Exhibit 99.1

SUN MICROSYSTEMS REPORTS RESULTS FOR

FISCAL 2005 THIRD QUARTER

SANTA CLARA, Calif. - April 14, 2005 - Sun Microsystems, Inc., (NASDAQ: SUNW)

reported results today for its fiscal third quarter, which ended March 27, 2005.

Revenues for the third quarter were $2.625 billion, a decrease of 1.0 percent as compared with $2.651 billion for the third quarter of fiscal 2004. Total gross margin as a percent of revenues was 41.3 percent, an increase of 1.0 percentage points as compared with the third quarter of fiscal 2004. Net loss for the third quarter of fiscal 2005 on a GAAP basis was $9 million or a net loss of $0.00 per share. This net loss included the favorable impact of $54 million in additional settlement income from Microsoft, a $69 million benefit related to the impact of a change in foreign withholding tax legislation, and a $23 million net beneficial correction to the valuation allowance on deferred tax assets and foreign tax provisions. This compared with a net loss of $760 million or a net loss of $0.23 per share for the third quarter of fiscal 2004.

Excluding a charge of $45 million for workforce and real estate restructuring, a $2 million gain on equity investments, $54 million in additional settlement income from Microsoft (recorded in other income), a $34 million beneficial correcting adjustment to the valuation allowance on deferred tax assets, and a tax benefit of $7 million for related tax effects, net loss for Q3 fiscal 2005 on a non-GAAP basis was $61 million or a net loss of $0.02 per share. This compared with a net loss, on a non-GAAP basis, in Q3 fiscal 2004 of $260 million or a net loss of $0.08 per share.

The cash and marketable debt securities balance at the end of the quarter was $7.357 billion.

“We made good progress in the third fiscal quarter, but more importantly we’re seeing a marked improvement over the first nine months of fiscal 2004,” said Scott McNealy, chairman and chief executive officer, Sun Microsystems, Inc. “Break even is a huge move forward from the loss we experienced a year ago. We’ve made over a $1 billion improvement in Net Income on a year to date three quarter comparison,” McNealy continued, “Revenue was stable for the first three quarters of fiscal 2005 as compared with the same period in fiscal 2004, while margins have improved and we’ve made tremendous strides in reducing our R&D and SG&A by over $400 million dollars. On top of that, in the third quarter we experienced growth in SunTM x86 server unit shipments, good traction in NetraTM servers, SunTM Fire 4-8 way and 12-24 way SPARC® processor-based servers, and SolarisTM10 registrations exceeded expectations. All of these results, combined with a solid new product pipeline, point to real improvements in the business.”

Sun has scheduled a conference call today to discuss its earnings for the third quarter 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.

FOR MORE INFORMATION

INVESTOR CONTACT:

Jeff Boldt (650) 786-0333

jeff.boldt@sun.com

MEDIA CONTACT:

Stephanie Vonallmen (650) 786-8589

stephanie.vonallmen@sun.com

INDUSTRY ANALYST CONTACT:

Joanne Masters (650) 786-0847

joanne.masters@sun.com

The company believes that presentation of results including items such as net income (loss) on a non-GAAP basis provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods.

Sun, Sun Microsystems, the Sun logo, Sun Fire, Netra, Solaris, 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						Nine Months Ended
	March 27, 2005			March 28, 2004			March 27, 2005			March 28, 2004
Net revenues:
Products	$	1,681		$	1,711		$	5,197		$	5,289
Services		944			940			2,897			2,786
Total net revenues		2,625			2,651			8,094			8,075
Cost of sales:
Cost of sales-products		975			980			3,044			3,052
Cost of sales-services		565			603			1,694			1,731
Total cost of sales		1,540			1,583			4,738			4,783
Gross margin		1,085			1,068			3,356			3,292
Operating expenses:
Research and development		450			470			1,313			1,408
Selling, general and administrative		736			842			2,132			2,468
Restructuring charges		45			203			177			194
Purchased in-process research and development		—			—			—			1
Total operating expenses		1,231			1,515			3,622			4,071
Operating loss		(146	)		(447	)		(266	)		(779	)
Gain (loss) on equity investments, net		2			3			7			(58	)
Interest and other income, net		91			23			155			64
Loss before income taxes		(53	)		(421	)		(104	)		(773	)
Provision (benefit) for income taxes		(44	)		339			34			398
Net loss	$	(9	)	$	(760	)	$	(138	)	$	(1,171	)
Net loss per common share-basic and diluted	$	0.00		$	(0.23	)	$	(0.04	)	$	(0.36	)
Shares used in the calculation of net loss per common share – basic and diluted		3,376			3,286			3,358			3,261

