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Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Sun Microsystems Reports Second Quarter Fiscal Year 2008 Results
Improved Margins and Bookings Growth Signal Strength in Customer Demand
SANTA CLARA, Calif. - January 24, 2008 - Sun Microsystems, Inc. (NASDAQ: JAVA) reported results today for its fiscal second quarter, which ended December 30, 2007.
Revenues for the second quarter of fiscal 2008 were $3.615 billion, an increase of approximately 1.4 percent as compared with $3.566 billion for the second quarter of fiscal 2007. Total gross margin as a percent of revenues was 48.5, an increase of 3.5 percentage points, as compared with the second quarter of fiscal 2007.
Net income for the second quarter of fiscal 2008 on a GAAP basis was $260 million, or $0.31 per share(1), as compared with a net income of $133 million, or $0.15 per share, for the second quarter of fiscal 2007. GAAP net income for the second quarter of fiscal 2008 included a $32 million restructuring charge.
Cash generated from operations for the second quarter of fiscal 2008 was $336 million, and the cash and marketable debt securities balance at the end of the quarter was $4.677 billion.
"Today's results clearly demonstrate steady progress against our financial targets and highlight the accelerating demand set to fuel growth in the back half of the fiscal year," said Jonathan Schwartz, CEO of Sun Microsystems. "Headlining the results were improved margins and strong bookings along with double digit growth in emerging markets including India, China, Latin America, Eastern Europe, the Middle East and Africa. Adding to the momentum were the Solaris Operating System OEM agreement with Dell and our introduction of the industry's first open source datacenter virtualization and management platform, Sun xVM."
Sun has scheduled a conference call today to discuss its financial results for the second quarter fiscal year 2008 at 1:30 p.m. (PT), which is being broadcast live at www.sun.com/investors.
Sun's Annual Analyst Summit (SAS) will be held February 4-6 in San Francisco, Calif. Financial analysts and portfolio managers who wish to attend in person are invited to register at www.cplan.com/sunanalyst2008. The general public is invited to attend online at www.sun.com/investors.
About Sun Microsystems, Inc.
Sun Microsystems develops the technologies that power the global marketplace. Guided by a singular vision -- "The Network is the Computer" -- Sun drives network participation through shared innovation, community development and open source leadership. Sun can be found in more than 100 countries and on www.sun.com.
Sun, Sun Microsystems, the Sun logo, Solaris, Java and The Network is the Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and other countries.
This press release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements regarding demand and expectations for growth in the second half of the fiscal year. 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 Sun's actual results to differ materially from those contained in such forward-looking statements include: risks associated with developing, designing, manufacturing and distributing new products; lack of success in technological advancements; pricing pressures; lack of customer acceptance and implementation of new products and technologies; the possibility of errors or defects in new products; a material acquisition, restructuring or other event that results in significant charges; competition; adverse business conditions; failure to retain key employees; the cancellation or delay of projects; Sun's reliance on single-source suppliers; risks associated with Sun's ability to purchase a sufficient amount of components to meet demand; inventory risks; risks associated with Sun's international customers and operations; delays in product development; Sun's dependence on significant customers and specific industries; and Sun's dependence on channel partners. Please also refer to Sun's periodic reports that are filed from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2007 and its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements.
(1) Basic and diluted net income per share have been retrospectively restated to reflect the one-for-four reverse stock split effective November 12, 2007.
Sun Microsystems, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(in millions, except per share amounts)
| |
Three Months Ended |
Six Months Ended |
| December 30, 2007 |
December 31, 2006 |
December 30, 2007 |
December 31, 2006 |
| Net revenues: |
| Products |
$2,249 |
$2,260 |
$4,229 |
$4,219 |
| Services |
1,366 |
1,306 |
2,605 |
2,536 |
| Total net revenues |
3,615 |
3,566 |
6,834 |
6,755 |
| Cost of sales: |
| Cost of sales-products (including stock-based compensation expense of $3, $4, $6 and $6)(1) |
1,161 |
1,228 |
2,190 |
2,351 |
| Cost of sales-services (including stock-based compensation expense of $9, $8, $17 and $16)(1) |
701 |
734 |
1,330 |
1,412 |
| Total cost of sales |
1,862 |
1,962 |
3,520 |
3,763 |
| Gross margin |
1,753 |
1,604 |
3,314 |
2,992 |
| Operating expenses: |
| Research and development (including stock-based compensation expense of $16, $17, $31 and $34)(1) |
463 |
507 |
909 |
980 |
| Selling, general and administrative (including stock-based compensation expense of $24, $29, $46 and $59)(1) |
995 |
978 |
1,934 |
1,936 |
| Restructuring and related impairment of long-lived assets |
32 |
26 |
145 |
47 |
| Purchased in-process research and development |
1 |
- |
1 |
- |
| Total operating expenses |
1,491 |
1,511 |
2,989 |
2,963 |
| Operating profit |
262 |
93 |
325 |
29 |
| Gain on equity investments, net |
- |
- |
22 |
- |
| Interest and other income, net |
53 |
63 |
111 |
105 |
| Income before income taxes |
315 |
156 |
458 |
134 |
| Provision for income taxes |
55 |
23 |
109 |
57 |
| Net income |
$260 |
$133 |
$349 |
$77 |
| Net income per common share - basic(2) |
$0.32 |
$0.15 |
$0.42 |
$0.09 |
| Net income per common share - diluted(2) |
$0.31 |
$0.15 |
$0.41 |
$0.09 |
| Shares used in the calculation of net income per common share - basic(2) |
806 |
881 |
836 |
878 |
| Shares used in the calculation of net income per common share - diluted(2) |
826 |
907 |
855 |
892 |
|
(1) For the three months ended December 30, 2007 and December 31, 2006, respectively.
