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

July 20, 2004

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 July 20, 2004, titled “Sun Microsystems Reports Preliminary Profit; Revenue and Server Unit Growth in Fiscal Fourth Quarter,” 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 July 20, 2004, Sun Microsystems, Inc. (“Sun”) issued a press release regarding Sun’s financial results for its fourth fiscal quarter and full fiscal year ended June 30, 2004. 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 restructuring charges, purchased in-process research and development, gain/loss on equity investments, net, impairment of goodwill and other intangible assets, settlement income, valuation allowance on deferred tax assets and related tax effects. Purchased in-process research and development and impairment of goodwill and other intangible assets are primarily related to the effect of Sun’s acquisition activity. Gain/loss on equity investments, net, shows the effect of our investment portfolio management. Settlement income is a result of our settlement with Microsoft. 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: July 20, 2004	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 July 20, 2004, titled “Sun Microsystems Reports Preliminary Profit; Revenue and Server Unit Growth in Fiscal Fourth Quarter,” together with related Condensed Consolidated Statements of Operations, Balance Sheets and Cash Flows and Operations Analysis

EX-99.1 2 f00351exv99w1.htm EXHIBIT 99.1

Exhibit 99.1

INVESTOR CONTACT:
Jeff Boldt (650) 786-0333
jeff.boldt@sun.com

MEDIA CONTACT:
May G. Petry (650) 786-0034
may.petry@sun.com

INDUSTRY ANALYST CONTACT:
Joanne Masters (650) 786-0847
joanne.masters@sun.com

SUN MICROSYSTEMS REPORTS PRELIMINARY PROFIT; REVENUE AND SERVER UNIT GROWTH IN FISCAL FOURTH QUARTER

SANTA CLARA, Calif. — July 20, 2004 — Sun Microsystems, Inc., (NASDAQ: SUNW) reported results today for its fiscal fourth quarter and full fiscal year, which ended June 30, 2004.

Revenues for the fourth quarter grew to $3.110 billion, an increase of 4.3 percent as compared with $2.982 billion for the fourth quarter of fiscal 2003. Total gross margin as a percent of revenues was 39.4 percent, a decrease of 4.3 percentage points as compared with the fourth quarter of fiscal 2003. Net income for the fourth quarter of fiscal 2004 was $795 million or $0.24 per share as compared with a net loss of $1.039 billion or a net loss of $0.32 per share for the fourth quarter of fiscal 2003.

Cash generated from operating activities was $2.172 billion for the quarter, and the balance of cash and marketable securities was $7.608 billion.

For the full 2004 fiscal year, Sun reported revenues of $11.185 billion, a decline of 2.2 percent as compared with $11.434 billion for the full 2003 fiscal year. Total gross margin as a percent of revenues was 40.4 percent, a decline of 2.8 percentage points as compared with the 2003 fiscal year. The net loss for fiscal year 2004 was $376 million or a net loss of $0.11 per share as compared with a net loss of $3.429 billion or a net loss of $1.07 per share for the 2003 fiscal year.

Results reported today include $1.6 billion of other income, and $350 million in deferred other income related to the Microsoft settlement. Sun has sought confirmation of certain aspects of its accounting relating to this settlement from the Securities and Exchange Commission. Financial results are pending final resolution of these matters.

Steve McGowan, Sun’s chief financial officer and executive vice president, corporate resources, said, “We’re pleased we grew revenue in fiscal Q4 based on consistent demand throughout the quarter across geographies and products. We’re also pleased that we

generated $2.2 billion in cash from operations in fiscal 2004 and ended the year with a cash and marketable securities balance in excess of $7.6 billion. This marks the 15^th consecutive fiscal year that Sun has generated positive cash flow from operations.”

“Delivering growth and preliminary profits in Q4 is a great way to end the year, with 46% server unit volume growth year-over-year and a sequential increase of 18%,” said Scott McNealy, chairman and chief executive officer, Sun Microsystems, Inc. “We enter the new fiscal year with a strong balance sheet, the strongest product and services portfolio in our history, and the largest developer and partner communities we’ve ever had. We’re delivering innovations based on some of the industry’s most coveted technologies, Solaris^TM OS and Java^TM platform, running on industry standard SPARC^®, AMD Opteron and Intel Xeon processors. In fiscal 2005, we’re focused on growing revenue and market share, generating cash, achieving sustained profitability, and rewarding long-term shareholders.”