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

	March 27, 2005		June 30, 2004*
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,534	$	2,141
Short-term marketable debt securities		1,601		1,460
Accounts receivable, net		2,020		2,339
Inventories		388		464
Deferred and prepaid tax assets		112		62
Prepaid expenses and other current assets		1,062		837
Total current assets		6,717		7,303
Property, plant and equipment, net		1,851		1,996
Long-term marketable debt securities		4,222		4,007
Goodwill		441		406
Other acquisition-related intangible assets, net		79		127
Other non-current assets, net		605		664
	$	13,915	$	14,503
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and short-term borrowings	$	—	$	257
Accounts payable		1,071		1,057
Accrued payroll-related liabilities		701		622
Accrued liabilities and other		1,165		1,308
Deferred revenues		1,409		1,617
Warranty reserve		225		252
Total current liabilities		4,571		5,113
Long-term debt		1,116		1,175
Long-term deferred revenues		509		557
Other non-current obligations		1,189		1,220
Total stockholders’ equity		6,530		6,438
	$	13,915	$	14,503

* Derived from audited financial statements

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

	Nine Months Ended
	March 27, 2005			March 28, 2004
Cash flows from operating activities:
Net loss	$	(138	)	$	(1,171	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		497			517
Amortization of other intangible assets and unearned equity compensation		73			65
Deferred taxes		(107	)		300
Loss (gain) on equity investments, net		(7	)		58
Purchased in-process research and development		—			1
Changes in operating assets and liabilities:
Accounts receivable, net		338			202
Inventories		79			(77	)
Prepaid and other assets		(264	)		(18	)
Accounts payable		16			113
Other liabilities		(313	)		64
Net cash provided by operating activities		174			54
Cash flows from investing activities:
Purchases of marketable debt securities		(5,115	)		(6,649	)
Proceeds from sales of marketable debt securities		4,066			6,374
Proceeds from maturities of marketable debt securities		651			—
Proceeds from sales of equity investments, net		47			14
Acquisition of property, plant and equipment, net		(199	)		(189	)
Acquisition of spare parts and other assets		(68	)		(56	)
Payments for acquisitions, net of cash acquired		(45	)		(201	)
Net cash used in investing activities		(663	)		(707	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net		134			151
Principal payments on borrowings and other obligations		(252	)		(7	)
Net cash provided by (used in) financing activities		(118	)		144
Net decrease in cash and cash equivalents		(607	)		(509	)
Cash and cash equivalents, beginning of period		2,141			2,015
Cash and cash equivalents, end of period	$	1,534		$	1,506

SUN MICROSYSTEMS, INC.

NON-GAAP CALCULATION OF NET LOSS EXCLUDING SPECIAL ITEMS

(unaudited)

(in millions, except per share amounts)

	Three Months Ended						Nine Months Ended
	March 27, 2005*			March 28, 2004			March 27, 2005*			March 28, 2004
Calculation of net loss excluding special items:
Net loss	$	(9	)	$	(760	)	$	(138	)	$	(1,171	)
Restructuring charges		45			203			177			194
Purchased in-process research and development		—			—			—			1
Loss (gain) on equity investments, net		(2	)		(3	)		(7	)		58
Settlement income**		(54	)		—			(54	)		—
Settlement of litigation***		—			—			55			—
Valuation allowance on deferred tax assets		(34	)		300			(34	)		300
Related tax effects		(7	)		—			(20	)		—
Net loss excluding special items	$	(61	)	$	(260	)	$	(21	)	$	(618	)
Net loss excluding special items per common share – basic & diluted	$	(0.02	)	$	(0.08	)	$	(0.01	)	$	(0.19	)
Shares used in the calculation of net loss excluding special items per common share – basic & diluted		3,376			3,286			3,358			3,261

