Exhibit 99.1

Sun Microsystems Delivers Another Solid Quarter

Reports Results for First Quarter Fiscal Year 2008

SANTA CLARA, Calif. - November 5, 2007 - Sun Microsystems, Inc. (NASDAQ: JAVA) reported results today for its fiscal first quarter, which ended September 30, 2007.

Revenues for the first quarter of fiscal 2008 were $3.219 billion, an increase of approximately 1 percent as compared with $3.189 billion for the first quarter of fiscal 2007. Total gross margin as a percent of revenues was 48.5, an increase of 5.0 percentage points, as compared with the first quarter of fiscal 2007.

Net income for the first quarter of fiscal 2008 on a GAAP basis was $89 million, or $0.03 per share on a diluted basis, as compared with a net loss of $56 million, or ($0.02) per share, for the first quarter of fiscal 2007. GAAP net income for the first quarter of fiscal 2008 includes a $113 million restructuring charge, which equates to $0.03 per share.

Cash generated from operations for the first quarter of fiscal 2008 was $574 million, and cash and marketable debt securities balance at the end of the quarter was $5.193 billion.

“We showed continued execution and operating discipline and delivered a very solid first quarter with continued revenue growth, profitability and gross margin expansion,” said Jonathan Schwartz, CEO of Sun Microsystems. “We saw particular strength in our high-end systems lineup, good growth in our subscription-based identity management software offerings, and even more adoption and momentum behind the award-winning open source Solaris^TM 10 Operating System and our virtualization offerings. Growth remains our top priority for fiscal 2008 as we look to capitalize on our UltraSPARC^® T2 servers, delivering outstanding Solaris and Linux performance with extreme energy efficiency.”

Sun has scheduled a conference call today to discuss its financial results for the first quarter fiscal year 2008 at 1:30 p.m. (PT), which is being broadcast live at www.sun.com/investors.

About Sun Microsystems, Inc.

Sun Microsystems develops the technologies that power the global marketplace. Guided by a singular vision — “The Network is the Computer^TM” — Sun drives network participation through shared innovation, community development and open source leadership. Sun can be found in more than 100 countries and on the Web at http://sun.com

# # #

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 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.

This press release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements regarding Sun’s future growth. 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, 2007. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements.

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
	September 30, 2007		October 1, 2006
Net revenues:
Products	$	1,980	$	1,959
Services		1,239		1,230
Total net revenues		3,219		3,189
Cost of sales:
Cost of sales-products (including stock-based compensation expense of $3 and $3) (1)		1,029		1,123
Cost of sales-services (including stock-based compensation expense of $8 and $8) (1)		629		678
Total cost of sales		1,658		1,801
Gross margin		1,561		1,388
Operating expenses:
Research and development (including stock-based compensation expense of $14 and $18) (1)		446		473
Selling, general and administrative (including stock-based compensation expense of $23 and $29) (1)		939		958
Restructuring and related impairment of long-lived assets		113		21
Total operating expenses		1,498		1,452
Operating profit (loss)		63		(64	)
Gain on equity investments, net		22		—
Interest and other income, net		58		42
Income (loss) before income taxes		143		(22	)
Provision for income taxes		54		34
Net income (loss)	$	89	$	(56	)
Net income (loss) per common share-basic and diluted	$	0.03	$	(0.02	)
Shares used in the calculation of net income (loss) per common share-basic		3,464		3,497
Shares used in the calculation of net income (loss) per common share-diluted		3,537		3,497

(1) For the three months ended September 30, 2007 and October 1, 2006, respectively.

