Press Release

EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

PRESS RELEASE

Sun Microsystems Exceeds Profit Target

Reports Results for Fourth Quarter and Full Fiscal Year 2007

SANTA CLARA, Calif. - July 30, 2007 - Sun Microsystems, Inc. (NASDAQ: SUNW) reported results today for its fourth quarter and full fiscal year, which ended June 30, 2007, exceeding its operating margin target, improving gross margin and delivering another sequential quarter of profit.

Revenues for the fourth quarter of fiscal 2007 were $3.835 billion. For the full fiscal year, the Company reported revenues of $13.873 billion, an increase of 6.2 percent over fiscal year 2006. Total gross margin as a percent of revenues for the fourth quarter was 47.2 percent, and gross margin for the full fiscal year was 45.2 percent, an increase of 2.1 percentage points over fiscal year 2006. Operating margin for the fourth quarter was 8.5 percent.

Net income for the fourth quarter of fiscal 2007 on a GAAP basis was $329 million, or $0.09 per share on a diluted basis. For the full fiscal year, net income was $473 million, or $0.13 per share, on a diluted basis, as compared with a net loss of $864 million, or ($0.25) per share, for fiscal 2006.

Cash generated from operations for the fourth quarter of fiscal 2007 was $564 million, and cash and marketable debt securities balance at the end of the quarter was approximately $5.9 billion.

“With a solid strategy and consistent execution, we delivered on our commitment to achieve at least 4 percent operating margin in the fourth quarter. This milestone marks significant progress toward our longer-term growth plan of at least 10 percent operating margin for the full fiscal year 2009,” said Jonathan Schwartz, president and CEO of Sun Microsystems. “The Solaris^™ 10 Operating System continues to fuel opportunity for us and our partners, allowing customers to leverage built-in virtualization to harvest more value from their datacenters, without the unnecessary expense of separate software licenses.”

Sun has scheduled a conference call today to discuss its financial results for the fourth quarter 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^™” — 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.

GAAP Net Income: GAAP net income for the fourth quarter of fiscal 2007 included: $48 million of stock-based compensation charges,

$15 million of restructuring and related impairment of assets charges, $70 million of purchase price accounting adjustments and intangible asset amortization charges related to acquisitions in fiscal 2006, $1 million of gain on equity investments and a $5 million benefit of related tax effects. The net impact of these five items reduced earnings per share on a diluted basis by approximately $0.04.

This press release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements regarding Sun’s longer-term growth plan of at least a 10% operating margin for the full fiscal year 2009. These forward-looking statements involve risks and uncertainties and actual results could differ materially from those predicted in any such forward-looking statements. Factors that could cause Sun’s actual results to differ materially from those contained in such forward-looking statements include: risks associated with developing, designing, manufacturing and distributing new products; lack of success in technological advancements; pricing pressures; lack of customer acceptance and implementation of new products and technologies; the possibility of errors or defects in new products; a material acquisition, restructuring or other event that results in significant charges; competition; adverse business conditions; failure to retain key employees; the cancellation or delay of projects; Sun’s reliance on single-source suppliers; risks associated with Sun’s ability to purchase a sufficient amount of components to meet demand; inventory risks; risks associated with Sun’s international customers and operations; delays in product development; Sun’s dependence on significant customers and specific industries; and Sun’s dependence on channel partners. Please also refer to Sun’s periodic reports that are filed from time to time with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2006 and its Quarterly Reports on Form 10-Q for the fiscal quarters ended October 1, 2006, December 31, 2006 and April 1, 2007. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements except as required by law.

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.

# # #

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.

Investor Contact:

Bret Schaefer

650-786-0123

bret.schaefer@sun.com

Press Contact:

Kristi Rawlinson

650-786-6933

kristi.rawlinson@sun.com

Industry Analyst Contact:

Melissa Selcher

650-787-1807

melissa.selcher@sun.com

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share amounts)


	Three Months Ended					Fiscal Years Ended
	June 30, 2007		June 30, 2006			June 30, 2007		June 30, 2006
Net revenues:
Products	$	2,492	$	2,524		$	8,771	$	8,371
Services		1,343		1,304			5,102		4,697

Total net revenues		3,835		3,828			13,873		13,068
Cost of sales:
Cost of sales-products (including stock-based compensation expense of $3, $2, $13 and $10) ⁽¹⁾		1,312		1,486			4,811		4,827
Cost of sales-services (including stock-based compensation expense of $8, $8, $31 and $29) ⁽¹⁾		711		703			2,797		2,612

