8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

October 16, 2003

Date of Report (date of earliest event reported)

SUN MICROSYSTEMS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	0-15086	94-2805249
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

4150 Network Circle
Santa Clara, CA 95054-1778

(Address of principal executive offices)

(650) 960-1300

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

TABLE OF CONTENTS

	Item 7. Financial Statements and Exhibits
	Item 12. Results of Operations and Financial Condition
SIGNATURE
EXHIBIT INDEX
EXHIBIT 99.1

Item 7.    Financial Statements and Exhibits

(c)	Exhibits
		The following exhibit is filed herewith:

Exhibit
Number	Description
99.1	Text of press release issued by Sun Microsystems, Inc., dated October 16, 2003, titled “Sun Microsystems Reports First Fiscal Quarter Results,” together with related Condensed Consolidated Statements of Operations, Balance Sheets and Cash Flows and Operations Analysis

Item 12. Results of Operations and Financial Condition

     This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

     On October 16, 2003, Sun Microsystems, Inc. (“Sun”) issued a press release regarding Sun’s financial results for its first fiscal quarter and fiscal year ended September 28, 2003. The full text of Sun's press release, together with the related Condensed Consolidated Statements of Operations, Balance Sheets and Cash Flows and Operations Analysis, are attached hereto as Exhibit 99.1.

     The Condensed Consolidated Statements of Operations and the Operations Analysis contain non-GAAP presentations of net income (loss) and EPS (basic and diluted) which exclude certain items below the presentation of the GAAP presentations of net income (loss) and EPS (basic and diluted). The excluded items include: in-process research and development, restructuring charges, loss on equity investments, net, impairment expense, valuation allowance on deferred tax assets and related tax effects. In-process research and development and goodwill impairment are primarily related to the effect of Sun’s acquisition activity. Gain/loss on equity investments shows the effect of our investment portfolio management. Sun may include or exclude items from its non-GAAP presentations of net income (loss) and EPS (basic and diluted) which are different from the items included or excluded from other companies’ non-GAAP presentations of net income (loss) and EPS (basic and diluted). Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. These measures and the other special items presented are not necessarily representative of Sun’s core operations and Sun management believes that presentation of those non-GAAP financial measures provides useful information to investors by illustrating the impact of the special items on Sun’s net income (loss) and EPS (basic and diluted).

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SUN MICROSYSTEMS, INC.
Date: October 16, 2003	By:	/s/ Stephen T. McGowan
		Stephen T. McGowan Chief Financial Officer and Executive Vice President, Corporate Resources

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Text of press release issued by Sun Microsystems, Inc., dated October 16, 2003, titled “Sun Microsystems Reports First Fiscal Quarter Results,” together with related Condensed Consolidated Statements of Operations, Balance Sheets and Cash Flows and Operations Analysis

EX-99.1 3 f93656exv99w1.htm EXHIBIT 99.1

INVESTOR CONTACT:

Jeff Boldt (650) 786-0333

jeff.boldt@sun.com

MEDIA AND INDUSTRY ANALYST CONTACT:

May Goh Petry (650) 786-0034

may.petry@sun.com

SUN MICROSYSTEMS REPORTS FIRST FISCAL QUARTER RESULTS

SANTA CLARA, Calif. — October 16, 2003 — Sun Microsystems, Inc. (NASDAQ: SUNW), a leader in systems and solutions that make the Net work, reported results today for its fiscal first quarter which ended September 28, 2003.

Revenues for the first quarter were $2.536 billion, a decline of 8 percent as compared with $2.747 billion for the first quarter of fiscal 2003. Total gross margin as a percent of revenues was 40.1 percent, a decrease of 1.1 percentage points as compared with the first quarter of fiscal 2003. Net loss for the first quarter of fiscal 2004 was $286 million or $0.09 per share compared with a net loss of $111 million or a net loss of $0.04 per share for the first quarter of fiscal 2003.