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

	September 30, 2007		June 30, 2007(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,752	$	3,620
Short-term marketable debt securities		1,067		962
Accounts receivable, net		2,203		2,964
Inventories		571		524
Deferred and prepaid tax assets		214		200
Prepaid expenses and other current assets		1,083		1,058
Total current assets		7,890		9,328
Property, plant and equipment, net		1,556		1,533
Long-term marketable debt securities		1,374		1,360
Goodwill		2,466		2,514
Other acquisition-related intangible assets, net		559		633
Other non-current assets		513		470
	$	14,358	$	15,838
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,140	$	1,381
Accrued payroll-related liabilities		649		842
Accrued liabilities and other		1,044		935
Deferred revenues		1,944		2,073
Warranty reserve		217		220
Total current liabilities		4,994		5,451
Long-term debt		1,270		1,264
Long-term deferred revenues		630		659
Other non-current obligations		1,271		1,285
Total stockholders’ equity		6,193		7,179
	$	14,358	$	15,838

(1) Derived from audited financial statements

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

	Three Months Ended
	September 30, 2007			October 1, 2006
Cash flows from operating activities:
Net income (loss)	$	89		$	(56	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		119			123
Amortization of other acquisition related intangible assets		74			81
Deferred taxes		8			(3	)
Impairment of assets		—			8
Gain on investments and other, net		(17	)		—
Stock-based compensation expense		48			58
Changes in operating assets and liabilities:
Accounts receivable, net		770			672
Inventories		(44	)		(71	)
Prepaid and other assets		(46	)		2
Accounts payable		(283	)		(151	)
Other liabilities		(144	)		(540	)
Net cash provided by operating activities		574			123
Cash flows from investing activities:
Decrease in restricted cash		3			—
Purchases of marketable debt securities		(637	)		(675	)
Proceeds from sales of marketable debt securities		251			515
Proceeds from maturities of marketable debt securities		269			136
Proceeds from sales of equity investments, net		30			7
Purchases and sales of property, plant and equipment		(127	)		160
Net cash provided by (used in) investing activities		(211	)		143
Cash flows from financing activities:
Purchase of common stock under 2007 Stock Repurchase Plan		(1,250	)		—
Proceeds from issuance of common stock, net		23			27
Principal payments on borrowings and other obligations		(4	)		(500	)
Net cash used in financing activities		(1,231	)		(473	)
Net decrease in cash and cash equivalents		(868	)		(207	)
Cash and cash equivalents, beginning of period		3,620			3,569
Cash and cash equivalents, end of period	$	2,752		$	3,362

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)