* The non-GAAP calculation of Net loss excluding special items for the three and nine month periods ended March 27, 2005 includes a $69 million benefit for the impact of the change in Dutch withholding tax legislation which was effected in the third quarter of fiscal 2005.

** Included in Interest and other income, net.

*** Included in Cost of sales—Products.

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)

STATEMENTS OF OPERATIONS	FY 2005								FY 2004										FY 2003
(in millions except per share amounts)	Q1		Q2		Q3		FY05		Q1		Q2		Q3		Q4		FY04		Q3		Q4		FY03
NET REVENUES
Products	1,676		1,840		1,681		5,197		1,634		1,944		1,711		2,066		7,355		1,897		2,003		7,793
Services	952		1,001		944		2,897		902		944		940		1,044		3,830		893		979		3,641
TOTAL	2,628		2,841		2,625		8,094		2,536		2,888		2,651		3,110		11,185		2,790		2,982		11,434
Growth vs. prior year (%)	3.6	%	-1.6	%	-1.0	%	0.2	%	-7.7	%	-0.9	%	-5.0	%	4.3	%	-2.2	%	-10.2	%	-12.8	%	-8.5	%
Growth vs. prior quarter (%)	-15.5	%	8.1	%	-7.6	%			-15.0	%	13.9	%	-8.2	%	17.3	%			-4.3	%	6.9	%
COST OF SALES
Products	949		1,065		975		2,989		965		1,107		980		1,238		4,290		1,021		1,110		4,342
Cost of settlement	55		0		0		55		0		0		0		0		0		0		0		0
Total	1,004		1,065		975		3,044		965		1,107		980		1,238		4,290		1,021		1,110		4,342
Services	551		578		565		1,694		555		573		603		648		2,379		526		568		2,150
TOTAL	1,555		1,643		1,540		4,738		1,520		1,680		1,583		1,886		6,669		1,547		1,678		6,492
% of revenue	59.2	%	57.8	%	58.7	%	58.5	%	59.9	%	58.2	%	59.7	%	60.6	%	59.6	%	55.4	%	56.3	%	56.8	%
PRODUCTS GROSS MARGIN
Products	727		775		706		2,208		669		837		731		828		3,065		876		893		3,451
% of product revenue	43.4	%	42.1	%	42.0	%	42.5	%	40.9	%	43.1	%	42.7	%	40.1	%	41.7	%	46.2	%	44.6	%	44.3	%
Cost of settlement	(55	)	0		0		(55	)	0		0		0		0		0		0		0		0
% of product revenue	-3.3	%	0.0	%	0.0	%	-1.1	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Total product margin	672		775		706		2,153		669		837		731		828		3,065		876		893		3,451
% of product revenue	40.1	%	42.1	%	42.0	%	41.4	%	40.9	%	43.1	%	42.7	%	40.1	%	41.7	%	46.2	%	44.6	%	44.3	%
Services gross margin	401		423		379		1,203		347		371		337		396		1,451		367		411		1,491
% of service revenue	42.1	%	42.3	%	40.1	%	41.5	%	38.5	%	39.3	%	35.9	%	37.9	%	37.9	%	41.1	%	42.0	%	41.0	%
Total excluding settlement	1,128		1,198		1,085		3,411		1,016		1,208		1,068		1,224		4,516		1,243		1,304		4,942
% of revenue	42.9	%	42.2	%	41.3	%	42.1	%	40.1	%	41.8	%	40.3	%	39.4	%	40.4	%	44.6	%	43.7	%	43.2	%
Cost of settlement	(55	)	0		0		(55	)	0		0		0		0		0		0		0		0
% of revenue	-2.1	%	0.0	%	0.0	%	-0.7	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
TOTAL GROSS MARGIN	1,073		1,198		1,085		3,356		1,016		1,208		1,068		1,224		4,516		1,243		1,304		4,942
% of revenue	40.8	%	42.2	%	41.3	%	41.5	%	40.1	%	41.8	%	40.3	%	39.4	%	40.4	%	44.6	%	43.7	%	43.2	%