Steve McGowan, Sun’s Chief Financial Officer and Executive Vice President, Corporate Resources, said, “Despite our challenges this quarter, we reached the highest level of services revenue ever for a fiscal first quarter and we made strong gains in the 1-2 way server market. We reduced SG&A expenses by $84 million year over year, and although cash flow from operations was a negative $49 million, we exited the quarter with a cash and marketable securities position of over $5.5 billion.”

Commenting on major initiatives in the quarter, Scott McNealy, Chairman, President and CEO, said, “While we have work to do, we made progress on key initiatives that will drive revenue going forward. Our quarterly Network Computing launch, NC03Q3, delivered over 30 breakthrough innovations, including the Sun Java™ Enterprise System which makes serious software simple at industry-beating price points. We continued to execute on our low-cost computing strategy as we saw an increase in demand for Sun™ x86 systems. We completed the acquisition of CenterRun, furthering our N1™ strategy to automate network computing, adding 60 new customers this quarter. And our systems value proposition continued to resonate with increasing storage attach rates. We are delivering innovation, choice and value like never before and continued execution of this strategy will pay-off in revenue generation over the long-run.”

Sun has scheduled a conference call today to discuss its earnings for the first quarter of

fiscal year 2004 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^TM” — 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://www.sun.com.

This news release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements relating to key initiatives that will drive revenue going forward, the Sun Java Enterprise System making serious software simple at industry-beating price points, delivering innovation, choice and value like never before and continued execution of this strategy and the resulting pay-off in revenue generation over the long-run. Such statements are just predictions and involve risks and uncertainties such that actual results and performance may differ materially. Factors that might cause such a difference include risks associated with continued adverse macroeconomic conditions in the U.S. and internationally, including adverse business conditions in the specific markets for Sun’s products, increased competition, lack of success in the timely development, production and acceptance of new products and services and in technical advancements, and the failure to manage costs and improve operating efficiencies. 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 Sun’s annual report on Form 10-K for the fiscal year ended June 30, 2003.

Sun, Sun Microsystems, the Sun logo, Java, N1 and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and in other countries.

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

				Three Months Ended
				September 28, 2003			September 29, 2002
Net revenues:
	Products			$	1,634		$	1,880
	Services				902			867
		Total net revenues			2,536			2,747
Cost of sales:
	Cost of sales-products				965			1,093
	Cost of sales-services				555			522
		Total cost of sales			1,520			1,615
			Gross margin		1,016			1,132
Operating expenses:
	Research and development				467			437
	Selling, general and administrative				798			882
	Restructuring charges				1			24
	Purchased in-process research and development				1			—
		Total operating expenses			1,267			1,343
			Operating loss		(251	)		(211	)
Loss on equity investments, net					(25	)		(31	)
Interest income, net					21			39
	Loss before income taxes				(255	)		(203	)
Provision (benefit) for income taxes					31			(92	)
Net loss				$	(286	)	$	(111	)
Net loss per common share-basic and diluted				$	(0.09	)	$	(0.04	)
Shares used in the calculation of net loss per common share – basic and diluted					3,235			3,168
Calculation of net loss excluding special items:
	Net loss per above			$	(286	)	$	(111	)
	Restructuring charges				1			24
	Purchased in-process research and development				1			—
	Loss on equity investments, net				25			31
	Related tax effects				—			(22	)
Net loss excluding special items				$	(259	)	$	(78	)
Net loss excluding special items per common share – basic and diluted				$	(0.08	)	$	(0.02	)
Shares used in the calculation of net loss excluding special items per common share – basic and diluted					3,235			3,168

SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)