STATEMENTS OF OPERATIONS (in millions except per share amounts)	FY 2008		FY 2007										FY 2006
	Q1		Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06
NET REVENUES
Products	1,980		1,959		2,260		2,060		2,492		8,771		1,704		2,108		2,035		2,524		8,371
Services	1,239		1,230		1,306		1,223		1,343		5,102		1,022		1,229		1,142		1,304		4,697
TOTAL	3,219		3,189		3,566		3,283		3,835		13,873		2,726		3,337		3,177		3,828		13,068
Growth vs. prior year (%)	0.9	%	17.0,0	%	6.9	%	3.3	%	0.2	%	6.2	%	3.7	%	17.5	%	20.9	%	28.7	%	18.0	%
Growth vs. prior quarter (%)	-16.1	%	-16.7	%	11.8	%	-7.9	%	16.8	%			-8.3	%	22.4	%	-4.8	%	20.5	%
COST OF SALES
Products	1,029		1,123		1,228		1,148		1,312		4,811		966		1,223		1,152		1,486		4,827
Services	629		678		734		674		711		2,797		558		693		658		703		2,612
TOTAL	1,658		1,801		1,962		1,822		2,023		7,608		1,524		1,916		1,810		2,189		7,439
% of revenue	51.5	%	56.5	%	55.0	%	55.5	%	52.8	%	54.8	%	55.9	%	57.4	%	57.0	%	57.2	%	56.9	%
GROSS MARGIN
Products	951		836		1,032		912		1,180		3,960		738		885		883		1,038		3,544
% of product revenue	48.0	%	42.7	%	45.7	%	44.3	%	47.4	%	45.1	%	43.3	%	42.0	%	43.4	%	41.1	%	42.3	%
Services gross margin	610		552		572		549		632		2,305		464		536		484		601		2,085
% of service revenue	49.2	%	44.9	%	43.8	%	44.9	%	47.1	%	45.2	%	45.4	%	43.6	%	42.4	%	46.1	%	44.4	%
TOTAL GROSS MARGIN	1,561		1,388		1,604		1,461		1,812		6,265		1,202		1,421		1,367		1,639		5,629
% of revenue	48.5	%	43.5	%	45.0	%	44.5	%	47.2	%	45.2	%	44.1	%	42.6	%	43.0	%	42.8	%	43.1	%
R&D	446		473		507		514		514		2,008		439		541		523		543		2,046
% of revenue	13.9	%	14.8	%	14.2	%	15.7	%	13.4	%	14.5	%	16.1	%	16.2	%	16.5	%	14.2	%	15.7	%
PURCHASED IN PROCESS R&D	0		0		0		0		0		0		60		0		0		0		60
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	2.2	%	0.0	%	0.0	%	0.0	%	0.5	%
SG&A	939		958		978		957		958		3,851		828		1,056		1,020		1,135		4,039
% of revenue	29.2	%	30.0	%	27.4	%	29.2	%	25.0	%	27.8	%	30.4	%	31.6	%	32.1	%	29.6	%	30.9	%
RESTRUCTURING CHARGES	113		21		26		35		15		97		12		10		36		226		284
% of revenue	3.5	%	0.7	%	0.7	%	1.1	%	0.4	%	0.7	%	0.4	%	0.3	%	1.1	%	6.0	%	2.2	%
IMPAIRMENT EXPENSE	0		0		0		0		0		0		0		0		0		70		70
% of revenue	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	1.8	%	0.5	%
TOTAL OPERATING EXPENSES	1,498		1,452		1,511		1,506		1,487		5,956		1,339		1,607		1,579		1,974		6,499
% of revenue	46.5	%	45.5	%	42.4	%	45.9	%	38.8	%	42.9	%	49.1	%	48.2	%	49.7	%	51.6	%	49.7	%
OPERATING INCOME (LOSS)	63		(64	)	93		(45	)	325		309		(137	)	(186	)	(212	)	(335	)	(870	)
Operating margin	2.0	%	-2.0	%	2.6	%	-1.4	%	8.5	%	2.2	%	-5.0	%	-5.6	%	-6.7	%	-8.8	%	-6.7	%
Interest and other income, net	58		42		63		50		59		214		44		25		26		19		114
Gain (loss) on equity investments, net	22		0		0		5		1		6		13		14		4		(4	)	27
Settlement income	0		0		0		54		0		54		0		0		0		54		54
PRETAX INCOME (LOSS)	143		(22	)	156		64		385		583		(80	)	(147	)	(182	)	(266	)	(675	)
Pretax income (loss) margin	4.4	%	-0.7	%	4.4	%	1.9	%	10.0	%	4.2	%	-2.9	%	-4.4	%	-5.7	%	-6.9	%	-5.2	%
INCOME TAX PROVISION (BENEFIT)	54		34		23		(3	)	56		110		43		76		35		35		189
NET INCOME (LOSS) (Reported)	89		(56	)	133		67		329		473		(123	)	(223	)	(217	)	(301	)	(864	)
Growth vs. prior year (%)	258.9	%	54.5	%	159.6	%	130.9	%	209.3	%	154.7	%	7.5	%	-5675.0	%	-675.0	%	-702.0	%	-707.5	%
Growth vs. prior quarter (%)	-72.9	%	81.4	%	337.5	%	-49.6	%	391.0	%			-346.0	%	-81.3	%	2.7	%	-38.7	%
Net income (loss) margin	2.8	%	-1.8	%	3.7	%	2.0	%	8.6	%	3.4	%	-4.5	%	-6.7	%	-6.8	%	-7.9	%	-6.6	%
EPS (Diluted) (Reported)	0.03		(0.02	)	0.04		0.02		0.09		0.13		(0.04	)	(0.07	)	(0.06	)	(0.09	)	(0.25	)
Growth vs. prior year (%)	250.0	%	50.0	%	157.1	%	133.3	%	200.0	%	152.0	%	0.0	%	-100.0	%	-500.0	%	-1000.0	%	-733.3	%
Growth vs. prior quarter (%)	-66.7	%	77.8	%	300.0	%	-50.0	%	350.0	%			-500.0	%	-75.0	%	14.3	%	-50.0	%
SHARES (CSE)(Diluted)	3,537		3,497		3,626		3,661		3,632		3,606		3,407		3,424		3,443		3,475		3,437
OUTSTANDING SHARES	3,297		3,512		3,540		3,554		3,534		3,534		3,409		3,458		3,470		3,505		3,505