Total cost of sales		2,023		2,189			7,608		7,439

Gross margin		1,812		1,639			6,265		5,629
Operating expenses:
Research and development (including stock-based compensation expense of $14, $20, $64 and $74) ⁽¹⁾		514		543			2,008		2,046
Selling, general and administrative (including stock-based compensation expense of $23, $33, $106 and $112) ⁽¹⁾		958		1,135			3,851		4,039
Restructuring and related impairment of long-lived assets		15		296			97		354
Purchased in-process research and development		—		—			—		60

Total operating expenses		1,487		1,974			5,956		6,499

Operating profit (loss)		325		(335	)		309		(870	)
Gain (loss) on equity investments, net		1		(4	)		6		27
Interest and other income, net		59		19			214		114
Settlement income		—		54			54		54

Income (loss) before income taxes		385		(266	)		583		(675	)
Provision for income taxes		56		35			110		189

Net income (loss)	$	329	$	(301	)	$	473	$	(864	)

Net income (loss) per common share-basic	$	0.09	$	(0.09	)	$	0.13	$	(0.25	)

Net income (loss) per common share-diluted	$	0.09	$	(0.09	)	$	0.13	$	(0.25	)

Shares used in the calculation of net income (loss) per common share-basic		3,555		3,475			3,531		3,437

Shares used in the calculation of net income (loss) per common share-diluted		3,632		3,475			3,606		3,437

(1)	For the three months ended June 30, 2007 and June 30, 2006 and fiscal year ended June 30, 2007 and June 30, 2006, respectively.

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)


	June 30, 2007		June 30, 2006*
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,620	$	3,569
Short-term marketable debt securities		962		496
Accounts receivable, net		2,964		2,702
Inventories		524		540
Deferred and prepaid tax assets		200		209
Prepaid expenses and other current assets		1,058		757

Total current assets		9,328		8,273

Property, plant and equipment, net		1,533		1,812
Long-term marketable debt securities		1,360		783
Goodwill		2,514		2,610
Other acquisition-related intangible assets, net		633		929
Other non-current assets		470		675

	$	15,838	$	15,082

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and short-term borrowings	$	1	$	503
Accounts payable		1,428		1,446
Accrued payroll-related liabilities		842		777
Accrued liabilities and other		887		1,190
Deferred revenues		2,073		1,988
Warranty reserve		220		261

Total current liabilities		5,451		6,165

Long-term debt		1,264		575
Long-term deferred revenues		659		506
Other non-current obligations		1,285		1,492
Total stockholders’ equity		7,179		6,344

	$	15,838	$	15,082

*	Derived from audited financial statements

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Fiscal Years Ended
	June 30, 2007			June 30, 2006
Cash flows from operating activities:
Net income (loss)	$	473		$	(864	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		517			575
Amortization of other acquisition related intangible assets		313			330
Deferred taxes		(23	)		(19	)
Impairment of assets		16			155
Gain on investments, net		(42	)		(10	)
Stock-based compensation expense		214			225
Purchased in-process research and development		—			60
Changes in operating assets and liabilities:
Accounts receivable, net		(235	)		(163	)
Inventories		(5	)		44
Prepaid and other assets		(212	)		245
Accounts payable		(5	)		130
Other liabilities		(53	)		(68	)

Net cash provided by operating activities		958			640

Cash flows from investing activities:
Increase in restricted cash		(5	)		(69	)
Purchases of marketable debt securities		(3,088	)		(1,831	)
Proceeds from sales of marketable debt securities		1,335			5,434
Proceeds from maturities of marketable debt securities		725			580
Proceeds from sales of equity investments, net		16			15
Purchases of property, plant and equipment		(488	)		(388	)
Proceeds from sales of property, plant and equipment		451			—
Payments for acquisitions, net of cash acquired		(23	)		(3,162	)

Net cash provided by (used in) investing activities		(1,077	)		579

Cash flows from financing activities:
Purchase of hedge on convertible notes		(83	)		—
Proceeds from issuance of common stock, net		44			249
Proceeds from borrowings and other obligations		720			50
Principal payments on borrowings and other obligations		(511	)		—

Net cash provided by financing activities		170			299

Net decrease in cash and cash equivalents		51			1,518
Cash and cash equivalents, beginning of period		3,569			2,051

Cash and cash equivalents, end of period	$	3,620		$	3,569

SUN MICROSYSTEMS, INC.

NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS

(unaudited)

(in millions, except per share amounts)


	Three Months Ended						Fiscal Years Ended
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006
Calculation of net income (loss) excluding special items:
Net income (loss), *	$	329		$	(301	)	$	473		$	(864	)
Restructuring and related impairment of long-lived assets		15			296			97			354
Purchased in-process research and development		—			—			—			60
Gain (loss) on equity investments, net		(1	)		4			(6	)		(27	)
Settlement income		—			(54	)		(54	)		(54	)
Related tax effects		(5	)		(8	)		(24	)		(19	)

Net income (loss) excluding special items	$	338		$	(63	)	$	486		$	(550	)

Net income (loss) excluding special items per common share – basic	$	0.10		$	(0.02	)	$	0.14		$	(0.16	)

Net income (loss) excluding special items per common share – diluted	$	0.09		$	(0.02	)	$	0.13		$	(0.16	)

Shares used in the calculation of net income (loss) excluding special items per common share – basic		3,555			3,475			3,531			3,437

Shares used in the calculation of net income (loss) excluding special items per common share – diluted		3,632			3,475			3,606			3,437

Net income for the three months and year ended June 30, 2007 included $48 million and $214 million of stock-based compensation expense or approximately $0.01 per share and $0.06 per share, respectively. Net loss for the three months and year ended June 30, 2006 included $63 million and $225 million of stock-based compensation expense or approximately $0.02 per share and $0.07 per share, respectively.

Net income for the three months and year ended June 30, 2007 included $70 million and $303 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share and $0.08 per share, respectively. Net loss for the three months and year ended June 30, 2006 included $86 million and $440 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share and $0.13 per share, respectively.

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)


STATEMENTS OF OPERATIONS	FY 2007										FY 2006										FY 2005
(in millions except per share amounts)	Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06		Q4		FY05

NET REVENUES
Products	1,959		2,260		2,060		2,492		8,771		1,704		2,108		2,035		2,524		8,371		1,927		7,126
Services	1,230		1,306		1,223		1,343		5,102		1,022		1,229		1,142		1,304		4,697		1,047		3,944

TOTAL	3,189		3,566		3,283		3,835		13,873		2,726		3,337		3,177		3,828		13,068		2,974		11,070
Growth vs. prior year (%)	17.0	%	6.9	%	3.3	%	0.2	%	6.2	%	3.7	%	17.5	%	20.9	%	28.7	%	18.0	%	-4.4	%	-1.0	%
Growth vs. prior quarter (%)	-16.7	%	11.8	%	-7.9	%	16.8	%			-8.3	%	22.4	%	-4.8	%	20.5	%			13.2	%

COST OF SALES
Products	1,123		1,228		1,148		1,312		4,811		966		1,223		1,152		1,486		4,827		1,130		4,119
Cost of settlement	0		0		0		0		0		0		0		0		0		0		0		55

Total	1,123		1,228		1,148		1,312		4,811		966		1,223		1,152		1,486		4,827		1,130		4,174
Services	678		734		674		711		2,797		558		693		658		703		2,612		613		2,307

TOTAL	1,801		1,962		1,822		2,023		7,608		1,524		1,916		1,810		2,189		7,439		1,743		6,481
% of revenue	56.5	%	55.0	%	55.5	%	52.8	%	54.8	%	55.9	%	57.4	%	57.0	%	57.2	%	56.9	%	58.6	%	58.5	%

GROSS MARGIN
Products	836		1,032		912		1,180		3,960		738		885		883		1,038		3,544		797		3,007
% of product revenue	42.7	%	45.7	%	44.3	%	47.4	%	45.1	%	43.3	%	42.0	%	43.4	%	41.1	%	42.3	%	41.4	%	42.2	%
Cost of settlement	0		0		0		0		0		0		0		0		0		0		0		(55	)
% of product revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	-0.8	%

Total product margin	836		1,032		912		1,180		3,960		738		885		883		1,038		3,544		797		2,952
% of product revenue	42.7	%	45.7	%	44.3	%	47.4	%	45.1	%	43.3	%	42.0	%	43.4	%	41.1	%	42.3	%	41.4	%	41.4	%

Services gross margin	552		572		549		632		2,305		464		536		484		601		2,085		434		1,637
% of service revenue	44.9	%	43.8	%	44.9	%	47.1	%	45.2	%	45.4	%	43.6	%	42.4	%	46.1	%	44.4	%	41.5	%	41.5	%