“Let’s start putting some questions to rest,” said Jonathan Schwartz, president and chief operating officer, Sun Microsystems, Inc. “With the 74% sequential increase in Java Enterprise System subscribers, now totaling 303,000, we’ve made progress in both monetizing Java technology and driving long-term savings for customers. In addition, Solaris OS volumes and OEM support on industry standard AMD and Intel platforms grew at an accelerated pace, with a 25% increase in Solaris x86 registered licenses to almost 1.1 million and a 69% sequential increase in Software Express for Solaris x86. We are now unquestionably on the offensive, with powerful resources at our disposal, and an excellent product calendar.”

Sun has scheduled a conference call today to discuss its earnings for the fourth quarter and full 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 that Sun’s financial results are pending final resolution of accounting for the Microsoft settlement; that Sun is delivering innovations based on some of the industry’s most coveted technologies; that in fiscal 2005, Sun is focused on growing revenue and market share, generating cash, achieving sustained profitability and rewarding long-term shareholders; and that Sun is now unquestionably on the offensive. 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 how the company accounts for the Microsoft settlement; continued adverse macroeconomic conditions in the U.S. and internationally, including adverse business conditions in the specific markets for Sun’s products; lack of success in the timely development, production and acceptance of new products and services and in technical advancements; increased

competition, 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 and quarterly reports on Form 10-Q for the fiscal quarters ended September 28, 2003, December 28, 2003, and March 28, 2004.

Sun, Sun Microsystems, the Sun logo, Solaris, Java, 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.

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

	Three Months Ended						Fiscal Years Ended
	June 30,			June 30,			June 30,			June 30,
	2004			2003			2004			2003
Net revenues:
Products	$	2,066		$	2,003		$	7,355		$	7,793
Services		1,044			979			3,830			3,641
Total net revenues		3,110			2,982			11,185			11,434
Cost of sales:
Cost of sales-products		1,238			1,110			4,290			4,342
Cost of sales-services		648			568			2,379			2,150
Total cost of sales		1,886			1,678			6,669			6,492
Gross margin		1,224			1,304			4,516			4,942
Operating expenses:
Research and development		518			482			1,926			1,837
Selling, general and administrative		845			826			3,313			3,329
Restructuring charges		145			(6	)		339			371
Purchased in-process research and development		69			—			70			4
Impairment of goodwill and other intangible assets		49			—			49			2,125
Total operating expenses		1,626			1,302			5,697			7,666
Operating income (loss)		(402	)		2			(1,181	)		(2,724	)
Loss on equity investments, net		(6	)		(26	)		(64	)		(84	)
Interest income, net		30			45			94			155
Settlement income		1,600			—			1,600			—
Income (loss) before income taxes		1,222			21			449			(2,653	)
Provision for income taxes		427			1,060			825			776
Net income (loss)	$	795		$	(1,039	)	$	(376	)	$	(3,429	)
Net income (loss) per common share — basic	$	0.24		$	(0.32	)	$	(0.11	)	$	(1.07	)
Net income (loss) per common share — diluted	$	0.24		$	(0.32	)	$	(0.11	)	$	(1.07	)
Shares used in the calculation of net income (loss) per common share — basic		3,327			3,219			3,277			3,190
Shares used in the calculation of net income (loss) per common share — diluted		3,348			3,219			3,277			3,190
Calculation of net income (loss) excluding special items:
Net income (loss) per above	$	795		$	(1,039	)	$	(376	)	$	(3,429	)
Restructuring charges		145			(6	)		339			371
Purchased in-process research and development		69			—			70			4
Loss on equity investments, net		6			26			64			84
Impairment of goodwill and other intangible assets		49			—			49			2,125
Settlement income		(1,600	)		—			(1,600	)		—
Valuation allowance on deferred tax assets		—			1,051			300			1,051
Related tax effects		367			(8	)		367			(239	)
Net income (loss) excluding special items	$	(169	)	$	24		$	(787	)	$	(33	)
Net income (loss) excluding special items per common share — basic	$	(0.05	)	$	0.01		$	(0.24	)	$	(0.01	)
Net income (loss) excluding special items per common share — diluted	$	(0.05	)	$	0.01		$	(0.24	)	$	(0.01	)
Shares used in the calculation of net income (loss) excluding special items per common share — basic		3,327			3,219			3,277			3,190
Shares used in the calculation of net income (loss) excluding special items per common share — diluted		3,327			3,251			3,277			3,190