	FY 2008		FY 2007										FY 2006
(in millions)	Q1		Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06
REVENUE BY GEOGRAPHY(3)
UNITED STATES ($M)	1,303		1,361		1,415		1,283		1,582		5,641		1,168		1,400		1,357		1,610		5,535
Growth vs. prior year (%)	-4.3	%	16.5	%	1.1	%	-5.5	%	-1.7	%	1.9	%	5.7	%	23.9	%	38.2	%	37.0	%	26.0	%
Growth vs. prior quarter (%)	-17.6	%	-15.5	%	4.0	%	-9.3	%	23.3	%			-0.6	%	19.9	%	-3.1	%	18.6	%
INTERNATIONAL AMERICAS ($M)	204		197		230		195		241		863		138		190		185		242		755
Growth vs. prior year (%)	3.6	%	42.8	%	21.1	%	5.4	%	-0.4	%	14.3	%	25.5	%	15.2	%	28.5	%	41.5	%	28.0	%
Growth vs. prior quarter (%)	-15.4	%	-18.6	%	16.8	%	-15.2	%	23.6	%			-19.3	%	37.7	%	-2.6	%	30.8	%
EMEA ($M)	1,161		1,109		1,311		1,212		1,367		4,999		966		1,224		1,115		1,341		4,646
Growth vs. prior year (%)	4.7	%	14.8	%	7.1	%	8.7	%	1.9	%	7.6	%	-0.7	%	18.0	%	10.5	%	18.4	%	11.9	%
Growth vs. prior quarter (%)	-15.1	%	-17.3	%	18.2	%	-7.6	%	12.8	%			-14.7	%	26.7	%	-8.9	%	20.3	%
APAC ($M)	551		522		610		593		645		2,370		454		523		520		635		2,132
Growth vs. prior year (%)	5.6	%	15.0	%	16.6	%	14.0	%	1.6	%	11.2	%	3.2	%	2.8	%	5.7	%	28.3	%	10.1	%
Growth vs. prior quarter (%)	-14.6	%	-17.8	%	16.9	%	-2.8	%	8.8	%			-8.3	%	15.2	%	-0.6	%	22.1	%
% of Total Revenue
UNITED STATES (%)	40.5	%	42.7	%	39.7	%	39.1	%	41.3	%	40.7	%	42.8	%	42.0	%	42.7	%	42.1	%	42.4	%
INTERNATIONAL AMERICAS (%)	6.3	%	6.2	%	6.4	%	5.9	%	6.3	%	6.2	%	5.1	%	5.7	%	5.8	%	6.3	%	5.8	%
EMEA (%)	36.1	%	34.7	%	36.8	%	36.9	%	35.6	%	36.0	%	35.4	%	36.6	%	35.1	%	35.0	%	35.5	%
APAC (%)	17.1	%	16.4	%	17.1	%	18.1	%	16.8	%	17.1	%	16.7	%	15.7	%	16.4	%	16.6	%	16.3	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)	1,475		1,468		1,634		1,500		1,853		6,455		1,274		1,438		1,474		1,811		5,997
Growth vs. prior year (%)	0.5	%	15.2	%	13.6	%	1.8	%	2.3	%	7.6	%	-5.9	%	-4.5	%	6.0	%	14.9	%	2.9	%
Growth vs. prior quarter (%)	-20.4	%	-18.9	%	11.3	%	-8.2	%	23.5	%			-19.2	%	12.9	%	2.5	%	22.9	%
STORAGE PRODUCTS ($M)	505		491		626		560		639		2,316		430		670		561		713		2,374
Growth vs. prior year (%)	2.9	%	14.2	%	-6.6	%	-0.2	%	-10.4	%	-2.4	%	33.5	%	100.0	%	92.1	%	103.1	%	82.6	%