Total excluding settlement	1,388		1,604		1,461		1,812		6,265		1,202		1,421		1,367		1,639		5,629		1,231		4,644
% of revenue	43.5	%	45.0	%	44.5	%	47.2	%	45.2	%	44.1	%	42.6	%	43.0	%	42.8	%	43.1	%	41.4	%	42.0	%
Cost of settlement	0		0		0		0		0		0		0		0		0		0		0		(55	)
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	-0.5	%

TOTAL GROSS MARGIN	1,388		1,604		1,461		1,812		6,265		1,202		1,421		1,367		1,639		5,629		1,231		4,589
% of revenue	43.5	%	45.0	%	44.5	%	47.2	%	45.2	%	44.1	%	42.6	%	43.0	%	42.8	%	43.1	%	41.4	%	41.5	%

R&D	473		507		514		514		2,008		439		541		523		543		2,046		472		1,785
% of revenue	14.8	%	14.2	%	15.7	%	13.4	%	14.5	%	16.1	%	16.2	%	16.5	%	14.2	%	15.7	%	15.9	%	16.1	%
PURCHASED IN PROCESS R&D	0		0		0		0		0		60		0		0		0		60		0		0
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	2.2	%	0.0	%	0.0	%	0.0	%	0.5	%	0.0	%	0.0	%
SG&A	958		978		957		958		3,851		828		1,056		1,020		1,135		4,039		788		2,919
% of revenue	30.0	%	27.4	%	29.2	%	25.0	%	27.8	%	30.4	%	31.6	%	32.1	%	29.6	%	30.9	%	26.5	%	26.4	%
RESTRUCTURING CHARGES	21		26		35		15		97		12		10		36		226		284		86		262
% of revenue	0.7	%	0.7	%	1.1	%	0.4	%	0.7	%	0.4	%	0.3	%	1.1	%	6.0	%	2.2	%	2.9	%	2.4	%
IMPAIRMENT EXPENSE	0		0		0		0		0		0		0		0		70		70		0		0
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	1.8	%	0.5	%	0.0	%	0.0	%

TOTAL OPERATING EXPENSES	1,452		1,511		1,506		1,487		5,956		1,339		1,607		1,579		1,974		6,499		1,346		4,966
% of revenue	45.5	%	42.4	%	45.9	%	38.8	%	42.9	%	49.1	%	48.2	%	49.7	%	51.6	%	49.7	%	45.3	%	44.9	%

OPERATING INCOME (LOSS)	(64	)	93		(45	)	325		309		(137	)	(186	)	(212	)	(335	)	(870	)	(115	)	(377	)
Operating margin	-2.0	%	2.6	%	-1.4	%	8.5	%	2.2	%	-5.0	%	-5.6	%	-6.7	%	-8.8	%	-6.7	%	-3.9	%	-3.4	%

Interest and other income, net	42		63		50		59		214		44		25		26		19		114		32		133
Gain (loss) on equity investments, net	0		0		5		1		6		13		14		4		(4	)	27		(1	)	6
Settlement income	0		0		54		0		54		0		0		0		54		54		0		54
PRETAX INCOME (LOSS)	(22	)	156		64		385		583		(80	)	(147	)	(182	)	(266	)	(675	)	(84	)	(184	)
Pretax income (loss) margin	-0.7	%	4.4	%	1.9	%	10.0	%	4.2	%	-2.9	%	-4.4	%	-5.7	%	-6.9	%	-5.2	%	-2.8	%	-1.7	%

INCOME TAX PROVISION (BENEFIT)	34		23		(3	)	56		110		43		76		35		35		189		(134	)	(77	)
TAX RATE (%)	N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A		N/A

NET INCOME (LOSS) (Reported)*****	(56	)	133		67		329		473		(123	)	(223	)	(217	)	(301	)	(864	)	50		(107	)
Growth vs. prior year (%)	54.5	%	159.6	%	130.9	%	209.3	%	154.7	%	7.5	%	-5675.0	%	-675.0	%	-702.0	%	-707.5	%	-93.6	%	72.4	%
Growth vs. prior quarter (%)	81.4	%	337.5	%	-49.6	%	391.0	%			-346.0	%	-81.3	%	2.7	%	-38.7	%			278.6	%
Net income (loss) margin	-1.8	%	3.7	%	2.0	%	8.6	%	3.4	%	-4.5	%	-6.7	%	-6.8	%	-7.9	%	-6.6	%	1.7	%	-1.0	%

