Revenue Growth and Strong Gross Margin Affirm Sun's Business Strategy and Focus on Innovation
Revenues for the first quarter of fiscal 2007 were $3.189 billion, an increase of 17 percent as compared with $2.726 billion for the first quarter of fiscal 2006. Year over year revenue increase resulted from both acquisitions and increasing acceptance of the Solaris(TM) 10 Operating System, as well as growth in the services business. Computer Systems Products revenues increased 15 percent year over year, the third consecutive quarter of year over year revenue increase.
Net loss for the first quarter of fiscal 2007 on a GAAP basis was $56 million or a net loss of ($0.02) per share, as compared with a net loss of $123 million, or net loss of ($0.04) per share, for the first quarter of fiscal 2006.
GAAP net loss for the first quarter of fiscal 2007 included: $21 million of restructuring and related impairment of asset charges and a $7 million benefit for related tax effects, $58 million of stock-based compensation charges and $79 million of intangible asset amortization relating to recent acquisitions. The net impact of these four items was approximately ($0.04) per share.
Cash generated from operations for the first quarter was $157 million, and cash and marketable debt securities balance at the end of the quarter was $4.671 billion.
"It's great to grow faster than the competition, maintain strong gross margins and see continued adoption of Solaris on HP, Dell and IBM computers," said Jonathan Schwartz, CEO of Sun Microsystems. "Customers across the world are turning to Sun as the safe choice for open source innovation, for industry leading identity and security management platforms and for the most eco-responsible infrastructure to power the network."
Sun has scheduled a conference call today to discuss its financial results for Q1 fiscal year 2007 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(TM)" -- 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 .
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 Sun's 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 its performance by excluding certain charges, gains and tax effects 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 "Non-GAAP Calculation of Net Income (Loss) Excluding Special Items " following the text of this press release.
NOTE: 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 other countries.
Contact: Bret Schaefer, +1-650-786-0123, or Email Contact, or Kathy Tom Engle, +1-415-294-4368, or Email Contact.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)
Three Months Ended
October 1, September 25,
2006 2005
Net revenues:
Products $1,959 $1,704
Services 1,230 1,022
Total net revenues 3,189 2,726
Cost of sales:
Cost of sales-products (including
stock-based compensation expense
of $3 and $2)(1) 1,123 966
Cost of sales-services (including
stock-based compensation expense
of $8 and $7)(1) 678 558
Total cost of sales 1,801 1,524
Gross margin 1,388 1,202
Operating expenses:
Research and development (including
stock-based compensation expense
of $18 and $17)(1) 473 439
Selling, general and administrative
(including stock-based compensation
expense of $29 and $24)(1) 958 828
Restructuring and related impairment
of long-lived assets 21 12
Purchased in-process research and development - 60
Total operating expenses 1,452 1,339
Operating loss (64) (137)
Gain on equity investments, net - 13
Interest and other income, net 42 44
Loss before income taxes (22) (80)
Provision for income taxes 34 43
Net loss $(56) $(123)
Net loss per common share-
basic and diluted $(0.02) $(0.04)
Shares used in the calculation of
net loss per common share-
basic and diluted 3,497 3,407
(1) For the three months ended October 1, 2006 and September 25, 2005,
respectively.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
October 1, June 30,
2006 2006*
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $3,362 $3,569
Short-term marketable debt
securities 609 496
Accounts receivable, net 2,036 2,702
Inventories 584 540
Deferred and prepaid tax
assets 214 209
Prepaid expenses and other
current assets 747 757
Total current
assets 7,552 8,273
Property, plant and equipment, net 1,583 1,812
Long-term marketable debt securities 700 783
Goodwill 2,566 2,610
Other acquisition-related intangible
assets, net 848 929
Other non-current assets, net 645 675
$13,894 $15,082
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt and short-term
borrowings $2 $503
Accounts payable 1,292 1,446
Accrued payroll-related
liabilities 661 777
Accrued liabilities and
other 1,063 1,190
Deferred revenues 1,695 1,988
Warranty reserve 244 261
Total current
liabilities 4,957 6,165
Long-term debt 582 575
Long-term deferred revenues 558 506
Other non-current obligations 1,388 1,492
Total stockholders' equity 6,409 6,344
$13,894 $15,082
* Derived from audited financial statements
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
Three Months Ended
October 1, September 25,
2006 2005
Cash flows from operating activities:
Net loss $(56) $(123)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 123 143
Amortization of other acquisition
related intangible assets 81 46
Deferred taxes (3) -
Impairment of assets 8 -
Gain on investments, net - (13)
Stock-based compensation expense 58 50
Purchased in-process research and
development - 60
Changes in operating assets and
liabilities:
Accounts receivable, net 672 449
Inventories (71) 67
Prepaid and other
assets 36 203
Accounts payable (151) (174)
Other liabilities (540) (484)
Net cash provided by operating
activities 157 224
Cash flows from investing activities:
Purchases of marketable debt
securities (675) (454)
Proceeds from sales of marketable
debt securities 515 2,818
Proceeds from maturities of
marketable debt securities 136 75
Proceeds from sales of equity
investments, net 7 9
Proceeds from sale (purchases) of
property, plant and equipment, net 160 (48)
Acquisition of spare parts and other
assets (34) (20)
Payments for acquisitions, net of
cash acquired - (3,150)
Net cash provided by (used in)
investing activities 109 (770)
Cash flows from financing activities:
Proceeds from issuance of common
stock, net 27 3
Principal payments on borrowings and
other obligations (500) -
Net cash provided by (used in)
financing activities (473) 3
Net decrease in cash and cash
equivalents (207) (543)
Cash and cash equivalents, beginning
of period 3,569 2,051
Cash and cash equivalents, end of
period $3,362 $1,508
SUN MICROSYSTEMS, INC.
NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS
(unaudited)
(in millions, except per share amounts)
Three Months Ended
October 1, September 25,
2006 2005
Calculation of net loss excluding
special items:
Net loss*, ** $(56) $(123)
Restructuring and related
impairment of long-lived
assets 21 12
Purchased in-process research and
development - 60
Gain on equity investments, net - (13)
Related tax
effects. (7) (4)
Net loss excluding special
items $(42) $(68)
Net loss excluding special items per
common share -- basic and diluted $(0.01) $(0.02)
Shares used in the calculation of net
loss excluding special items per
common share -- basic and diluted 3,497 3,407
* Net loss for the three months ended October 1, 2006 and September
25, 2005 included $58 million and $50 million of stock-based
compensation expense or approximately $0.02 per share and $0.01 per
share, respectively.
** Net loss for the three months ended October 1, 2006 and September
25, 2005 included $79 million and $122 million of purchase price
accounting adjustments and intangible asset amortization relating to
our fiscal 2006 acquisitions or approximately $0.02 per share and
$0.04 per share, respectively.
Web site: http://sun.com//