Growth vs. prior quarter (%)	-21.0	%	-31.1	%	27.5	%	-10.5	%	14.1	%			22.5	%	55.8	%	-16.3	%	27.1	%
SUPPORT SERVICES ($M)	979		987		1,001		950		1,024		3,962		835		953		904		986		3,678
Growth vs. prior year (%)	-0.8	%	18.2	%	5.0	%	5.1	%	3.9	%	7.7	%	12.1	%	23.1	%	23.2	%	26.7	%	21.3	%
Growth vs. prior quarter (%)	-4.4	%	0.1	%	1.4	%	-5.1	%	7.8	%			7.3	%	14.1	%	-5.1	%	9.1	%
PROFESSIONAL SERVICES & EDUCATIONAL SERVICES ($M)	260		243		305		273		319		1,140		187		276		238		318		1,019
Growth vs. prior year (%)	7.0	%	29.9	%	10.5	%	14.7	%	0.3	%	11.9	%	-9.7	%	21.6	%	13.3	%	18.2	%	11.6	%
Growth vs. prior quarter (%)	-18.5	%	-23.6	%	25.5	%	-10.5	%	16.8	%			-30.5	%	47.6	%	-13.8	%	33.6	%
NET BOOKINGS ($M)(2)	3,149		3,036		3,603		3,238		3,909		13,786		2,413		3,018		2,680		3,376		11,487
Growth vs. prior year (%)	3.7	%	25.8	%	19.4	%	20.8	%	15.8	%	20.0	%	-1.6	%	1.4	%	5.7	%	9.7	%	4.0	%
Growth vs. prior quarter (%)	-19.4	%	-10.1	%	18.7	%	-10.1	%	20.7	%			-21.6	%	25.1	%	-11.2	%	26.0	%
BOOK TO BILL RATIO	0.98		0.95		1.01		0.99		1.02				0.97		1.11		0.99		1.04
PRODUCT BACKLOG ($M)(1), (2)	980		994		1,021		975		1,051				718		1,021		980		1,099
SERVICES BACKLOG ($M)	951		875		729		820		624				690		580		608		752
TOTAL BACKLOG ($M)	1,931		1,869		1,750		1,795		1,675				1,408		1,601		1,588		1,851
DEFERRED REVENUES
PRODUCTS DEFERRED REVENUES ($M)	597		507		568		603		629				460		519		527		621
Growth vs. prior year (%)	17.8	%	10.2	%	9.4	%	14.4	%	1.3	%			11.8	%	19.9	%	29.5	%	15.2	%
Growth vs. prior quarter (%)	-5.1	%	-18.4	%	12.0	%	6.2	%	4.3	%			-14.7	%	12.8	%	1.5	%	17.8	%
SERVICES DEFERRED REVENUES ($M)	1,977		1,746		1,630		1,881		2,103				1,596		1,491		1,629		1,873
Growth vs. prior year (%)	13.2	%	9.4	%	9.3	%	15.5	%	12.3	%			9.4	%	6.6	%	7.8	%	13.3	%
Growth vs. prior quarter (%)	-6.0	%	-6.8	%	-6.6	%	15.4	%	11.8	%			-3.4	%	-6.6	%	9.3	%	15.0	%
TOTAL DEFERRED REVENUES ($M)	2,574		2,253		2,198		2,484		2,732				2,056		2,010		2,156		2,494
Growth vs. prior year (%)	14.2	%	9.6	%	9.4	%	15.2	%	9.5	%			9.9	%	9.7	%	12.4	%	13.8	%
Growth vs. prior quarter (%)	-5.8	%	-9.7	%	-2.4	%	13.0	%	10.0	%			-6.2	%	-2.2	%	7.3	%	15.7	%