EPS (Diluted) (Reported)	(0.02	)	0.04		0.02		0.09		0.13		(0.04	)	(0.07	)	(0.06	)	(0.09	)	(0.25	)	0.01		(0.03	)
Growth vs. prior year (%)	50.0	%	157.1	%	133.3	%	200.0	%	152.0	%	0.0	%	-100.0	%	-500.0	%	-1000.0	%	-733.3	%	-95.7	%	75.0	%
Growth vs. prior quarter (%)	77.8	%	300.0	%	-50.0	%	350.0	%			-500.0	%	-75.0	%	14.3	%	-50.0	%			100.0	%

SHARES (CSE)(Diluted)	3,497		3,626		3,661		3,632		3,606		3,407		3,424		3,443		3,475		3,437		3,410		3,368
OUTSTANDING SHARES	3,512		3,540		3,554		3,534		3,534		3,409		3,458		3,470		3,505		3,505		3,408		3,408

The information above for the fiscal year ended June 30, 2005 has been restated to reflect the adjustments that are further discussed in our Annual Report on Form 10-K, filed with the SEC on September 13, 2005.


	FY 2007										FY 2006										FY 2005
(in millions)	Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06		Q4		FY05
REVENUE BY GEOGRAPHY***
UNITED STATES ($M)	1,361		1,415		1,283		1,582		5,641		1,168		1,400		1,357		1,610		5,535		1,175		4,392
Growth vs. prior year (%)	16.5	%	1.1	%	-5.5	%	-1.7	%	1.9	%	5.7	%	23.9	%	38.2	%	37.0	%	26.0	%	-13.3	%	-7.9	%
Growth vs. prior quarter (%)	-15.5	%	4.0	%	-9.3	%	23.3	%			-0.6	%	19.9	%	-3.1	%	18.6	%			19.7	%
INTERNATIONAL AMERICAS ($M)	197		230		195		241		863		138		190		185		242		755		171		590
Growth vs. prior year (%)	42.8	%	21.1	%	5.4	%	-0.4	%	14.3	%	25.5	%	15.2	%	28.5	%	41.5	%	28.0	%	8.2	%	5.0	%
Growth vs. prior quarter (%)	-18.6	%	16.8	%	-15.2	%	23.6	%			-19.3	%	37.7	%	-2.6	%	30.8	%			18.8	%
EMEA ($M)	1,109		1,311		1,212		1,367		4,999		966		1,224		1,115		1,341		4,646		1,133		4,152
Growth vs. prior year (%)	14.8	%	7.1	%	8.7	%	1.9	%	7.6	%	-0.7	%	18.0	%	10.5	%	18.4	%	11.9	%	4.2	%	5.3	%
Growth vs. prior quarter (%)	-17.3	%	18.2	%	-7.6	%	12.8	%			-14.7	%	26.7	%	-8.9	%	20.3	%			12.3	%
APAC ($M)	522		610		593		645		2,370		454		523		520		635		2,132		495		1,936
Growth vs. prior year (%)	15.0	%	16.6	%	14.0	%	1.6	%	11.2	%	3.2	%	2.8	%	5.7	%	28.3	%	10.1	%	-2.9	%	1.2	%
Growth vs. prior quarter (%)	-17.8	%	16.9	%	-2.8	%	8.8	%			-8.3	%	15.2	%	-0.6	%	22.1	%			0.6	%
% of Total Revenue
UNITED STATES (%)	42.7	%	39.7	%	39.1	%	41.3	%	40.7	%	42.8	%	42.0	%	42.7	%	42.1	%	42.4	%	39.6	%	39.7	%
INTERNATIONAL AMERICAS (%)	6.2	%	6.4	%	5.9	%	6.3	%	6.2	%	5.1	%	5.7	%	5.8	%	6.3	%	5.8	%	5.7	%	5.3	%
EMEA (%)	34.7	%	36.8	%	36.9	%	35.6	%	36.0	%	35.4	%	36.6	%	35.1	%	35.0	%	35.5	%	38.1	%	37.5	%
APAC (%)	16.4	%	17.1	%	18.1	%	16.8	%	17.1	%	16.7	%	15.7	%	16.4	%	16.6	%	16.3	%	16.6	%	17.5	%

PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)	1,468		1,634		1,500		1,853		6,455		1,274		1,438		1,474		1,811		5,997		1,576		5,826
Growth vs. prior year (%)	15.2	%	13.6	%	1.8	%	2.3	%	7.6	%	-5.9	%	-4.5	%	6.0	%	14.9	%	2.9	%	-3.8	%	-0.5	%
Growth vs. prior quarter (%)	-18.9	%	11.3	%	-8.2	%	23.5	%			-19.2	%	12.9	%	2.5	%	22.9	%			13.3	%
DATA MANAGEMENT PRODUCTS ($M)	491		626		560		639		2,316		430		670		561		713		2,374		351		1,300
Growth vs. prior year (%)	14.2	%	-6.6	%	-0.2	%	-10.4	%	-2.4	%	33.5	%	100.0	%	92.1	%	103.1	%	82.6	%	-17.8	%	-13.4	%
Growth vs. prior quarter (%)	-31.1	%	27.5	%	-10.5	%	14.1	%			22.5	%	55.8	%	-16.3	%	27.1	%			20.2	%
SUPPORT SERVICES ($M)	987		1,001		950		1,024		3,962		835		953		904		986		3,678		778		3,031
Growth vs. prior year (%)	18.2	%	5.0	%	5.1	%	3.9	%	7.7	%	12.1	%	23.1	%	23.2	%	26.7	%	21.3	%	-1.8	%	1.1	%
Growth vs. prior quarter (%)	0.1	%	1.4	%	-5.1	%	7.8	%			7.3	%	14.1	%	-5.1	%	9.1	%			6.0	%
PROFESSIONAL SERVICES & EDUCATIONAL SERVICES ($M)	243		305		273		319		1,140		187		276		238		318		1,019		269		913
Growth vs. prior year (%)	29.9	%	10.5	%	14.7	%	0.3	%	11.9	%	-9.7	%	21.6	%	13.3	%	18.2	%	11.6	%	6.7	%	9.9	%
Growth vs. prior quarter (%)	-23.6	%	25.5	%	-10.5	%	16.8	%			-30.5	%	47.6	%	-13.8	%	33.6	%			28.1	%

NET BOOKINGS ($M)**	3,036		3,603		3,238		3,909		13,786		2,413		3,018		2,680		3,376		11,487		3,078		11,043
Growth vs. prior year (%)	25.8	%	19.4	%	20.8	%	15.8	%	20.0	%	-1.6	%	1.4	%	5.7	%	9.7	%	4.0	%	-3.2	%	-2.4	%
Growth vs. prior quarter (%)	-10.1	%	18.7	%	-10.1	%	20.7	%			-21.6	%	25.1	%	-11.2	%	26.0	%			21.4	%
PRODUCT BACKLOG ($M), *	994		1,021		975		1,051				718		1,021		980		1,099				805

*	Our product backlog includes orders for which customer-requested delivery is scheduled within six months and orders that have been specified by the customers for which products have been shipped but revenue has been deferred.

**	The numbers presented prior to Q1 fiscal 2007 did not contain StorageTek information and should not be viewed as comparable.

***	Geographic revenue reported for FY06, Q1FY07 and Q2FY07 has been adjusted to reflect a correction in intercompany revenue to properly report country of origin.


BALANCE SHEETS**	FY 2007										FY 2006									FY 2005
(in millions)	Q1		Q2		Q3		Q4				Q1		Q2		Q3		Q4			Q4

CASH & ST INVESTMENTS	3,971		3,456		4,114		4,582				2,501		2,449		2,872		4,065			3,396
ACCOUNTS RECEIVABLE, NET	2,036		2,331		2,458		2,964				2,087		2,289		2,301		2,702			2,231
RAW MATERIALS	119		126		106		125				82		95		49		68			48
WORK IN PROCESS	92		106		101		95				183		134		125		97			121
FINISHED GOODS	373		373		360		304				286		321		400		375			262

TOTAL INVENTORIES	584		605		567		524				551		550		574		540			431
OTHER CURRENT ASSETS	961		970		1,023		1,258				998		933		966		966			1,133

TOTAL CURRENT ASSETS	7,552		7,362		8,162		9,328				6,137		6,221		6,713		8,273			7,191
PP&E, NET	1,583		1,579		1,586		1,533				1,901		1,914		1,880		1,812			1,769
GOODWILL	2,566		2,571		2,571		2,514				2,466		2,472		2,487		2,610			441
LT MARKETABLE DEBT SECURITIES	700		1,381		1,372		1,360				2,032		1,827		1,557		783			4,128
OTHER NON-CURRENT ASSETS	1,493		1,409		1,359		1,103				1,938		1,874		1,733		1,604			661

