated from operations for the third quarter was $197 million and cash and marketable debt securities balance at the end of the quarter was $4.429 billion.

"We're growing again. Products are winning awards. The Solaris 10 Operating System is a runaway success. The next step is consistent profitability," said Scott McNealy, chairman and CEO, Sun Microsystems.

"Each quarter we drive for measurable improvement in our products, customer acceptance, competitive position and operational execution. During Q3, we grew our traditional business year over year in the United States, most of Asia, parts of Europe and almost all parts of the International Americas. We're pleased with customer acceptance of our products in key markets such as telco, government, energy and retail, to name a few. We're well positioned in the marketplace, and expect to reach new and traditional customers with our open source, industry-leading Solaris 10 software stack and our recently improved systems products," said Jonathan Schwartz, president and COO, Sun Microsystems.

"Our investments in R&D during the past couple of years have resulted in a terrific product line. Combined with our recent acquisitions of StorageTek and SeeBeyond, as well as other technologies, we now offer a broader and more compelling portfolio of choices to our customers. We're pleased with the improvement in demand across numerous geographies; in particular, our growth in the U.S. market was broadly-based across both traditional and nascent industries. We delivered the results we were anticipating, including our operating expense guidance for the quarter," said Michael Lehman, chief financial officer and executive vice president, Corporate Resources, Sun Microsystems.

Sun has scheduled a conference call today to discuss its earnings for Q3 fiscal year 2006 at 1:30 p.m. (PT), which is being broadcast live at www.sun.com/investors.

About Sun Microsystems, Inc.

A singular vision -- "The Network Is The Computer" -- guides Sun in the development of technologies that power the world's most important markets. Sun's philosophy of sharing innovation and building communities is at the forefront of the next wave of computing: the Participation Age. Sun can be found in more than 100 countries and on the Web at sun.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the future results and performance of Sun Microsystems, Inc., including statements regarding growth, consistent profitability, Sun's position in the marketplace and expectations regarding reaching new and traditional customers. These forward-looking statements involve risks and uncertainties and actual results could differ materially from those predicted in any such forward-looking statements. Factors that could cause actual results to differ materially from those contained in our projections and forward-looking statements include: increased competition; failure to rapidly and successfully develop and introduce new products; our reliance on single-source suppliers; risks associated with our ability to purchase a sufficient amount of components to meet demand; inventory risks; risks associated with our international customers and operations; delays in product development or customer acceptance and implementation of new products and technologies; our dependence on significant customers and specific industries; our dependence on channel partners; risks associated with our tape products; and failure to successfully integrate acquisition candidates. Please also refer to Sun's periodic reports that are filed from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended September 25, 2005 and December 25, 2005. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements.

To supplement Sun's consolidated financial statements presented in accordance with GAAP, Sun provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data. The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

Sun's management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain charges, gains and tax effects that may not be indicative of our core business operating results. Sun believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Sun's performance. These non-GAAP financial measures also facilitate comparisons to Sun's historical performance and our competitors' operating results. We include these non-GAAP financial measures because we believe they are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. Non-GAAP measures are reconciled to comparable GAAP measures in the table entitled "Non-GAAP Calculation of Net Income (Loss) Excluding Special Items " following the text of this press release.

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.