			September 28, 2003		June 30, 2003*
			(unaudited)
ASSETS
Current assets:
	Cash and cash equivalents		$	1,481	$	2,015
	Short-term marketable debt securities			1,039		1,047
	Accounts receivable, net			1,905		2,381
	Inventories			426		416
	Deferred and prepaid tax assets			132		133
	Prepaid expenses and other current assets			758		787
		Total current assets		5,741		6,779
Property, plant and equipment, net				2,152		2,267
Long-term marketable debt securities				3,006		2,679
Goodwill				389		326
Other acquisition-related intangible assets, net				94		91
Other non-current assets, net				731		843
			$	12,113	$	12,985
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt and short-term borrowings		$	263	$	—
	Accounts payable			780		903
	Accrued payroll-related liabilities			524		479
	Accrued liabilities and other			869		1,027
	Deferred revenues			1,214		1,453
	Warranty reserve			259		267
		Total current liabilities		3,909		4,129
Long-term debt				1,215		1,531
Long-term deferred revenues				462		450
Other non-current obligations				364		384
Total stockholders’ equity				6,163		6,491
			$	12,113	$	12,985

* Derived from audited financial statements

SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)

				Three Months Ended
				September 28, 2003			September 29, 2002
Cash flows from operating activities:
	Net loss			$	(286	)	$	(111	)
		Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization			194			241
		Amortization of other intangible assets and unearned equity compensation			24			31
		Tax benefits from employee stock plans			—			2
		Deferred taxes			—			(92	)
		Loss on equity investments, net			25			31
		Purchased in-process research and development			1			—
		Changes in operating assets and liabilities:
			Accounts receivable, net		470			612
			Inventories		(11	)		82
			Prepaid and other assets		39			(82	)
			Accounts payable		(126	)		(246	)
			Other liabilities		(379	)		(286	)
Net cash provided by (used in) operating activities					(49	)		182
Cash flows from investing activities:
			Purchases of marketable debt securities		(3,491	)		(1,245	)
			Proceeds from sales of marketable debt securities		3,156			1,387
			Proceeds from maturities of marketable debt securities		—			111
			Purchases of equity investments		—			(1	)
			Proceeds from sales of equity investments		2			—
			Acquisition of property, plant and equipment, net		(55	)		(83	)
			Acquisition of spare parts and other assets		(19	)		(44	)
			Payments for acquisitions, net of cash acquired		(85	)		1
Net cash provided by (used in) investing activities					(492	)		126
Cash flows from financing activities:
			Acquisition of common stock		—			(499	)
			Proceeds from issuance of common stock, net		7			4
			Principal payments on borrowings and other obligations		—			(201	)
Net cash provided by (used in) financing activities					7			(696	)
Net decrease in cash and cash equivalents					(534	)		(388	)
Cash and cash equivalents, beginning of period					2,015			2,024
Cash and cash equivalents, end of period				$	1,481		$	1,636

SUN MICROSYSTEMS, INC.
OPERATIONS ANALYSIS — CONSOLIDATED (UNAUDITED)