TOTAL ASSETS	13,894		14,302		15,050		15,838				14,474		14,308		14,370		15,082			14,190

SHORT TERM BORROWINGS	2		1		1		1				512		508		505		503			0
ACCOUNTS PAYABLE	1,292		1,331		1,214		1,428				1,091		1,214		1,315		1,446			1,167
ACCRUED LIABILITIES & OTHER	1,968		2,026		1,925		1,949				2,147		1,905		1,918		2,228			1,951
DEFERRED REVENUES	1,695		1,631		1,895		2,073				1,507		1,541		1,684		1,988			1,648

TOTAL CURRENT LIABILITIES	4,957		4,989		5,035		5,451				5,257		5,168		5,422		6,165			4,766
LT DEBT	582		579		1,270		1,264				603		593		585		575			1,123
LT DEFERRED REVENUES	558		567		589		659				549		469		472		506			544
OTHER NON-CURRENT OBLIGATIONS	1,388		1,396		1,264		1,285				1,410		1,585		1,504		1,492			1,083
STOCKHOLDERS’ EQUITY	6,409		6,771		6,892		7,179				6,655		6,493		6,387		6,344			6,674

TOTAL LIABILITIES & SE	13,894		14,302		15,050		15,838				14,474		14,308		14,370		15,082			14,190


CASH FLOW**	Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06	Q4		FY05
OPERATING ACTIVITIES	123		129		142		564		958		224		(191	)	197		410		640	195		369
INVESTING ACTIVITIES	143		(1,013	)	(110	)	(97	)	(1,077	)	(770	)	(214	)	217		1,346		579	238		(425	)
FINANCING ACTIVITIES	(473	)	135		647		(139	)	170		3		90		34		172		299	84		(34	)

KEY METRICS	Q1		Q2		Q3		Q4				Q1		Q2		Q3		Q4			Q4
INVENTORY TURNS (hist.)	13.6		13.4		13.6		14.3				13.4		13.7		10.8		15.3			14.5
INVENTORY TURNS-PRODUCT ONLY (hist.)	8.8		8.6		8.7		9.0				8.6		8.8		6.9		9.9			9.3
DAYS SALES OUTSTANDING	57		59		67		70				69		62		65		64			68
DAYS PAYABLES OUTSTANDING	(65	)	(61	)	(60	)	(64	)			(64	)	(57	)	(65	)	(59	)		(60	)
DAYS OF SUPPLY ON HAND	29		28		28		23				33		26		29		22			22
L-T DEBT/EQUITY (%)	9.1	%	8.6	%	18.4	%	17.6	%			9.1	%	9.1	%	9.2	%	9.1	%		16.8	%
ROE (12 mo. avg.)(%)	-12.4	%	-6.8	%	-2.4	%	6.9	%			-1.5	%	-4.9	%	-7.8	%	-13.4	%		-1.6	%
BOOK VALUE PER SHARE ($)	1.82		1.91		1.94		2.03				1.95		1.89		1.84		1.81			1.96
PRICE PER SHARE @ CLOSE	4.95		5.42		6.01		5.26				3.87		4.36		4.97		4.15			3.73
ROA (12 mo. avg.)(%)	-5.5	%	-3.1	%	-1.1	%	3.2	%			-0.7	%	-2.3	%	-3.6	%	-5.9	%		-0.8	%
DEPREC. & AMORT. ($M)	204		214		209		203				189		265		228		224			198
CAPITAL INVESTMENTS, NET ($M)*	(160	)	81		152		(73	)			48		82		63		122			58
NUMBER OF EMPLOYEES	36,250		34,667		34,494		34,219				38,588		38,802		38,312		38,061			31,117
REV. PER EMP. (12 mo.)($K)	373.3		397.3		402.0		405.4				289.4		300.6		314.8		343.3			355.8
GM PER EMP. (12mo.)($K)	160.4		173.2		176.6		183.1				122.3		127.3		134.6		147.9			147.5
OP EXP AS % OF REV (12mo.)	48.9	%	47.4	%	46.5	%	42.9	%			45.8	%	47.3	%	48.1	%	49.7	%		44.9	%
NET INCOME (LOSS) PER EMP. (12mo.)($K)	(22.0	)	(12.7	)	(4.6	)	13.82				(2.5	)	(8.4	)	(13.2	)	(22.7	)		(3.4	)

The information above has been restated to reflect the adjustments that are further discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2005, filed with the SEC on September 13, 2005.