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

	June 30, 2004		June 30, 2003*
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,141	$	2,015
Short-term marketable debt securities		1,460		1,047
Accounts receivable, net		2,345		2,381
Inventories		464		416
Deferred and prepaid tax assets		62		133
Prepaid expenses and other current assets		831		787
Total current assets		7,303		6,779
Property, plant and equipment, net		1,981		2,267
Long-term marketable debt securities		4,007		2,679
Goodwill		405		326
Other acquisition-related intangible assets, net.		128		91
Other non-current assets, net		664		843
	$	14,488	$	12,985
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and short-term borrowings	$	257	$	—
Accounts payable		1,057		903
Accrued payroll-related liabilities		627		479
Accrued liabilities and other		1,306		1,027
Deferred revenues		1,617		1,453
Warranty reserve		252		267
Total current liabilities		5,116		4,129
Long-term debt		1,175		1,531
Long-term deferred revenues		557		450
Other non-current obligations		1,190		384
Total stockholders’ equity		6,450		6,491
	$	14,488	$	12,985

* Derived from audited financial statements

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

	Fiscal Years Ended
	June 30, 2004			June 30, 2003
Cash flows from operating activities:
Net loss	$	(376	)	$	(3,429	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		710			918
Amortization of other intangible assets and unearned equity compensation		89			110
Impairment of goodwill and other intangible assets		49			2,125
Tax benefits from employee stock plans		5			9
Deferred taxes		661			706
Loss on equity investments, net		64			84
Purchased in-process research and development		70			4
Changes in operating assets and liabilities:
Accounts receivable, net		55			387
Inventories		(44	)		181
Prepaid and other assets		72			31
Accounts payable		158			(133	)
Other liabilities		713			44
Net cash provided by operating activities		2,226			1,037
Cash flows from investing activities:
Purchases of marketable debt securities		(8,469	)		(6,958	)
Proceeds from sales of marketable debt securities		5,795			6,476
Proceeds from maturities of marketable debt securities		854			578
Proceeds from (purchases of) equity investments, net		30			(4	)
Acquisition of property, plant and equipment, net		(246	)		(373	)
Acquisition of spare parts and other assets		(74	)		(217	)
Payments for acquisitions, net of cash acquired		(201	)		(30	)
Net cash used in investing activities		(2,311	)		(528	)
Cash flows from financing activities:
Acquisition of common stock		—			(499	)
Proceeds from issuance of common stock, net		239			182
Principal payments on borrowings and other obligations		(28	)		(201	)
Net cash provided by (used in) financing activities		211			(518	)
Net increase (decrease) in cash and cash equivalents		126			(9	)
Cash and cash equivalents, beginning of period		2,015			2,024
Cash and cash equivalents, end of period	$	2,141		$	2,015