R&D	416		447		450		1,313		467		471		470		518		1,926		467		482		1,837
% of revenue	15.8	%	15.7	%	17.1	%	16.2	%	18.4	%	16.3	%	17.7	%	16.7	%	17.2	%	16.7	%	16.2	%	16.1	%
PURCHASED IN PROCESS R&D	0		0		0		0		1		0		0		69		70		0		0		4
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	2.2	%	0.6	%	0.0	%	0.0	%	0.0	%
SG&A	684		712		736		2,132		798		828		842		849		3,317		791		826		3,329
% of revenue	26.0	%	25.1	%	28.0	%	26.3	%	31.5	%	28.7	%	31.8	%	27.3	%	29.7	%	28.4	%	27.7	%	29.1	%
RESTRUCTURING CHARGES	108		24		45		177		1		(10	)	203		150		344		(4	)	(6	)	371
% of revenue	4.1	%	0.8	%	1.7	%	2.2	%	0.0	%	-0.3	%	7.7	%	4.8	%	3.1	%	-0.1	%	-0.2	%	3.2	%
IMPAIRMENT EXPENSE	0		0		0		0		0		0		0		49		49		0		0		2,125
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	1.6	%	0.4	%	0.0	%	0.0	%	18.6	%
TOTAL OPERATING EXPENSES	1,208		1,183		1,231		3,622		1,267		1,289		1,515		1,635		5,706		1,254		1,302		7,666
% of revenue	46.0	%	41.6	%	46.9	%	44.7	%	50.0	%	44.6	%	57.1	%	52.6	%	51.0	%	44.9	%	43.7	%	67.0	%
OPERATING INCOME (LOSS)	(135	)	15		(146	)	(266	)	(251	)	(81	)	(447	)	(411	)	(1,190	)	(11	)	2		(2,724	)
Operating margin	-5.1	%	0.5	%	-5.6	%	-3.3	%	-9.9	%	-2.8	%	-16.9	%	-13.2	%	-10.6	%	-0.4	%	0.1	%	-23.8	%
Interest and other income, net	31		33		37		101		21		20		23		30		94		33		45		155
Gain (loss) on equity investments, net	(4	)	9		2		7		(25	)	(36	)	3		(6	)	(64	)	(16	)	(26	)	(84	)
Settlement income	0		0		54		54		0		0		0		1,597		1,597		0		0		0
PRETAX INCOME (LOSS)	(108	)	57		(53	)	(104	)	(255	)	(97	)	(421	)	1,210		437		6		21		(2,653	)
Pretax income (loss) margin	-4.1	%	2.0	%	-2.0	%	-1.3	%	-10.1	%	-3.4	%	-15.9	%	38.9	%	3.9	%	0.2	%	0.7	%	-23.2	%
INCOME TAX PROVISION (BENEFIT)	39		39		(44	)	34		31		28		339		427		825		2		1,060		776
TAX RATE (%)	N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A		44.0	%	N/A		N/A
NET INCOME (LOSS) (Reported)	(147	)	18		(9	)	(138	)	(286	)	(125	)	(760	)	783		(388	)	4		(1,039	)	(3,429	)
Growth vs. prior year (%)	48.6	%	114.4	%	98.8	%	88.2	%	-157.7	%	94.5	%	-19100.0	%	175.4	%	88.7	%	110.8	%	-1803.3	%	-484.2	%
Growth vs. prior quarter (%)	-118.8	%	112.2	%	-150.0	%			72.5	%	56.3	%	-508.0	%	203.0	%			100.2	%	-26075.0	%
Net income (loss) margin	-5.6	%	0.6	%	-0.3	%	-1.7	%	-11.3	%	-4.3	%	-28.7	%	25.2	%	-3.5	%	0.1	%	-34.8	%	-30.0	%
EPS (Diluted) (Reported)	(0.04	)	0.01		0.00		(0.04	)	(0.09	)	(0.04	)	(0.23	)	0.23		(0.12	)	0.00		(0.32	)	(1.07	)
Growth vs. prior year (%)	55.6	%	125.0	%	100.0	%	88.9	%	-125.0	%	94.4	%	N/A		171.9	%	-88.8	%	100.0	%	-1700.0	%	-494.4	%
Growth vs. prior quarter (%)	-117.4	%	125.0	%	-100.0	%			71.9	%	55.6	%	-475.0	%	200.0	%			100.0	%	N/A
SHARES (CSE)(Diluted)	3,343		3,400		3,376		3,358		3,235		3,262		3,286		3,348		3,277		3,218		3,219		3,190
OUTSTANDING SHARES	3,344		3,375		3,383		3,383		3,240		3,280		3,293		3,336		3,336		3,200		3,236		3,236

