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Sun Microsystems Reports Results for the Third Quarter Fiscal 2009

Revenues for the third quarter of fiscal 2009 were $2.614 billion, as compared with $3.266 billion for the third quarter of fisc

Sun Microsystems, Inc. (NASDAQ: JAVA) reported results today for its third quarter of fiscal 2009, which ended March 29, 2009.

Revenues for the third quarter of fiscal 2009 were $2.614 billion, as compared with $3.266 billion for the third quarter of fiscal 2008, and compared with $3.220 billion for the second quarter of fiscal 2009. Total gross margin as a percent of revenues was 42.7, a decrease of 2.2 percentage points as compared with the third quarter of fiscal 2008 and an increase of 0.8 percentage points as compared with the second quarter of fiscal 2009.

Net loss for the third quarter of fiscal 2009 on a GAAP basis was $201 million, or $(0.27) per share on a diluted basis, as compared with a net loss of $34 million, or $(0.04) per share, for the third quarter of fiscal 2008, and compared with a net loss of $209 million, or $(0.28) per share, for the second quarter of fiscal 2009. GAAP net loss per share includes a restructuring charge of $46 million primarily related to the restructuring announcement of November 2008.

On a non-GAAP basis, net loss for the third quarter of fiscal 2009 was $52 million, or $(0.07) per share on a diluted basis, as compared with a non-GAAP net income of $132 million, or $0.17 per share, for the third quarter of fiscal 2008, and compared with a non-GAAP net income of $114 million, or $0.15 per share, for the second quarter of fiscal 2009. Non-GAAP net income per share excludes purchased in-process research and development, amortization of acquisition-related intangibles, stock-based compensation, restructuring and related impairment of long-lived assets, net gain or loss on equity investments and the tax effect of these non-GAAP adjustments.

Sun ended the quarter with a cash and marketable debt securities balance of $2.990 billion and generated cash flow from operations for the third quarter of fiscal 2009 of $178 million – the third consecutive quarter of positive cash flow from operations in fiscal 2009, and following upon 19 consecutive years of positive cash flow from operations.

Third Quarter Highlights

  • Grew billings nearly 4 percent year-over-year in combined key growth categories of Total Software, Open Storage, SolarisTM-based SPARC® CMT Servers, and X64 Servers.
    • Combined key growth categories accounted for 40 percent of total billings in the third quarter of fiscal 2009 versus 30 percent in the third quarter of fiscal 2008.
    • Total Software billings grew 28 percent year-over-year.
    • Open Storage billings grew 63 percent year-over-year.
    • Solaris-based SPARC CMT Servers billings grew 3 percent year-over-year.
  • Reduced R&D and SG&A expenses nearly 15 percent year-over-year.

Sun will not be hosting a conference call in conjunction with these results. For more information or to access the financial results, please visit www.sun.com/investors.

To supplement Sun's preliminary financial results presented in accordance with GAAP, Sun provides non-GAAP net income and non-GAAP net income per share data on a diluted basis. The presentation of these non-GAAP financial measures should be considered in addition to Sun's GAAP results and are 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 its performance by excluding certain gains, losses and charges that may not be indicative of Sun's 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 its competitors' operating results. Sun includes these non-GAAP financial measures because management believes 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 “Calculation of Non-GAAP Net Income (Loss)” following the text of this press release.

About Sun Microsystems, Inc.

Sun Microsystems develops the technologies that power the global marketplace. Guided by a singular vision -- "The Network is the ComputerTM" -- Sun drives network participation through shared innovation, community development and open source leadership. Sun can be found in more than 100 countries and on the Web at http://sun.com.

Sun, Sun Microsystems, the Sun logo, Java, Solaris, and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. or its subsidiaries in the United States and other countries. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. in the United States and other countries. Producers bearing SPARC trademarks are based upon an architecture developed by Sun Microsystems, Inc.

 
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)
 
 
 

Three Months Ended

 

Nine Months Ended

March 29,   March 30, March 29,   March 30,

2009

2008 2009 2008
 
Net revenues:
Products $ 1,519 $ 2,003 $ 5,222 $ 6,232
Services   1,095     1,263     3,602     3,868
Total net revenues 2,614 3,266 8,824 10,100
Cost of sales:
Cost of sales-products 877 1,106 3,200 3,296
Cost of sales-services   621     692     1,957     2,022
Total cost of sales   1,498     1,798     5,157     5,318
Gross margin 1,116 1,468 3,667 4,782
Operating expenses:
Research and development 393 457 1,227 1,366
Selling, general and administrative 843 989 2,679 2,923
Restructuring charges and related impairment of long-lived assets 46 14 331 159
Purchased in-process research and development 3 24 3 25
Impairment of goodwill   -     -     1,445     -
Total operating expenses   1,285     1,484     5,685     4,473
Operating income (loss) (169 ) (16 ) (2,018 ) 309
Gain on equity investments, net 3 - 8 22
Interest and other income (expense), net   (2 )   34     (3 )   145
Income (loss) before income taxes (168 ) 18 (2,013 ) 476
Provision for income taxes   33     52     74     161
Net income (loss) $ (201 ) $ (34 ) $ (2,087 ) $ 315
 