STATEMENTS OF OPERATIONS				FY 2004			FY 2003															FY 2002
(in millions except per share amounts)				Q1			Q1			Q2			Q3			Q4			FY03			Q1			Q2			Q3			Q4			FY02
NET REVENUES
	Products				1,634			1,880			2,013			1,897			2,003			7,793			2,057			2,260			2,269			2,507			9,093
	Services				902			867			902			893			979			3,641			804			848			838			913			3,403
TOTAL					2,536			2,747			2,915			2,790			2,982			11,434			2,861			3,108			3,107			3,420			12,496
			Growth vs. prior year (%)		-7.7	%		-4.0	%		-6.2	%		-10.2	%		-12.8	%		-8.5	%		-43.3	%		-39.2	%		-24.1	%		-14.4	%		-31.5	%
			Growth vs. prior quarter (%)		-15.0	%		-19.7	%		6.1	%		-4.3	%		6.9	%					-28.4	%		8.6	%		0.0	%		10.1	%
COST OF SALES
	Products				965			1,093			1,118			1,021			1,110			4,342			1,287			1,437			1,306			1,476			5,506
	Services				555			522			534			526			568			2,150			518			532			494			530			2,074
TOTAL					1,520			1,615			1,652			1,547			1,678			6,492			1,805			1,969			1,800			2,006			7,580
			% of revenue		59.9	%		58.8	%		56.7	%		55.4	%		56.3	%		56.8	%		63.1	%		63.4	%		57.9	%		58.7	%		60.7	%
GROSS MARGIN ($)
	Products				669			787			895			876			893			3,451			770			823			963			1,031			3,587
			% of product revenue		40.9	%		41.9	%		44.5	%		46.2	%		44.6	%		44.3	%		37.4	%		36.4	%		42.4	%		41.1	%		39.4	%
	Services				347			345			368			367			411			1,491			286			316			344			383			1,329
			% of service revenue		38.5	%		39.8	%		40.8	%		41.1	%		42.0	%		41.0	%		35.6	%		37.3	%		41.1	%		41.9	%		39.1	%
TOTAL					1,016			1,132			1,263			1,243			1,304			4,942			1,056			1,139			1,307			1,414			4,916
			% of revenue		40.1	%		41.2	%		43.3	%		44.6	%		43.7	%		43.2	%		36.9	%		36.6	%		42.1	%		41.3	%		39.3	%
R&D					467			437			451			467			482			1,837			473			428			468			463			1,832
			% of revenue		18.4	%		15.9	%		15.5	%		16.7	%		16.2	%		16.1	%		16.5	%		13.8	%		15.1	%		13.5	%		14.7	%
PURCHASED IN PROCESS R&D					1			0			4			0			0			4			3			0			0			0			3
			% of revenue		0.0	%		0.0	%		0.1	%		0.0	%		0.0	%		0.0	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%
SG&A					798			882			830			791			826			3,329			961			966			985			894			3,806
			% of revenue		31.5	%		32.1	%		28.5	%		28.4	%		27.7	%		29.1	%		33.6	%		31.1	%		31.7	%		26.1	%		30.5	%
RESTRUCTURING CHARGES					1			24			357			(4	)		(6	)		371			14			511			(4	)		(4	)		517
			% of revenue		0.0	%		0.9	%		12.2	%		-0.1	%		-0.2	%		3.2	%		0.5	%		16.4	%		-0.1	%		-0.1	%		4.1	%
IMPAIRMENT EXPENSE					0			0			2,125			0			0			2,125			0			0			6			0			6
			% of revenue		0.0	%		0.0	%		72.9	%		0.0	%		0.0	%		18.6	%		0.0	%		0.0	%		0.2	%		0.0	%		0.0	%
TOTAL OPERATING EXPENSES					1,267			1,343			3,767			1,254			1,302			7,666			1,451			1,905			1,455			1,353			6,164
			% of revenue		50.0	%		48.9	%		129.2	%		44.9	%		43.7	%		67.0	%		50.7	%		61.3	%		46.8	%		39.6	%		49.3	%
OPERATING INCOME (LOSS)					(251	)		(211	)		(2,504	)		(11	)		2			(2,724	)		(395	)		(766	)		(148	)		61			(1,248	)
