SANTA CLARA, Calif. - November 1, 2005 - Sun Microsystems, Inc., (NASDAQ: SUNW) reported results today for its fiscal first quarter, which ended September 25, 2005, the Company's first period that included results of operations from SeeBeyond Technology Corporation, which Sun acquired on August 25, 2005, and Storage Technology Corporation, which Sun acquired on August 31, 2005.

Revenues for the first quarter of fiscal 2006 were $2.726 billion, an increase of 3.7 percent as compared with $2.628 billion for the first quarter of fiscal 2005. Total gross margin as a percent of revenues was 44.1 percent, an increase of 3.3 percentage points, as compared with the first quarter of fiscal 2005.

Net loss for the first quarter of fiscal 2006 on a GAAP basis, which included $50 million with respect to stock based compensation related to the implementation of SFAS 123R in the quarter, was $123 million or a net loss of $0.04 per share, as compared with a net loss of $133 million, or a net loss of $0.04 per share, for the first quarter of fiscal 2005.

GAAP net loss for the first quarter of fiscal 2006 included a $60 million acquisitions-related charge for purchased in-process research and development costs, a $12 million charge for workforce and real estate restructuring, a $13 million gain on equity investments, and a $4 million benefit for related tax effects. Excluding these charges, gain and tax effects, non-GAAP net loss was $68 million or $0.02 per share. For comparability, if we exclude the stock based compensation charge relating to the implementation of SFAS 123R of $50 million, our non-GAAP net loss was $18 million or a loss of $0.01 per share.

Cash flow from operations for the first quarter was $224 million and cash and marketable debt securities balance at the end of the quarter was $4.533 billion.

Steve McGowan, Sun's chief financial officer and executive vice president, corporate resources, said, "In addition to closing two significant acquisitions during the quarter, we continued to build upon 16 consecutive years of generating positive cash flow from operations. We are very pleased with the strength of our balance sheet at quarter end that includes a cash position of over $4.5 billion and an increase in deferred revenues. "

"With the acquisitions of StorageTek and SeeBeyond this quarter, revenue grew and customers are responding very positively," said Scott McNealy, chairman and CEO, Sun Microsystems. "We're seeing momentum, with the doubling of price/performance for our UltraSPARC IV+ processor-based Sun Fire servers, clearing the 3,000,000 license mark with Solaris 10 Operating System (OS), a 55% sequential increase in Sun Java Enterprise System subscribers, and our Opteron processor-based Sun Fire server business growing units 109% and our midrange storage arrays, led by the Sun StorEdge 6920, growing revenue 15% year over year. We are confident in our product strategy, and as momentum behind our execution builds, we are beginning to fire on all cylinders."

The Q1 fiscal 2006 results included $226 million in revenue, $99 million in gross margin, $17 million in research and development expense and $87 million in selling, general and administrative expense from the closing dates related to the operations of StorageTek and SeeBeyond following the respective closing dates of these acquisitions and reflect the impact of preliminary purchase price allocations and adjustments. We have estimated the fair value of certain tangible and intangible assets acquired and liabilities assumed in our preliminary allocation of purchase price. As permitted under GAAP, and for up to twelve months from the date of acquisition, some of these estimates may be subject to adjustment as we finalize the purchase price allocation.

Sun has scheduled a conference call today to discuss its earnings for Q1 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 http://sun.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the future results and performance of Sun Microsystems, Inc., including statements regarding our expectations with respect to our customers' response to the StorageTek and SeeBeyond acquisitions, Sun's momentum and Sun beginning to fire on all cylinders. 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 international customers and operations; delays in product development or customer acceptance and implementation of new products and technologies; pricing pressures; our dependence on significant customers and specific industries; our dependence on channel partners; 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. Sun assumes no obligation and does not 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 in this press release 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, Sun Fire, Solaris, Java, Sun StorEdge 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. Opteron is a trademark or registered trademark of Advanced Micro Devices, Inc.