	FY 2005								FY 2004										FY 2003
(in millions)	Q1		Q2		Q3		FY05		Q1		Q2		Q3		Q4		FY04		Q3		Q4		FY03
REVENUE BY GEOGRAPHY
UNITED STATES ($M)	1,105		1,130		982		3,217		1,162		1,214		1,037		1,356		4,769		1,212		1,327		5,048
Growth vs. prior year (%)	-4.9	%	-6.9	%	-5.3	%	-5.7	%	-6.4	%	-4.2	%	-14.4	%	2.2	%	-5.5	%	-15.8	%	-22.6	%	-14.9	%
Growth vs. prior quarter (%)	-18.5	%	2.3	%	-13.1	%			-12.4	%	4.5	%	-14.6	%	30.8	%			-4.3	%	9.5	%
EUROPE ($M)	918		975		938		2,831		780		966		941		1,026		3,713		886		954		3,578
Growth vs. prior year (%)	17.7	%	0.9	%	-0.3	%	5.4	%	-3.2	%	3.6	%	6.2	%	7.5	%	3.8	%	-4.1	%	-2.0	%	-0.8	%
Growth vs. prior quarter (%)	-10.5	%	6.2	%	-3.8	%			-18.2	%	23.8	%	-2.6	%	9.0	%			-4.9	%	7.7	%
JAPAN ($M)	183		190		197		570		185		192		207		178		762		243		200		936
Growth vs. prior year (%)	-1.1	%	-1.0	%	-4.8	%	-2.4	%	-26.0	%	-21.0	%	-14.8	%	-11.0	%	-18.6	%	-12.6	%	-1.5	%	-11.7	%
Growth vs. prior quarter (%)	2.8	%	3.8	%	3.7	%			-7.5	%	3.8	%	7.8	%	-14.0	%			0.0	%	-17.7	%
REST OF WORLD ($M)	422		546		508		1,476		409		516		466		550		1,941		449		501		1,872
Growth vs. prior year (%)	3.2	%	5.8	%	9.0	%	6.1	%	-8.9	%	9.1	%	3.8	%	9.8	%	3.7	%	-3.6	%	-5.5	%	-1.2	%
Growth vs. prior quarter (%)	-23.3	%	29.4	%	-7.0	%			-18.4	%	26.2	%	-9.7	%	18.0	%			-5.1	%	11.6	%
% of Total Revenue
UNITED STATES (%)	42.0	%	39.8	%	37.4	%	39.7	%	45.8	%	42.1	%	39.1	%	43.6	%	42.6	%	43.4	%	44.5	%	44.1	%
EUROPE (%)	34.9	%	34.3	%	35.7	%	35.0	%	30.8	%	33.4	%	35.5	%	33.0	%	33.2	%	31.8	%	32.0	%	31.3	%
JAPAN (%)	7.0	%	6.7	%	7.5	%	7.0	%	7.3	%	6.6	%	7.8	%	5.7	%	6.8	%	8.7	%	6.7	%	8.2	%