(1) 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.

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

(3) 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(2) (3) (in millions)	FY 2008		FY 2007										FY 2006
	Q1		Q1		Q2		Q3		Q4				Q1		Q2		Q3		Q4
CASH & ST INVESTMENTS	3,819		3,971		3,456		4,114		4,582				2,501		2,449		2,872		4,065
ACCOUNTS RECEIVABLE, NET	2,203		2,036		2,331		2,458		2,964				2,087		2,289		2,301		2,702
RAW MATERIALS	130		119		126		106		125				82		95		49		68
WORK IN PROCESS	110		92		106		101		95				183		134		125		97
FINISHED GOODS	331		373		373		360		304				286		321		400		375
TOTAL INVENTORIES	571		584		605		567		524				551		550		574		540
OTHER CURRENT ASSETS	1,297		961		970		1,023		1,258				998		933		966		966
TOTAL CURRENT ASSETS	7,890		7,552		7,362		8,162		9,328				6,137		6,221		6,713		8,273
PP&E, NET	1,556		1,583		1,579		1,586		1,533				1,901		1,914		1,880		1,812
GOODWILL	2,466		2,566		2,571		2,571		2,514				2,466		2,472		2,487		2,610
LT MARKETABLE DEBT SECURITIES	1,374		700		1,381		1,372		1,360				2,032		1,827		1,557		783
OTHER NON-CURRENT ASSETS	1,072		1,493		1,409		1,359		1,103				1,938		1,874		1,733		1,604
TOTAL ASSETS	14,358		13,894		14,302		15,050		15,838				14,474		14,308		14,370		15,082
ACCOUNTS PAYABLE	1,140		1,263		1,296		1,187		1,381				1,091		1,214		1,315		1,446
ACCRUED LIABILITIES & OTHER	1,910		1,999		2,062		1,953		1,997				2,659		2,413		2,423		2,731
DEFERRED REVENUES	1,944		1,695		1,631		1,895		2,073				1,507		1,541		1,684		1,988
TOTAL CURRENT LIABILITIES	4,994		4,957		4,989		5,035		5,451				5,257		5,168		5,422		6,165
LT DEBT	1,270		582		579		1,270		1,264				603		593		585		575
LT DEFERRED REVENUES	630		558		567		589		659				549		469		472		506
OTHER NON-CURRENT OBLIGATIONS	1,271		1,388		1,396		1,264		1,285				1,410		1,585		1,504		1,492
STOCKHOLDERS’ EQUITY	6,193		6,409		6,771		6,892		7,179				6,655		6,493		6,387		6,344
TOTAL LIABILITIES & SE	14,358		13,894		14,302		15,050		15,838				14,474		14,308		14,370		15,082
CASH FLOW(2)	Q1		Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06
OPERATING ACTIVITIES	574		123		129		142		564		958		204		(211	)	184		390		567
INVESTING ACTIVITIES	(211	)	143		(1,013	)	(110	)	(97	)	(1,077	)	(750	)	(194	)	230		1,366		652
FINANCING ACTIVITIES	(1,231	)	(473	)	135		647		(139	)	170		3		90		34		172		299
KEY METRICS	Q1		Q1		Q2		Q3		Q4				Q1		Q2		Q3		Q4
DAYS SALES OUTSTANDING (DSO)	62		57		59		67		70				69		62		65		64
DAYS OF SUPPLY ON HAND (DOS)	31		29		28		28		23				33		26		29		22
DAYS PAYABLES OUTSTANDING (DPO)	(62	)	(63	)	(59	)	(59	)	(61	)			(64	)	(57	)	(65	)	(59	)
CASH CONVERSION CYCLE (CCC)	31		23		28		36		32				37		31		29		26
L-T DEBT/EQUITY (%)	20.5	%	9.1	%	8.6	%	18.4	%	17.6	%			9.1	%	9.1	%	9.2	%	9.1	%
INVENTORY TURNS-PRODUCT ONLY (hist.)	8.2		8.8		8.6		8.7		9.0				8.6		8.8		9.3		9.9
ROE (12 mo. avg.)(%)	9.1	%	-12.4	%	-6.8	%	-2.4	%	6.9	%			-1.5	%	-4.9	%	-7.8	%	-13.4	%
ROA (12 mo. avg.)(%)	4.2	%	-5.5	%	-3.1	%	-1.1	%	3.2	%			-0.7	%	-2.3	%	-3.6	%	-5.9	%
ROIC (12 mo. avg.)(%)	1.7	%	-5.5	%	-3.7	%	-2.5	%	4.5	%			-2.9	%	-4.0	%	-4.2	%	-26.0	%
DEPREC. & AMORT. ($M)	193		204		214		209		203				189		265		228		224
CAPITAL INVESTMENTS, NET ($M)(1)	127		(160	)	81		152		(36	)			48		82		63		122
NUMBER OF EMPLOYEES	33,904		36,250		34,667		34,494		34,219				38,588		38,802		38,312		38,061
REVENUE PER EMPLOYEE (12 mo. Avg.) ($K)	405		357		374		387		397				334		332		333		340