			Operating margin		-9.9	%		-7.7	%		-85.9	%		-0.4	%		0.1	%		-23.8	%		-13.8	%		-24.6	%		-4.8	%		1.8	%		-10.0	%
Interest income, net					21			39			38			33			45			155			107			68			77			47			299
Loss on equity investments, net					(25	)		(31	)		(11	)		(16	)		(26	)		(84	)		(19	)		(39	)		(23	)		(18	)		(99	)
PRETAX INCOME (LOSS)					(255	)		(203	)		(2,477	)		6			21			(2,653	)		(307	)		(737	)		(94	)		90			(1,048	)
			Pretax income (loss) margin		-10.1	%		-7.4	%		-85.0	%		0.2	%		0.7	%		-23.2	%		-10.7	%		-23.7	%		-3.0	%		2.6	%		-8.4	%
INCOME TAX PROVISION (BENEFIT)					31			(92	)		(194	)		2			1,060			776			(127	)		(306	)		(57	)		29			(461	)
TAX RATE (%)					N/A			45.5	%		7.8	%		44.0	%		N/A			N/A			41.5	%		41.5	%		60.8	%		11.3	%		44.0	%
NET INCOME (LOSS) (Reported)					(286	)		(111	)		(2,283	)		4			(1,039	)		(3,429	)		(180	)		(431	)		(37	)		61			(587	)
			Growth vs. prior year (%)		-157.7	%		38.3	%		-429.7	%		110.8	%		-1803.3	%		-484.2	%		-139.5	%		-201.9	%		-127.2	%		169.3	%		-163.3	%
			Growth vs. prior quarter (%)		72.5	%		-282.0	%		-1956.8	%		100.2	%		-26075.0	%					-104.5	%		-139.4	%		91.4	%		264.9	%
			Net income (loss) margin		-11.3	%		-4.0	%		-78.3	%		0.1	%		-34.8	%		-30.0	%		-6.3	%		-13.9	%		-1.2	%		1.8	%		-4.7	%
EPS (Diluted) (Reported)					(0.09	)		(0.04	)		(0.72	)		0.00			(0.32	)		(1.07	)		(0.06	)		(0.13	)		(0.01	)		0.02			(0.18	)
			Growth vs. prior year (%)		-125.0	%		33.3	%		-453.8	%		100.0	%		-1700.0	%		-494.4	%		-146.2	%		-208.3	%		-125.0	%		166.7	%		-166.7	%
			Growth vs. prior quarter (%)		71.9	%		-300.0	%		-1700.0	%		100.0	%		N/A						-100.0	%		-116.7	%		92.3	%		300.0	%
SHARES (CSE)(Diluted)					3,235			3,168			3,181			3,218			3,219			3,190			3,240			3,239			3,245			3,309			3,242
OUTSTANDING SHARES					3,240			3,116			3,194			3,200			3,236			3,236			3,237			3,250			3,245			3,234			3,234
GAAP net income (loss)					(286	)		(111	)		(2,283	)		4			(1,039	)		(3,429	)		(180	)		(431	)		(37	)		61			(587	)
		In-process research and development			1			0			4			0			0			4			3			0			0			0			3
		Restructuring charges			1			24			357			(4	)		(6	)		371			14			511			(4	)		(4	)		517
		Loss on equity investments, net			25			31			11			16			26			84			19			39			23			18			99
		Impairment expense			0			0			2,125			0			0			2,125			0			0			6			0			6
		Valuation allowance on deferred tax assets			0			0			0			0			1,051			1,051			0			0			0			0			0
		Related tax effects			0			(22	)		(204	)		(5	)		(8	)		(239	)		(14	)		(218	)		(8	)		(6	)		(246	)
Net income (loss) excluding special items					(259	)		(78	)		10			11			24			(33	)		(158	)		(99	)		(20	)		69			(208	)
			Growth vs. prior year (%)		-232.1	%		50.6	%		110.1	%		155.0	%		-65.2	%		84.1	%		-134.6	%		-120.0	%		-113.8	%		527.3	%		-118.8	%
EPS (Diluted) excluding special items *					(0.08	)		(0.02	)		0.00			0.00			0.01			(0.01	)		(0.05	)		(0.03	)		(0.01	)		0.02			(0.06	)
			Growth vs. prior year (%)		-300.0	%		60.0	%		100.0	%		100.0	%		-50.0	%		83.3	%		-138.5	%		-121.4	%		-125.0	%					-118.8	%