*	Included in the Q1 fiscal 2007 capital investments, net, are the cash proceeds of approximately $214 million from the sale of our Newark, California facility.

**	Certain numbers presented in the Q1-Q3 fiscal 2007 balance sheets and statements of cash flows have been reclassified from other non-current assets to other current assets and investing activities to operating activities, respectively, to reflect a change in associated classification.


NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS	FY2007										FY 2006										FY 2005
(in millions except per share amounts)	Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06		Q4***		FY05*

GAAP net income (loss)**, ***	(56	)	133		67		329		473		(123	)	(223	)	(217	)	(301	)	(864	)	50		(107	)
Purchased in-process research and development	0		0		0		0		0		60		0		0		0		60		0		0
Restructuring and related impairment of long-lived assets	21		26		35		15		97		12		10		36		226		284		86		262
Loss (gain) on equity investments, net	0		0		(5	)	(1	)	(6	)	(13	)	(14	)	(4	)	4		(27	)	1		(6	)
Impairment expense	0		0		0		0		0		0		0		0		70		70		0		0
Settlement income	0		0		(54	)	0		(54	)	0		0		0		(54	)	(54	)	0		(54	)
Settlement of litigation**	0		0		0		0		0		0		0		0		0		0		0		55
Valuation allowance on deferred tax assets	0		0		0		0		0		0		0		0		0		0		0		(34	)
Related tax effects	(7	)	(4	)	(8	)	(5	)	(24	)	(4	)	(3	)	(4	)	(8	)	(19	)	(6	)	(26	)

Net income (loss) excluding special items	(42	)	155		35		338		486		(68	)	(230	)	(189	)	(63	)	(550	)	131		90
Growth vs. prior year (%)	38.2	%	167.4	%	118.5	%	636.5	%	188.4	%	-351.9	%	-1869.2	%	133.3	%	-148.1	%	-711.1	%	174.4	%	111.4	%
EPS (Diluted) excluding special items	(0.01	)	0.04		0.01		0.09		0.13		(0.02	)	(0.07	)	(0.06	)	(0.02	)	(0.16	)	0.04		0.03
Growth vs. prior year (%)	50.0	%	157.1	%	116.7	%	550.0	%	176.5	%	-300.0	%	-100.0	%	-200.0	%	-150.0	%	633.3	%	180.0	%	112.5	%

SHARES (CSE)(Diluted)	3,497		3,626		3,661		3,632		3,606		3,407		3,424		3,443		3,475		3,437		3,410		3,368
OUTSTANDING SHARES	3,512		3,540		3,554		3,534		3,534		3,409		3,458		3,470		3,505		3,505		3,408		3,408

The non-GAAP calculation of Net income (loss) excluding special items for the three month period ended March 27, 2005 and year ended June 30, 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 and a $213 million benefit arising from adjustments to our income tax reserves resulting from the conclusion of a U.S. and foreign income tax audit.

**	Included in Cost of sales – products

***	The non-GAAP calculation of net income excluding special items for the three months ended June 30, 2005 includes a $213 million benefit arising from adjustments to our income tax reserves resulting from the conclusion of a U.S. and foreign income tax audit.

****

Net income (loss) for the three months ended June 30, 2007, April 1, 2007, December 31, 2006, and October 1, 2006 included $48 million, $50 million, $58 million, and $58 million Of stock-based compensation expense or approximately $0.01 per share, $0.01 per share, $0.02 per share and $0.02 per share, respectively. Net income (loss) for the three months ended June 30, 2007, March 26, 2006, December 25, 2005 and September 25, 2005 included $63 million, $57 million, $55 million and $50 million of stock-based compensation expense or approximately $0.02 per share, $0.02 per share, $0.02 per share and $0.01 per share, respectively.

*****

Net income (loss) for the three months ended June 30, 2007, April 1, 2007, December 31, 2006 and October 1, 2006, included $70 million, $75 million, $79 million, $79 million of purchase price accounting adjustments and intangible asset amortization relating to our fiscal 2006 acquisitions or approximately $0.02 per share, $0.02 per share, $0.02 per share and $0.02 per share, respectively. Net loss for the three months ended June 30, 2006, March 26, 2006, December 25, 2005 and September 25, 2005 included $86 million, $87 million, $145 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, $0.03 per share, $0.04 per share and $0.04 per share, respectively.