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

STATEMENTS OF OPERATIONS	FY 2004															FY 2003															FY 2002
(in millions except per share amounts)	Q1			Q2			Q3			Q4			FY04			Q1			Q2			Q3			Q4			FY03			Q4			FY02
NET REVENUES
Products		1,634			1,944			1,711			2,066			7,355			1,880			2,013			1,897			2,003			7,793			2,507			9,093
Services		902			944			940			1,044			3,830			867			902			893			979			3,641			913			3,403
TOTAL		2,536			2,888			2,651			3,110			11,185			2,747			2,915			2,790			2,982			11,434			3,420			12,496
Growth vs. prior year (%)		-7.7	%		-0.9	%		-5.0	%		4.3	%		-2.2	%		-4.0	%		-6.2	%		-10.2	%		-12.8	%		-8.5	%		-14.4	%		-31.5	%
Growth vs. prior quarter (%)		-15.0	%		13.9	%		-8.2	%		17.3	%					-19.7	%		6.1	%		-4.3	%		6.9	%					10.1	%
COST OF SALES
Products		965			1,107			980			1,238			4,290			1,093			1,118			1,021			1,110			4,342			1,476			5,506
Services		555			573			603			648			2,379			522			534			526			568			2,150			530			2,074
TOTAL		1,520			1,680			1,583			1,886			6,669			1,615			1,652			1,547			1,678			6,492			2,006			7,580
% of revenue		59.9	%		58.2	%		59.7	%		60.6	%		59.6	%		58.8	%		56.7	%		55.4	%		56.3	%		56.8	%		58.7	%		60.7	%
GROSS MARGIN ($)
Products		669			837			731			828			3,065			787			895			876			893			3,451			1,031			3,587
% of product revenue		40.9	%		43.1	%		42.7	%		40.1	%		41.7	%		41.9	%		44.5	%		46.2	%		44.6	%		44.3	%		41.1	%		39.4	%
Services		347			371			337			396			1,451			345			368			367			411			1,491			383			1,329
% of service revenue		38.5	%		39.3	%		35.9	%		37.9	%		37.9	%		39.8	%		40.8	%		41.1	%		42.0	%		41.0	%		41.9	%		39.1	%
TOTAL		1,016			1,208			1,068			1,224			4,516			1,132			1,263			1,243			1,304			4,942			1,414			4,916
% of revenue		40.1	%		41.8	%		40.3	%		39.4	%		40.4	%		41.2	%		43.3	%		44.6	%		43.7	%		43.2	%		41.3	%		39.3	%
R&D		467			471			470			518			1,926			437			451			467			482			1,837			463			1,832
% of revenue		18.4	%		16.3	%		17.7	%		16.7	%		17.2	%		15.9	%		15.5	%		16.7	%		16.2	%		16.1	%		13.5	%		14.7	%
PURCHASED IN PROCESS R&D		1			0			0			69			70			0			4			0			0			4			0			3
% of revenue		0.0	%		0.0	%		0.0	%		2.2	%		0.6	%		0.0	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
SG&A		798			828			842			845			3,313			882			830			791			826			3,329			894			3,806
% of revenue		31.5	%		28.7	%		31.8	%		27.2	%		29.6	%		32.1	%		28.5	%		28.4	%		27.7	%		29.1	%		26.1	%		30.5	%
RESTRUCTURING CHARGES		1			(10	)		203			145			339			24			357			(4	)		(6	)		371			(4	)		517
% of revenue		0.0	%		-0.3	%		7.7	%		4.7	%		3.0	%		0.9	%		12.2	%		-0.1	%		-0.2	%		3.2	%		-0.1	%		4.1	%
IMPAIRMENT EXPENSE		0			0			0			49			49			0			2,125			0			0			2,125			0			6
% of revenue		0.0	%		0.0	%		0.0	%		1.6	%		0.4	%		0.0	%		72.9	%		0.0	%		0.0	%		18.6	%		0.0	%		0.0	%
TOTAL OPERATING EXPENSES		1,267			1,289			1,515			1,626			5,697			1,343			3,767			1,254			1,302			7,666			1,353			6,164
% of revenue		50.0	%		44.6	%		57.1	%		52.3	%		50.9	%		48.9	%		129.2	%		44.9	%		43.7	%		67.0	%		39.6	%		49.3	%
OPERATING INCOME (LOSS)		(251	)		(81	)		(447	)		(402	)		(1,181	)		(211	)		(2,504	)		(11	)		2			(2,724	)		61			(1,248	)