REST OF WORLD (%)	16.1	%	19.2	%	19.4	%	18.3	%	16.1	%	17.9	%	17.6	%	17.7	%	17.4	%	16.1	%	16.8	%	16.4	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)	1,354		1,505		1,389		4,248		1,282		1,568		1,365		1,639		5,854		1,530		1,580		6,243
Growth vs. prior year (%)	5.6	%	-4.0	%	1.8	%	0.8	%	-15.2	%	-3.3	%	-10.8	%	3.7	%	-6.2	%	-17.9	%	-21.1	%	-15.6	%
Growth vs. prior quarter (%)	-17.4	%	11.2	%	-7.7	%			-18.9	%	22.3	%	-12.9	%	20.1	%			-5.6	%	3.3	%
NETWORK STORAGE PRODUCTS ($M)	322		335		292		949		352		376		346		427		1,501		367		423		1,550
Growth vs. prior year (%)	-8.5	%	-10.9	%	-15.6	%	-11.6	%	-4.3	%	-4.1	%	-5.7	%	0.9	%	-3.2	%	-9.4	%	-16.2	%	-8.7	%
Growth vs. prior quarter (%)	-24.6	%	4.0	%	-12.8	%			-16.8	%	6.8	%	-8.0	%	23.4	%			-6.4	%	15.3	%
SUPPORT SERVICES ($M)	745		774		734		2,253		731		745		731		792		2,999		704		755		2,844
Growth vs. prior year (%)	1.9	%	3.9	%	0.4	%	2.1	%	7.0	%	6.1	%	3.8	%	4.9	%	5.5	%	10.7	%	9.1	%	12.1	%
Growth vs. prior quarter (%)	-5.9	%	3.9	%	-5.2	%			-3.2	%	1.9	%	-1.9	%	8.3	%			0.3	%	7.2	%
CLIENT SOLUTIONS & KNOWLEDGE SERVICES ($M)	207		227		210		644		171		199		209		252		831		189		224		797
Growth vs. prior year (%)	21.1	%	14.1	%	0.5	%	11.2	%	-7.1	%	-0.5	%	10.6	%	12.5	%	4.3	%	-6.4	%	1.4	%	-7.9	%
Growth vs. prior quarter (%)	-17.9	%	9.7	%	-7.5	%			-23.7	%	16.4	%	5.0	%	20.6	%			-5.5	%	18.5	%
NET BOOKINGS ($M)	2,453		2,976		2,534		7,963		2,538		2,980		2,617		3,179		11,314		2,688		3,020		11,298
Growth vs. prior year (%)	-3.3	%	-0.1	%	-3.2	%	-2.1	%	-2.4	%	-0.3	%	-2.6	%	5.3	%	0.1	%	-13.0	%	-13.4	%	-9.5	%
Growth vs. prior quarter (%)	-22.8	%	21.3	%	-14.9	%			-16.0	%	17.4	%	-12.2	%	21.5	%			-10.1	%	12.4	%
BACKLOG ($M)	659		792		701				707		799		765		834				667		705