* For the quarters ended June 30, 2003 and December 29, 2002, Sun used 3,251 shares and 3,205 shares, respectively, to calculate the “Net income (loss) excluding special items per common share-diluted”. For all other periods, the number of shares used to calculate “EPS (Diluted) (Reported)” and “EPS (Diluted) excluding special items” were the same.

				FY 2004			FY 2003															FY 2002
(in millions)				Q1			Q1			Q2			Q3			Q4			FY03			Q1			Q2			Q3			Q4			FY02
REVENUE BY GEOGRAPHY
		UNITED STATES ($M)			1,162			1,242			1,267			1,212			1,328			5,049			1,347			1,436			1,439			1,714			5,936
			Growth vs. prior year (%)		-6.4	%		-7.8	%		-11.8	%		-15.8	%		-22.5	%		-14.9	%		-50.5	%		-42.2	%		-13.9	%		-9.9	%		-32.4	%
			Growth vs. prior quarter (%)		-12.5	%		-27.5	%		2.0	%		-4.3	%		9.6	%					-29.2	%		6.6	%		0.2	%		19.1	%
		EUROPE ($M)			780			806			932			886			954			3,578			809			900			924			973			3,606
			Growth vs. prior year (%)		-3.2	%		-0.4	%		3.6	%		-4.1	%		-2.0	%		-0.8	%		-38.6	%		-39.8	%		-30.9	%		-13.2	%		-31.6	%
			Growth vs. prior quarter (%)		-18.2	%		-17.2	%		15.6	%		-4.9	%		7.7	%					-27.8	%		11.2	%		2.7	%		5.3	%
		JAPAN ($M)			185			250			243			243			200			936			287			292			278			203			1,060
			Growth vs. prior year (%)		-26.0	%		-12.9	%		-16.8	%		-12.6	%		-1.5	%		-11.7	%		-32.2	%		-32.7	%		-43.6	%		-43.8	%		-38.0	%
			Growth vs. prior quarter (%)		-7.5	%		23.2	%		-2.8	%		0.0	%		-17.7	%					-20.5	%		1.7	%		-4.8	%		-27.0	%
		REST OF WORLD ($M)			409			449			473			449			500			1,871			418			480			466			530			1,894
			Growth vs. prior year (%)		-8.9	%		7.4	%		-1.5	%		-3.6	%		-5.7	%		-1.2	%		-28.5	%		-31.6	%		-21.4	%		-13.3	%		-24.0	%
			Growth vs. prior quarter (%)		-18.2	%		-15.3	%		5.3	%		-5.1	%		11.4	%					-31.6	%		14.8	%		-2.9	%		13.7	%
	% of Total Revenue
		UNITED STATES (%)			45.8	%		45.2	%		43.5	%		43.4	%		44.5	%		44.2	%		47.1	%		46.2	%		46.3	%		50.1	%		47.5	%
		EUROPE (%)			30.8	%		29.3	%		32.0	%		31.8	%		32.0	%		31.3	%		28.3	%		29.0	%		29.7	%		28.5	%		28.9	%