Operating margin		-9.9	%		-2.8	%		-16.9	%		-12.9	%		-10.6	%		-7.7	%		-85.9	%		-0.4	%		0.1	%		-23.8	%		1.8	%		-10.0	%
Interest income, net		21			20			23			30			94			39			38			33			45			155			47			299
Gain (loss) on equity investments, net		(25	)		(36	)		3			(6	)		(64	)		(31	)		(11	)		(16	)		(26	)		(84	)		(18	)		(99	)
Settlement income		0			0			0			1,600			1,600			0			0			0			0			0			0			0
PRETAX INCOME (LOSS)		(255	)		(97	)		(421	)		1,222			449			(203	)		(2,477	)		6			21			(2,653	)		90			(1,048	)
Pretax income (loss) margin		-10.1	%		-3.4	%		-15.9	%		39.3	%		4.0	%		-7.4	%		-85.0	%		0.2	%		0.7	%		-23.2	%		2.6	%		-8.4	%
INCOME TAX PROVISION (BENEFIT)		31			28			339			427			825			(92	)		(194	)		2			1,060			776			29			(461	)
TAX RATE (%)		N/A			N/A			N/A			N/A			N/A			45.5	%		7.8	%		44.0	%		N/A			N/A			11.3	%		44.0	%
NET INCOME (LOSS) (Reported)		(286	)		(125	)		(760	)		795			(376	)		(111	)		(2,283	)		4			(1,039	)		(3,429	)		61			(587	)
Growth vs. prior year (%)		-157.7	%		94.5	%		-19100.0	%		176.5	%		89.0	%		38.3	%		-429.7	%		110.8	%		-1803.3	%		-484.2	%		169.3	%		-163.3	%
Growth vs. prior quarter (%)		72.5	%		56.3	%		-508.0	%		204.6	%					-282.0	%		-1956.8	%		100.2	%		-26075.0	%					264.9	%
Net income (loss) margin		-11.3	%		-4.3	%		-28.7	%		25.6	%		-3.4	%		-4.0	%		-78.3	%		0.1	%		-34.8	%		-30.0	%		1.8	%		-4.7	%
EPS (Diluted) (Reported)		(0.09	)		(0.04	)		(0.23	)		0.24			(0.11	)		(0.04	)		(0.72	)		0.00			(0.32	)		(1.07	)		0.02			(0.18	)
Growth vs. prior year (%)		-125.0	%		94.4	%		N/A			175.0	%		-89.7	%		33.3	%		-453.8	%		100.0	%		-1700.0	%		-494.4	%		166.7	%		-166.7	%
Growth vs. prior quarter (%)		71.9	%		55.6	%		-475.0	%		204.3	%					-300.0	%		-1700.0	%		100.0	%		N/A						300.0	%
SHARES (CSE)(Diluted)		3,235			3,262			3,286			3,348			3,277			3,168			3,181			3,218			3,219			3,190			3,309			3,242
OUTSTANDING SHARES		3,240			3,280			3,293			3,337			3,337			3,116			3,194			3,200			3,236			3,236			3,234			3,234
GAAP net income (loss)		(286	)		(125	)		(760	)		795			(376	)		(111	)		(2,283	)		4			(1,039	)		(3,429	)		61			(587	)
In-process research and development		1			0			0			69			70			0			4			0			0			4			0			3
Restructuring charges		1			(10	)		203			145			339			24			357			(4	)		(6	)		371			(4	)		517
Loss (gain) on equity investments, net		25			36			(3	)		6			64			31			11			16			26			84			18			99
Impairment expense		0			0			0			49			49			0			2,125			0			0			2,125			0			6
Settlement income		0			0			0			(1,600	)		(1,600	)		0			0			0			0			0			0			0
Valuation allowance on deferred tax assets		0			0			300			0			300			0			0			0			1,051			1,051			0			0
Related tax effects		0			0			0			367			367			(22	)		(204	)		(5	)		(8	)		(239	)		(6	)		(246	)
Net income (loss) excluding special items		(259	)		(99	)		(260	)		(169	)		(787	)		(78	)		10			11			24			(33	)		69			(208	)
Growth vs. prior year (%)		-232.1	%		-1090.0	%		-2463.6	%		-804.2	%		-2284.8	%		50.6	%		110.1	%		155.0	%		-65.2	%		84.1	%		527.3	%		-118.8	%
EPS (Diluted) excluding special items *		(0.08	)		(0.03	)		(0.08	)		(0.05	)		(0.24	)		(0.02	)		0.00			0.00			0.01			(0.01	)		0.02			(0.06	)
Growth vs. prior year (%)		-300.0	%		N/A			N/A			-600.0	%		-2300.0	%		60.0	%		100.0	%		100.0	%		-50.0	%		83.3	%		N/A			-118.8	%