BALANCE SHEETS	FY 2005								FY 2004										FY 2003
(in millions)	Q1		Q2		Q3				Q1		Q2		Q3		Q4				Q3		Q4
CASH & ST INVESTMENTS	3,520		3,639		3,135				2,520		2,160		2,372		3,601				2,636		3,062
ACCOUNTS RECEIVABLE, NET	1,730		1,840		2,020				1,905		2,214		2,201		2,339				2,296		2,381
RAW MATERIALS	66		60		70				103		93		92		78				73		93
WORK IN PROCESS	155		154		117				137		161		180		131				152		134
FINISHED GOODS	195		215		201				186		226		225		255				172		189
TOTAL INVENTORIES	416		429		388				426		480		497		464				397		416
OTHER CURRENT ASSETS	842		960		1,174				890		966		1,246		899				1,302		920
TOTAL CURRENT ASSETS	6,508		6,868		6,717				5,741		5,820		6,316		7,303				6,631		6,779
PP&E, NET	1,918		1,903		1,851				2,152		2,115		2,075		1,996				2,265		2,267
GOODWILL	406		406		441				389		466		470		406				326		326
LT MARKETABLE DEBT SECURITIES	3,913		3,825		4,222				3,006		3,001		3,111		4,007				2,902		2,679
OTHER NON-CURRENT ASSETS, NET	762		732		684				825		822		811		791				1,421		934
TOTAL ASSETS	13,507		13,734		13,915				12,113		12,224		12,783		14,503				13,545		12,985
SHORT TERM BORROWINGS	0		0		0				263		263		257		257				0		0
ACCOUNTS PAYABLE	807		963		1,071				780		906		1,011		1,057				870		903
ACCRUED LIABILITIES & OTHER	2,105		2,032		2,091				1,652		1,583		1,884		2,182				1,792		1,773
DEFERRED REVENUES	1,346		1,313		1,409				1,214		1,213		1,342		1,617				1,162		1,453
TOTAL CURRENT LIABILITIES	4,258		4,308		4,571				3,909		3,965		4,494		5,113				3,824		4,129
LT DEBT	1,163		1,145		1,116				1,215		1,214		1,209		1,175				1,495		1,531
LT DEFERRED REVENUES	524		519		509				462		463		537		557				512		450
OTHER NON-CURRENT OBLIGATIONS	1,264		1,242		1,189				364		343		990		1,220				354		384
STOCKHOLDERS’ EQUITY	6,298		6,520		6,530				6,163		6,239		5,553		6,438				7,360		6,491
TOTAL LIABILITIES & SE	13,507		13,734		13,915				12,113		12,224		12,783		14,503				13,545		12,985
CASH FLOW	Q1		Q2		Q3		FY05		Q1		Q2		Q3		Q4		FY04		Q3		Q4		FY03
OPERATING ACTIVITIES	124		52		(2	)	174		(49	)	(282	)	385		2,172		2,226		379		335		1,037
INVESTING ACTIVITIES	157		(475	)	(345	)	(663	)	(492	)	123		(338	)	(1,604	)	(2,311	)	(108	)	(253	)	(528	)
FINANCING ACTIVITIES	(235	)	99		18		(118	)	7		106		31		67		211		10		95		(518	)
KEY METRICS	Q1		Q2		Q3				Q1		Q2		Q3		Q4				Q3		Q4
INVENTORY TURNS (hist.)	15.9		14.7		15.0				13.7		13.3		14.5		15.2				14.3		12.9
INVENTORY TURNS-PRODUCT ONLY (hist.)	10.3		9.4		9.7				9.0		8.7		9.3		9.8				9.9		8.6
DAYS SALES OUTSTANDING	59		58		69				68		69		75		68				74		72
DAYS PAYABLES OUTSTANDING	(46	)	(53	)	(63	)			(46	)	(49	)	(57	)	(50	)			(51	)	(48	)
DAYS OF SUPPLY ON HAND	24		23		23				25		26		28		22				23		22
L-T DEBT/EQUITY (%)	18.5	%	17.6	%	17.1	%			19.7	%	19.5	%	21.8	%	18.3	%			20.3	%	23.6	%
ROE (12 mo. avg.)(%)	-4.1	%	-1.7	%	10.0	%			-52.8	%	-22.0	%	-36.2	%	-6.4	%			-27.6	%	-45.1	%
BOOK VALUE PER SHARE ($)	1.88		1.93		1.93				1.90		1.90		1.69		1.93				2.30		2.01
PRICE PER SHARE @ CLOSE	4.13		5.44		4.03				3.84		4.38		4.11		4.33				3.43		4.65
ROA (12 mo. avg.)(%)	-1.9	%	-0.8	%	4.6	%			-27.7	%	-11.4	%	-17.6	%	-3.0	%			-15.8	%	-24.8	%
DEPREC. & AMORT. ($M)	187		191		192				218		189		175		231				216		265
CAPITAL EXPENDITURES ($M)	56		85		58				55		72		62		60				57		135
NUMBER OF EMPLOYEES	32,449		31,855		31,999				36,014		35,802		35,386		34,962				35,745		36,068
REV. PER EMP. (12 mo.)($K)	347.5		352.5		350.1				311.6		312.7		312.5		319.9				332.1		317.0
GM PER EMP. (12mo.)($K)	140.9		143.2		143.1				134.0		133.3		129.9		129.2				141.3		137.0
OP EXP AS% OF REV (12mo.)	50.1	%	49.3	%	46.9	%			67.6	%	45.7	%	48.6	%	51.0	%			65.0	%	67.0	%
NET INCOME (LOSS) PER EMP. (12mo.)($K)	(7.7	)	(3.3	)	20.2				(100.1	)	(40.4	)	(62.5	)	(11.1	)			(65.2	)	(95.1	)

