SANTA CLARA, Calif. - Oct.14, 2004 - Sun Microsystems, Inc., (NASDAQ: SUNW) reported results today for its fiscal first quarter, which ended September 26, 2004.

Revenues for the first quarter grew to $2.628 billion, an increase of 3.6 percent as compared with $2.536 billion for the first quarter of fiscal 2004. Total gross margin as a percent of revenues was 39.8 percent, a decrease of 0.3 percentage points as compared with the first quarter of fiscal 2004. Excluding the $82 million charge related to a litigation settlement with Kodak, gross margin would have been $1.128 billion, or 42.9 percent on a non-GAAP basis. Net loss for the first quarter of fiscal 2005 was $174 million or $0.05 per share as compared with a net loss of $286 million or $0.09 per share for the first quarter of fiscal 2004. This loss includes a charge of $108 million for previously announced workforce and real estate restructuring, an $82 million charge related to litigation settlement, a $4 million loss on equity investments, and a $7 million benefit for related tax effects. Excluding these amounts, net income for the quarter on a non-GAAP basis would have been $13 million.

Cash generated from operating activities was $124 million for the quarter, and the balance of cash and marketable debt securities was $7.433 billion.

"The first fiscal quarter is usually our toughest but the management team executed well operationally," said Scott McNealy, chairman and chief executive officer, Sun Microsystems, Inc. "Following a solid June quarter, we now have two quarters in a row of year over year revenue growth. And we are on the offense again as a result of our newly revamped product line, a result of our sometimes controversial but continued commitment to R&D investments in the last three years. Stay tuned as we announce Solaris 10 OS in November. We believe this is one of our best new products in maybe a decade. And it runs on Opteron and SPARC��."

Steve McGowan, Sun's chief financial officer and executive vice president, corporate resources, said, "We're very pleased with fiscal Q1 results. We grew revenue year-over-year for the second consecutive quarter, increased our gross margin percentage sequentially, lowered combined R&D and SG&A spending by over $260 million sequentially, and generated positive cash flow from operations." Sun has scheduled a conference call today to discuss its earnings for the first 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 http://sun.com

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding that Sun is on the offense again as a result of our newly revamped product line and Sun's expectation to announce Solaris 10 in November. Factors that could cause results to differ include risks associated with lack of success in technological advancements; lack of acceptance of new products; lack of marketing success; and cancellation or delay of projects, in particular Solaris 10. 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 our annual report on Form 10-K for the fiscal year ended June 30, 2004.

The company believes that presentation of results including items such as net income (loss) and gross margin 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. The operating results for the quarter include a preliminary accounting for the settlement with Kodak.

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