(2) Basic and diluted shares and basic and diluted net income per share have been retrospectively restated to
reflect the one-for-four reverse stock split effective November 12, 2007.
Sun Microsystems, Inc.
Condensed Consolidated Balance Sheets
(in millions)
|
|
December 30, 2007
(unaudited) |
June 30, 2007(1) |
| Assets |
| Current Assets: |
| Cash and cash equivalents |
$2,214 |
$3,620 |
| Short-term marketable debt securities |
1,219 |
962 |
| Accounts receivable, net |
2,789 |
2,964 |
| Inventories |
631 |
524 |
| Deferred and prepaid tax assets |
213 |
200 |
| Prepaid expenses and other current assets |
1,093 |
1,058 |
| Total current assets |
8,159 |
9,328 |
| Property, plant and equipment, net |
1,569 |
1,533 |
| Long-term marketable debt securities |
1,244 |
1,360 |
| Goodwill |
2,496 |
2,514 |
| Other acquisition-related intangible assets, net |
493 |
633 |
| Other non-current assets |
518 |
470 |
| |
$14,479 |
$15,838 |
| Liabilities and stockholders' equity |
| Current liabilities: |
| Accounts payable |
1,312 |
1,381 |
| Accrued payroll-related liabilities |
730 |
842 |
| Accrued liabilities and other |
1,133 |
961 |
| Deferred revenues |
2,049 |
2,047 |
| Warranty reserve |
211 |
220 |
| Total current liabilities |
5,435 |
5,451 |
| Long-term debt |
1,273 |
1,264 |
| Long-term deferred revenues |
640 |
659 |
| Other non-current obligations |
1,259 |
1,285 |
| Total stockholders' equity |
5,872 |
7,179 |
| |
$14,479 |
$15,838 |
|
(1) Derived from audited financial statements.
Sun Microsystems, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited, in millions)
| |
Six Months Ended |
| December 30, 2007 |
December 31, 2006 |
| Cash flows from operating activities: |
Net income |
$349 |
$77 |
Adjustments to reconcile net income to net cash provided by operating activities: |
Depreciation and other amortization |
241 |
257 |
Amortization of other acquisition related intangible assets |
148 |
161 |
Deferred taxes |
8 |
(20) |
Impairment of long-lived assets |
- |
12 |
Gain on investments and other, net |
(23) |
- |
Stock-based compensation expense |
100 |
116 |
Write-off of purchased in-process research and development |
1 |
- |
Changes in operating assets and liabilities: |
Accounts receivable, net |
187 |
390 |
Inventories |
(104) |
(89) |
Prepaid and other assets |
(30) |
(7) |
Accounts payable |
(110) |
(106) |
Other liabilities |
143 |
(539) |
Net cash provided by operating activities
|
910
|
252
|
Cash flows from investing activities: |
Increase in restricted cash, net |
(19) |
(10) |
Purchases of marketable debt securities |
(1,030) |
(1,894) |
Proceeds from sales of marketable debt securities |
509 |
662 |
Proceeds from maturities of marketable debt securities |
379 |
296 |
Proceeds from sales of equity investments, net |
27 |
7 |
Proceeds from sales (purchases of) property, plant and equipment, net |
(235) |
79 |
Payments for acquisitions, net of cash acquired |
(41) |
(10) |
Net cash used in investing activities
|
(410)
|
(870)
|
Cash flows from financing activities: |
Purchase of common stock under 2007 Stock Repurchase Plan |
(2,000) |
- |
Proceeds from issuance of common stock, net |
102 |
138 |
Principal payments on borrowings and other obligations |
(8) |
(476) |
Net cash used in financing activities
|
(1,906)
|
(338)
|
Net decrease in cash and cash equivalents |
(1,406) |
(956) |
Cash and cash equivalents, beginning of period |
3,620 |
3,569 |
Cash and cash equivalents, end of period
|
$2,214
|
$2,613
|
|
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