*	For the quarters ended June 30, 2004, 2003 and December 29, 2002, Sun used 3,327, 3,251 shares and 3,205 shares, respectively, to calculate the “Net income (loss) excluding special items.”
	For all other periods, the number of shares used to calculate “EPS (Diluted) (Reported)” and “EPS (Diluted) excluding special items” were the same.

1

	FY 2004															FY 2003															FY 2002
(in millions)	Q1			Q2			Q3			Q4			FY04			Q1			Q2			Q3			Q4			FY03			Q4			FY02
REVENUE BY GEOGRAPHY
UNITED STATES ($M)		1,162			1,214			1,037			1,356			4,769			1,242			1,267			1,212			1,328			5,049			1,714			5,936
Growth vs. prior year (%)		-6.4	%		-4.2	%		-14.4	%		2.1	%		-5.5	%		-7.8	%		-11.8	%		-15.8	%		-22.5	%		-14.9	%		-9.9	%		-32.4	%
Growth vs. prior quarter (%)		-12.5	%		4.5	%		-14.6	%		30.8	%					-27.5	%		2.0	%		-4.3	%		9.6	%					19.1	%
EUROPE ($M)		780			928			921			1,002			3,631			806			932			886			954			3,578			973			3,606
Growth vs. prior year (%)		-3.2	%		-0.4	%		4.0	%		5.0	%		1.5	%		-0.4	%		3.6	%		-4.1	%		-2.0	%		-0.8	%		-13.2	%		-31.6	%
Growth vs. prior quarter (%)		-18.2	%		19.0	%		-0.8	%		8.8	%					-17.2	%		15.6	%		-4.9	%		7.7	%					5.3	%
JAPAN ($M)		185			192			207			177			761			250			243			243			200			936			203			1,060
Growth vs. prior year (%)		-26.0	%		-21.0	%		-14.8	%		-11.5	%		-18.7	%		-12.9	%		-16.8	%		-12.6	%		-1.5	%		-11.7	%		-43.8	%		-38.0	%
Growth vs. prior quarter (%)		-7.5	%		3.8	%		7.8	%		-14.5	%					23.2	%		-2.8	%		0.0	%		-17.7	%					-27.0	%
REST OF WORLD ($M)		409			554			486			575			2,024			449			473			449			500			1,871			530			1,894
Growth vs. prior year (%)		-8.9	%		17.1	%		8.2	%		15.0	%		8.2	%		7.4	%		-1.5	%		-3.6	%		-5.7	%		-1.2	%		-13.3	%		-24.0	%
Growth vs. prior quarter (%)		-18.2	%		35.5	%		-12.3	%		18.3	%					-15.3	%		5.3	%		-5.1	%		11.4	%					13.7	%
% of Total Revenue
UNITED STATES (%)		45.8	%		42.1	%		39.2	%		43.6	%		42.6	%		45.2	%		43.5	%		43.4	%		44.5	%		44.2	%		50.1	%		47.5	%
EUROPE (%)		30.8	%		32.1	%		34.7	%		32.2	%		32.5	%		29.3	%		32.0	%		31.8	%		32.0	%		31.3	%		28.5	%		28.9	%
JAPAN (%)		7.3	%		6.6	%		7.8	%		5.7	%		6.8	%		9.1	%		8.3	%		8.7	%		6.7	%		8.2	%		5.9	%		8.5	%
REST OF WORLD (%)		16.1	%		19.2	%		18.3	%		18.5	%		18.1	%		16.3	%		16.2	%		16.1	%		16.8	%		16.4	%		15.5	%		15.2	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)		1,282			1,568			1,365			1,639			5,854			1,512			1,621			1,530			1,580			6,243			2,002			7,396
Growth vs. prior year (%)		-15.2	%		-3.3	%		-10.8	%		3.7	%		-6.2	%		-10.6	%		-11.8	%		-17.9	%		-21.1	%		-15.6	%		-21.4	%		-40.3	%
Growth vs. prior quarter (%)		-18.9	%		22.3	%		-12.9	%		20.1	%					-24.5	%		7.2	%		-5.6	%		3.3	%					7.4	%
NETWORK STORAGE PRODUCTS ($M)		352			376			346			427			1,501			368			392			367			423			1,550			505			1,697
Growth vs. prior year (%)		-4.3	%		-4.1	%		-5.7	%		0.9	%		-3.2	%		0.8	%		-7.1	%		-9.4	%		-16.2	%		-8.7	%		-7.5	%		-35.4	%
Growth vs. prior quarter (%)		-16.8	%		6.8	%		-8.0	%		23.4	%					-27.1	%		6.5	%		-6.4	%		15.3	%					24.7	%
SUPPORT SERVICES ($M)		731			745			731			792			2,999			683			702			704			755			2,844			692			2,538
Growth vs. prior year (%)		7.0	%		6.1	%		3.8	%		4.9	%		5.5	%		16.8	%		12.3	%		10.7	%		9.1	%		12.1	%		12.5	%		16.0	%
Growth vs. prior quarter (%)		-3.2	%		1.9	%		-1.9	%		8.3	%					-1.3	%		2.8	%		0.3	%		7.2	%					8.8	%
PROFESSIONAL AND EDUCATION SERVICES ($M)		171			199			209			252			831			184			200			189			224			797			221			865
Growth vs. prior year (%)		-7.1	%		-0.5	%		10.6	%		12.5	%		4.3	%		-16.0	%		-10.3	%		-6.4	%		1.4	%		-7.9	%		-23.0	%		-17.4	%
Growth vs. prior quarter (%)		-23.7	%		16.4	%		5.0	%		20.6	%					-16.7	%		8.7	%		-5.5	%		18.5	%					9.4	%
NET BOOKINGS ($M)		2,538			2,980			2,617			3,055			11,190			2,601			2,989			2,688			3,020			11,298			3,486			12,484
Growth vs. prior year (%)		-2.4	%		-0.3	%		-2.6	%		1.2	%		-1.0	%		-4.3	%		-6.4	%		-13.0	%		-13.4	%		-9.5	%		-4.5	%		-27.7	%
Growth vs. prior quarter (%)		-16.0	%		17.4	%		-12.2	%		16.7	%					-25.4	%		14.9	%		-10.1	%		12.4	%					12.9	%
BACKLOG ($M)		707			799			765			710			710			695			769			667			705			705			841			841

