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Q4 FY 2009 Financial Results

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Sun Microsystems Reports Final Results for Full Fiscal Year and Fourth Quarter 2009

Sun Microsystems, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(in millions, except per share amounts)

  Three Months Ended Fiscal Years Ended
June 30, 2009 June 30, 2008 June 30, 2009 June 30, 2008
Net revenues:
    Products $1,482 $2,386 $6,704 $8,618
    Services 1,143 1,394 4,745 5,262
      Total net revenues 2,625 3,780 11,449 13,880
Cost of sales:
    Cost of sales-products 924 1,372 4,124 4,668
    Cost of sales-services 637 735 2,594 2,757
      Total cost of sales 1,561 2,107 6,718 7,425
        Gross margin 1,064 1,673 4,731 6,455
Operating expenses:
    Research and development 421 468 1,648 1,834
    Selling, general and administrative 782 1,032 3,461 3,955
    Restructuring charges 64 104 395 263
    Purchased in-process research and development - 6 3 31
    Impairment of goodwill and intangible assets 15 - 1,460 -
      Total operating expenses 1,282 1,610 6,967 6,083
        Operating income (loss) (218) 63 (2,236) 372
Gain on equity investments, net - 10 8 32
Interest and other income (expense), net 1 16 (2) 161
Settlement income 47 45 47 45
     Income (loss) before income taxes (170) 134 (2,183) 610
Provision (benefit) for income taxes (23) 46 51 207
Net income (loss) $(147) $88 $(2,234) $403
Net income (loss) per common share-basic $(0.20) $0.11 $(2.99) $0.50
Net income (loss) per common share-diluted $(0.20) $0.11 $(2.99) $0.49
Shares used in the calculation of net income (loss) per common share-basic 749 772 747 809
Shares used in the calculation of net income (loss) per common share-diluted 749 776 747 822

Sun Microsystems, Inc.
Condensed Consolidated Balance Sheets
(in millions)

  June 30, 2009
 June 30, 2008(1)
Assets
Current Assets:
   Cash and cash equivalents $1,876 $2,272
   Short-term marketable debt securities 981 429
   Accounts receivable, net 2,258 3,019
   Inventories 566 680
   Deferred and prepaid tax assets 188 216
   Prepaid expenses and other current assets, net 995 1,218
     Total current assets 6,864 7,834
Property, plant and equipment, net 1,616 1,611
Long-term marketable debt securities 204 609
Goodwill 1,743 3,215
Other acquisition-related intangible assets, net 269 565
Other non-current assets, net 536 506
  $11,232 $14,340
Liabilities and stockholders' equity
Current liabilities:
   Accounts payable 1,027 1,387
   Accrued payroll-related liabilities 573 734
   Accrued liabilities and other 983 1,105
   Deferred revenues 2,341 2,236
   Warranty reserve 143 206
   Current portion of long-term debt 554 -
     Total current liabilities 5,621 5,668
Long-term debt 695 1,265
Long-term deferred revenues 635 683
Other non-current obligations 976 1,136
Stockholders' equity:
Preferred stock - -
Common stock and additional paid-in-capital 7,582 7,391
Treasury stock, at cost (2,569) (2,726)
Retained earnings (accumulated deficit) (2,055) 430
Accumulated other comprehensive income 347 493
Total stockholders' equity 3,305 5,588
  $11,232 $14,340

(1) Derived from audited financial statements.

Sun Microsystems, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)

  Fiscal Years Ended
June 30, 2009 June 30, 2008
Cash flows from operating activities:
Net income (loss):
 $(2,234) $403
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
 474 476
Amortization of acquisition-related intangible assets
 296 310
Stock-based compensation expense
 192 214
Purchased in-process research and development
 3 31
Impairment of goodwill and intangible assets
 1,460 -
(Gain) Loss on investments and other, net
 30 (68)
Deferred taxes
 (34) 2
Changes in operating assets and liabilities:
Accounts receivable, net
 757 (9)
Inventories
 113 (148)
Prepaid and other assets
 140 (165)
Accounts payable
 (364) (15)
Other liabilities
 (376) 298
 
Net cash provided by operating activities
 
 
457
 
 
1,329
 
Cash flows from investing activities:
Decrease (increase) in restricted cash
 (24) 17
Purchases of marketable debt securities
 (1,813) (1,333)
Proceeds from sales of marketable debt securities
 508 1,550
Proceeds from maturities of marketable debt securities
 1,130 1,058
Proceeds from sales of equity investments, net
 13 32
Purchases of property, plant and equipment, net
 (466) (520)
Proceeds from sales of property, plant and equipment
 - 79
Payments for acquisitions, net of cash acquired
 (55) (949)
 
Net cash used in investing activities
 
 
(707)
 
 
(66)
 
Cash flows from financing activities:
Purchase of common stock call options
 (130) (2,764)
Proceeds from issuance of options and ESPP purchases, net
 51 177
Proceeds from issuance of convertible notes, net
 -
Principal payments on borrowings and other obligations
 (16) (24)
 
Net cash used in by financing activities
 
 
(95)
 
 
(2,611)
 
Effect of changes in exchange rates on cash and cash equivalents
 (51) -
Net decrease in cash and cash equivalents
 (396) (1,348)
Cash and cash equivalents, beginning of period
 2,272 3,620
 
Cash and cash equivalents, end of period
 
 
$1,876
 
 
$2,272
 

Sun Microsystems, Inc.
Calculation of Non-GAAP Net Income (Loss)
(in millions, except per share amounts)

  Three Months Ended
June 30, 2009 June 30, 2008 March 29, 2009
Calculation of non-GAAP net income (loss):
GAAP income (loss)
$(147) $88 $(201)
Purchased in-process research and development
 - 6 3
Amortization of acquisition related intangibles
 72 86 72
Stock-based compensation
 42 57 49
Restructuring charges
 64 104 46
Impairment of goodwill and intangible assets
 15 - -
Settlement income
 (47) (45) -
(Gain) loss on equity investments, net
 - (10) (3)
Tax effect of non-GAAP adjustments
 (20) (11) (18)
Non-GAAP net income (loss)
 $(21) $275 $(52)
Diluted non-GAAP net income (loss) per share
 $(0.03) $0.35 $(0.07)
Shares used in the calculation of non-GAAP net income (loss) per common share - diluted
 749 776 745