		JAPAN (%)			7.3	%		9.1	%		8.3	%		8.7	%		6.7	%		8.2	%		10.0	%		9.4	%		8.9	%		5.9	%		8.5	%
		REST OF WORLD (%)			16.1	%		16.3	%		16.2	%		16.1	%		16.8	%		16.4	%		14.6	%		15.4	%		15.0	%		15.5	%		15.2	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)					1,282			1,512			1,621			1,530			1,580			6,243			1,692			1,838			1,864			2,002			7,396
			Growth vs. prior year (%)		-15.2	%		-10.6	%		-11.8	%		-17.9	%		-21.1	%		-15.6	%		-52.2	%		-48.8	%		-31.3	%		-21.4	%		-40.3	%
			Growth vs. prior quarter (%)		-18.9	%		-24.5	%		7.2	%		-5.6	%		3.3	%					-33.6	%		8.6	%		1.4	%		7.4	%
NETWORK STORAGE PRODUCTS ($M)					352			368			392			367			423			1,550			365			422			405			505			1,697
			Growth vs. prior year (%)		-4.3	%		0.8	%		-7.1	%		-9.4	%		-16.2	%		-8.7	%		-54.5	%		-42.2	%		-26.1	%		-7.5	%		-35.4	%
			Growth vs. prior quarter (%)		-16.8	%		-27.1	%		6.5	%		-6.4	%		15.3	%					-33.2	%		15.6	%		-4.0	%		24.7	%
SUPPORT SERVICES ($M)					731			683			702			704			755			2,844			585			625			636			692			2,538
			Growth vs. prior year (%)		7.0	%		16.8	%		12.3	%		10.7	%		9.1	%		12.1	%		20.4	%		16.2	%		15.8	%		12.5	%		16.0	%
			Growth vs. prior quarter (%)		-3.2	%		-1.3	%		2.8	%		0.3	%		7.2	%					-4.9	%		6.8	%		1.8	%		8.8	%
PROFESSIONAL AND EDUCATION SERVICES ($M)					171			184			200			189			224			797			219			223			202			221			865
			Growth vs. prior year (%)		-7.1	%		-16.0	%		-10.3	%		-6.4	%		1.4	%		-7.9	%		1.4	%		-14.2	%		-28.9	%		-23.0	%		-17.4	%
			Growth vs. prior quarter (%)		-23.7	%		-16.7	%		8.7	%		-5.5	%		18.5	%					-23.7	%		1.8	%		-9.4	%		9.4	%
NET BOOKINGS ($M)					2,538			2,601			2,989			2,688			3,020			11,298			2,717			3,193			3,088			3,486			12,484
		Growth vs. prior year (%)			-2.4	%		-4.3	%		-6.4	%		-13.0	%		-13.4	%		-9.5	%		-46.2	%		-35.5	%		-14.5	%		-4.5	%		-27.7	%
		Growth vs. prior quarter (%)			-16.0	%		-25.4	%		14.9	%		-10.1	%		12.4	%					-25.6	%		17.5	%		-3.3	%		12.9	%
BACKLOG ($M)					707			695			769			667			705			705			709			794			775			841			841