2

BALANCE SHEETS	FY 2004								FY 2003								FY 2002
(in millions)	Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4		Q4
CASH & ST INVESTMENTS		2,520		2,160		2,372		3,601		2,632		2,606		2,636		3,062		2,885
ACCOUNTS RECEIVABLE, NET		1,905		2,214		2,201		2,345		2,133		2,291		2,296		2,381		2,745
RAW MATERIALS		103		93		92		120		103		85		73		93		130
WORK IN PROCESS		137		161		180		62		197		217		152		134		211
FINISHED GOODS		186		226		225		282		209		182		172		189		250
TOTAL INVENTORIES		426		480		497		464		509		484		397		416		591
OTHER CURRENT ASSETS		890		966		1,246		893		1,629		1,447		1,302		920		1,556
TOTAL CURRENT ASSETS		5,741		5,820		6,316		7,303		6,903		6,828		6,631		6,779		7,777
PP&E, NET		2,152		2,115		2,075		1,981		2,408		2,321		2,265		2,267		2,453
GOODWILL		389		466		470		405		2,182		326		326		326		2,182
LT MARKETABLE DEBT SECURITIES		3,006		3,001		3,111		4,007		2,612		2,671		2,902		2,679		2,979
OTHER NON-CURRENT ASSETS, NET		825		822		811		792		1,271		1,323		1,421		934		1,131
TOTAL ASSETS		12,113		12,224		12,783		14,488		15,376		13,469		13,545		12,985		16,522
SHORT TERM BORROWINGS		263		263		257		257		0		0		0		0		205
ACCOUNTS PAYABLE		780		906		1,011		1,057		798		809		870		903		1,044
ACCRUED LIABILITIES & OTHER		1,652		1,583		1,884		2,185		1,873		1,900		1,792		1,773		2,023
DEFERRED REVENUES		1,214		1,213		1,342		1,617		1,109		1,079		1,162		1,453		1,321
TOTAL CURRENT LIABILITIES		3,909		3,965		4,494		5,116		3,780		3,788		3,824		4,129		4,593
LT DEBT		1,215		1,214		1,209		1,175		1,500		1,519		1,495		1,531		1,449
LT DEFERRED REVENUES		462		463		537		557		547		520		512		450		477
OTHER NON-CURRENT OBLIGATIONS		364		343		990		1,190		240		369		354		384		202
STOCKHOLDERS’ EQUITY		6,163		6,239		5,553		6,450		9,309		7,273		7,360		6,491		9,801
TOTAL LIABILITIES & SE		12,113		12,224		12,783		14,488		15,376		13,469		13,545		12,985		16,522