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)

NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS	FY 2005								FY 2004										FY 2003
(in millions except per share amounts)	Q1		Q2		Q3*		FY05*		Q1		Q2		Q3		Q4		FY04		Q3		Q4		FY03
GAAP net income (loss)	(147	)	18		(9	)	(138	)	(286	)	(125	)	(760	)	783		(388	)	4		(1,039	)	(3,429	)
In-process research and development	0		0		0		0		1		0		0		69		70		0		0		4
Restructuring charges	108		24		45		177		1		(10	)	203		150		344		(4	)	(6	)	371
Loss (gain) on equity investments, net	4		(9	)	(2	)	(7	)	25		36		(3	)	6		64		16		26		84
Impairment expense	0		0		0		0		0		0		0		49		49		0		0		2,125
Settlement income**	0		0		(54	)	(54	)	0		0		0		(1,597	)	(1,597	)	0		0		0
Settlement of litigation***	55		0		0		55		0		0		0		0		0		0		0		0
Valuation allowance on deferred tax assets	0		0		(34	)	(34	)	0		0		300		0		300		0		1,051		1,051
Related tax effects	(7	)	(6	)	(7	)	(20	)	0		0		0		367		367		(5	)	(8	)	(239	)
Net income (loss) excluding special items	13		27		(61	)	(21	)	(259	)	(99	)	(260	)	(173	)	(791	)	11		24		(33	)
Growth vs. prior year (%)	105.0	%	127.3	%	76.5	%	96.6	%	-232.1	%	-1090.0	%	-2463.6	%	-820.8	%	-2297.0	%	155.0	%	-65.2	%	84.1	%
EPS (Diluted) excluding special items ****	0.00		0.01		(0.02	)	(0.01	)	(0.08	)	(0.03	)	(0.08	)	(0.05	)	(0.24	)	0.00		0.01		(0.01	)
Growth vs. prior year (%)	100.0	%	133.3	%	75.0	%	94.7	%	-300.0	%	N/A		N/A		-600.0	%	-2300.0	%	100.0	%	-50.0	%	83.3	%
SHARES (CSE)(Diluted)	3,343		3,400		3,376		3,358		3,235		3,262		3,286		3,327		3,277		3,218		3,219		3,190
OUTSTANDING SHARES	3,344		3,375		3,383		3,383		3,240		3,280		3,293		3,336		3,336		3,200		3,236		3,236

* The non-GAAP calculation of Net income (loss) excluding special items for the three and nine month periods ended March 27, 2005 includes a $69 million benefit for the impact of the change in Dutch withholding tax legislation which was effected in the third quarter of fiscal 2005.

** Included in Interest and other income, net.

*** Included in Cost of sales – products.

**** For the quarters ended September 26, 2004, and June 30, 2004 and 2003, Sun used 3,356, 3,327, and 3,251 shares, respectively, to calculate the “EPS (Diluted) excluding special items”. For all other periods, the number of shares Used to calculate “EPS (Diluted) (Reported)” and “EPS (Diluted) excluding special items” was the same.