Net income (loss) per common share-basic $ (0.27 ) $ (0.04 ) $ (2.80 ) $ 0.38
Net income (loss) per common share-diluted $ (0.27 ) $ (0.04 ) $ (2.80 ) $ 0.38
Shares used in the calculation of net income (loss) per common share-basic   745     785     746     821

Shares used in the calculation of net income (loss) per common share-diluted

  745     785     746     837
 
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
 
 

 

March 29,

 

June 30,

 

2009

 

2008(1)

 

(unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 1,569 $ 2,272
Short-term marketable debt securities 1,134 429
Accounts receivable, net 2,265 3,019
Inventories 561 680
Deferred and prepaid tax assets 185 216
Prepaid expenses and other current assets, net   1,036     1,218  
Total current assets 6,750 7,834
 
Property, plant and equipment, net 1,670 1,611
Long-term marketable debt securities 287 609
Goodwill 1,740 3,215
Other acquisition-related intangible assets, net 357 565
Other non-current assets, net   458     506  
$ 11,262   $ 14,340  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 1,049 $ 1,387
Accrued payroll-related liabilities 595 734
Accrued liabilities and other 1,142 1,105
Deferred revenues 2,190 2,236
Warranty reserve 160 206
Current portion of long-term debt   562     -  
Total current liabilities 5,698 5,668
 
Long-term debt 695 1,265
Long-term deferred revenues 548 683
Other non-current obligations 970 1,136
Stockholders’ equity:
Common stock and additional paid-in-capital 7,541 7,391
Treasury stock, at cost (2,680 ) (2,726 )
Retained earnings (accumulated deficit) (1,819 ) 430
Accumulated other comprehensive income   309     493  
Total stockholders’ equity   3,351     5,588  
$ 11,262   $ 14,340  
 
(1) Derived from audited financial statements.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
 
 
 

Nine Months Ended

March 29,   March 30,
2009 2008
 
 
Cash flows from operating activities:
Net income (loss) $ (2,087 ) $ 315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 321 354
Amortization of acquisition-related intangible assets 224 224
Stock-based compensation expense 150 157
Purchased in-process research and development 3 25
Impairment of goodwill 1,445 -
(Gain) loss on investments and other, net 23 (54 )
Deferred taxes 2 8
Changes in operating assets and liabilities:
Accounts receivable, net 752 603
Inventories 118 (205 )
Prepaid and other assets, net 177 (105 )
Accounts payable (341 ) (114 )
Other liabilities   (405 )   31  
Net cash provided by operating activities   382     1,239  
Cash flows from investing activities:
Decrease (increase) in restricted cash (19 ) 22
Purchases of marketable debt securities (1,535 ) (1,292 )
Proceeds from sales of marketable debt securities 423 1,404
Proceeds from maturities of marketable debt securities 684 764
Proceeds from sales of equity investments, net 7 25
Purchases of property, plant and equipment, net (404 ) (297 )
Payment for acquisitions, net of cash acquired   (55 )   (923 )
Net cash used in investing activities   (899 )   (297 )
Cash flows from financing activities:
Purchase of common stock under stock repurchase plans (130 ) (2,300 )
Proceeds from issuance of options and ESPP purchases, net 24 121
Principal payments on borrowings and other obligations   (12 )   (20 )
Net cash used in financing activities   (118 )   (2,199 )
Effect of changes in exchange rates on cash and cash equivalents   (68 )   -  
Net decrease in cash and cash equivalents (703 ) (1,257 )
Cash and cash equivalents, beginning of period   2,272     3,620  
Cash and cash equivalents, end of period $ 1,569   $ 2,363  
 
SUN MICROSYSTEMS, INC.
CALCULATION OF NON-GAAP NET INCOME (LOSS)
(unaudited)
(in millions, except per share amounts)
 
 

 

Three Months Ended

March 29,   March 30,   December 28,

2009

2008

2008

 
Calculation of non-GAAP net income (loss):
GAAP loss $ (201 ) $ (34 ) $ (209 )
Purchased in-process research and development 3 24 -
Amortization of acquisition related intangibles 72 76 72
Stock-based compensation 49 57 52
Restructuring and related impairment of long-lived assets 46 14 222
(Gain) loss on equity investments, net (3 ) - 3
Tax effect of non-GAAP adjustments   (18 )   (5 )   (26 )
Non-GAAP net income (loss) $ (52 ) $ 132   $ 114  
Diluted non-GAAP net income (loss) per share $ (0.07 ) $ 0.17   $ 0.15  
 
Shares used in the calculation of non-GAAP net income (loss) per common share – diluted   745     797     746  

 

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