CASH FLOW	Q1			Q2			Q3			Q4			FY04			Q1			Q2			Q3			Q4			FY03			Q4			FY02
OPERATING ACTIVITIES		(49	)		(282	)		385			2,172			2,226			182			141			379			335			1,037			177			880
INVESTING ACTIVITIES		(492	)		123			(338	)		(1,604	)		(2,311	)		126			(293	)		(108	)		(253	)		(528	)		287			39
FINANCING ACTIVITIES		7			106			31			67			211			(696	)		73			10			95			(518	)		(112	)		(367	)

KEY METRICS	Q1			Q2			Q3			Q4			Q1			Q2			Q3			Q4			Q4
INVENTORY TURNS (hist.)		13.7			13.3			14.5			15.2			10.9			12.8			14.3			12.9			9.2
INVENTORY TURNS-PRODUCT ONLY (hist.)		9.0			8.7			9.3			9.8			7.8			9.0			9.9			8.6			6.7
DAYS SALES OUTSTANDING		68			69			75			68			70			71			74			72			72
DAYS PAYABLES OUTSTANDING		(46	)		(49	)		(57	)		(50	)		(44	)		(44	)		(51	)		(48	)		(47	)
DAYS OF SUPPLY ON HAND		25			26			28			22			28			26			23			22			27
L-T DEBT/EQUITY (%)		19.7	%		19.5	%		21.8	%		18.2	%		16.1	%		20.9	%		20.3	%		23.6	%		14.8	%
ROE (12 mo. avg.)(%)		-52.8	%		-22.0	%		-36.2	%		-6.2	%		-5.3	%		-26.3	%		-27.6	%		-45.1	%		-5.9	%
BOOK VALUE PER SHARE ($)		1.90			1.90			1.69			1.93			2.99			2.28			2.30			2.01			3.03
PRICE PER SHARE @ CLOSE		3.84			4.38			4.11			4.33			2.67			3.25			3.43			4.65			5.01
P/E RATIO (previous 4 qtrs)		N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A			N/A
ROA (12 mo. avg.)(%)		-27.7	%		-11.4	%		-17.6	%		-2.9	%		-3.1	%		-15.2	%		-15.8	%		-24.8	%		-3.5	%
DEPREC. & AMORT. ($M)		218			189			184			208			272			275			216			265			286
CAPITAL EXPENDITURES ($M)		55			72			62			57			83			98			57			135			98
NUMBER OF EMPLOYEES		36,014			35,802			35,386			34,962			39,001			36,460			35,745			36,068			39,433
REV. PER EMP. (12 mo.)($K)		311.6			312.7			312.5			319.9			317.5			334.3			332.1			317.0			316.9
GM PER EMP. (12mo.)($K)		134.0			133.3			129.9			129.2			128.0			140.3			141.3			137.0			124.7
OP EXP AS % OF REV (12mo.)		67.6	%		45.7	%		48.6	%		50.9	%		48.9	%		65.0	%		65.0	%		67.0	%		49.3	%
NET INCOME (LOSS) PER EMP. (12mo.)($K)		(100.1	)		(40.4	)		(62.5	)		(10.8	)		(13.3	)		(65.0	)		(65.2	)		(95.1	)		(14.9	)

EX-99.1

exv99w1