BALANCE SHEETS		FY 2004			FY 2003															FY 2002
(in millions)		Q1			Q1			Q2			Q3			Q4			FY03			Q1			Q2			Q3			Q4			FY02
CASH & ST INVESTMENTS			2,520			2,632			2,606			2,636			3,062						1,938			1,853			2,384			2,885
ACCOUNTS RECEIVABLE, NET			1,905			2,133			2,291			2,296			2,381						2,183			2,274			2,407			2,745
	RAW MATERIALS		133			136			119			101			114						449			305			206			168
	WORK IN PROCESS		73			123			130			82			75						129			104			118			125
	FINISHED GOODS		220			250			235			214			227						267			215			230			298
TOTAL INVENTORIES			426			509			484			397			416						845			624			554			591
OTHER CURRENT ASSETS			890			1,629			1,447			1,302			920						2,291			2,512			2,348			1,556
TOTAL CURRENT ASSETS			5,741			6,903			6,828			6,631			6,779						7,257			7,263			7,693			7,777
PP&E, NET			2,152			2,408			2,321			2,265			2,267						2,744			2,596			2,512			2,453
GOODWILL			389			2,182			326			326			326						2,181			2,180			2,182			2,182
LT MARKETABLE DEBT SECURITIES			3,006			2,612			2,671			2,902			2,679						4,068			4,117			3,564			2,979
OTHER NON-CURRENT ASSETS, NET			825			1,271			1,323			1,421			934						1,112			997			923			1,131
TOTAL ASSETS			12,113			15,376			13,469			13,545			12,985						17,362			17,153			16,874			16,522
SHORT TERM BORROWINGS			263			0			0			0			0						9			217			207			205
ACCOUNTS PAYABLE			780			798			809			870			903						813			871			935			1,044
ACCRUED LIABILITIES & OTHER			1,652			1,873			1,900			1,792			1,773						2,078			2,147			2,135			2,023
DEFERRED REVENUES			1,214			1,109			1,079			1,162			1,453						1,087			1,040			1,055			1,321
TOTAL CURRENT LIABILITIES			3,909			3,780			3,788			3,824			4,129						3,987			4,275			4,332			4,593
LT DEBT			1,215			1,500			1,519			1,495			1,531						1,643			1,408			1,384			1,449
LT DEFERRED REVENUES			462			547			520			512			450						656			613			570			477
OTHER NON-CURRENT OBLIGATIONS			364			240			369			354			384						824			958			857			202
STOCKHOLDERS’ EQUITY			6,163			9,309			7,273			7,360			6,491						10,252			9,899			9,731			9,801
TOTAL LIABILITIES & SE			12,113			15,376			13,469			13,545			12,985						17,362			17,153			16,874			16,522
CASH FLOW			Q1			Q1			Q2			Q3			Q4		FY03				Q1			Q2			Q3			Q4		FY02
OPERATING ACTIVITIES			(49	)		182			141			379			335			1,037			333			82			288			177			880
INVESTING ACTIVITIES			(492	)		126			(293	)		(108	)		(253	)		(528	)		(534	)		17			269			287			39
FINANCING ACTIVITIES			7			(696	)		73			10			95			(518	)		(250	)		85			(90	)		(112	)		(367	)
KEY METRICS			Q1			Q1			Q2			Q3			Q4		FY03				Q1			Q2			Q3			Q4		FY02
INVENTORY TURNS (hist.)			13.7			10.9			12.8			14.3			12.9						11.8			11.7			10.6			9.2
INVENTORY TURNS-PRODUCT ONLY (hist.)			9.0			7.8			9.0			9.9			8.6						9.1			8.7			7.8			6.7
DAYS SALES OUTSTANDING			68			70			71			74			72						69			66			70			72
DAYS PAYABLES OUTSTANDING			(46	)		(44	)		(44	)		(51	)		(48	)					(41	)		(40	)		(47	)		(47	)
DAYS OF SUPPLY ON HAND			25			28			26			23			22						42			29			28			27
L-T DEBT/EQUITY (%)			19.7	%		16.1	%		20.9	%		20.3	%		23.6	%					16.0	%		14.2	%		14.2	%		14.8	%
ROE (12 mo. avg.)(%)			-52.8	%		-5.3	%		-26.3	%		-27.6	%		-45.1	%					2.8	%		-5.5	%		-7.3	%		-5.9	%
BOOK VALUE PER SHARE ($)			1.90			2.99			2.28			2.30			2.01						3.17			3.05			3.00			3.03
PRICE PER SHARE @ CLOSE			3.84			2.67			3.25			3.43			4.65						8.27			12.59			9.52			5.01
P/E RATIO (previous 4 qtrs)			N/A			N/A			N/A			N/A			N/A						118			N/A			N/A			N/A
ROA (12 mo. avg.)(%)			-27.7	%		-3.1	%		-15.2	%		-15.8	%		-24.8	%					1.6	%		-3.2	%		-4.2	%		-3.5	%
DEPREC. & AMORT. ($M)			218			272			275			216			265						273			260			273			286
CAPITAL EXPENDITURES ($M)			55			83			98			57			135						213			122			126			98
NUMBER OF EMPLOYEES			36,014			39,001			36,460			35,745			36,068						43,260			40,093			39,473			39,433
REV. PER EMP. (12 mo.)($K)			311.6			317.5			334.3			332.1			317.0						371.4			350.7			331.1			316.9
GM PER EMP. (12mo.)($K)			134.0			128.0			140.3			141.3			137.0						158.0			138.0			130.4			124.7
OP EXP AS % OF REV (12mo.)			67.6	%		48.9	%		65.0	%		65.0	%		67.0	%					41.2	%		47.8	%		50.8	%		49.3	%
NET INCOME (LOSS) PER EMP. (12mo.)($K)			(100.1	)		(13.3	)		(65.0	)		(65.2	)		(95.1	)					6.7			(14.0	)		(18.6	)		(14.9	)

-----END PRIVACY-ENHANCED MESSAGE-----

EX-99.1

Exhibit 99.1