(1) 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.

(2) Certain numbers presented in the Q1-Q3 fiscal 2007 and all periods in Fiscal 2006 balance sheets and statements of cash flow 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.

(3) Certain numbers presented in the fiscal 2007 balance sheets have been reclassified from accounts payable to accrued liabilities and other.

SUN MICROSYSTEMS, INC.

ADJUSTED EBITDA - NON-GAAP(1) (in millions)	FY2008		FY2007										FY 2006
	Q1		Q1		Q2		Q3		Q4		FY07		Q1		Q2		Q3		Q4		FY06
Net income (loss), as reported	89		(56	)	133		67		329		473		(123	)	(223	)	(217	)	(301	)	(864	)
Interest (income) expense, net	(58	)	(42	)	(63	)	(50	)	(59	)	(214	)	(44	)	(25	)	(26	)	(19	)	(114	)
Taxes	54		34		23		(3	)	56		110		43		76		35		35		189
Amortization of acquisition related intangibles	74		81		80		78		74		313		46		107		89		89		331
Depreciation and amortization	119		123		134		131		129		517		143		158		139		135		575
EBITDA	278		140		307		223		529		1,199		65		93		20		(61	)	117
Adjustments:
Stock based compensation	48		58		58		50		48		214		58		58		50		48		214
(Gain) loss on equity investments, net	(22	)	0		0		(5	)	(1	)	(6	)	(13	)	(14	)	(4	)	4		(27	)
Settlement (income) loss	0		0		0		(54	)	0		(54	)	0		0		0		(54	)	(54	)
Adjusted EBITDA	304		198		365		214		576		1,353		110		137		66		(63	)	250
Adjusted EBITDA % of revenue	9.4	%	6.2	%	10.2	%	6.5	%	15.0	%	9.8	%	4.0	%	4.1	%	2.1	%	-1.6	%	1.9	%
Growth vs. prior year (%)	53.5	%	80.0	%	166.4	%	224.2	%	1014.3	%	441.2	%	-11.3	%	-45.2	%	-33.3	%	-148.1	%	-58.6	%
Growth vs. prior quarter (%)	-47.2	%	414.3	%	84.3	%	-41.4	%	169.2	%	0.0	%	-16.0	%	24.5	%	-51.8	%	-195.5	%	0.0	%

(1) Non-GAAP Financial Measures

This operations analysis and the related conference call contain non-GAAP financial measures. Sun utilizes a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing its overall business performance, for making operating decisions and for forecasting and planning future periods. These non-GAAP financial measures include EBITDA and Adjusted EBITDA. EBITDA is defined as earnings before net interest, taxes, amortization of acquisition related intangibles and other depreciation and amortization. We further exclude stock-based compensation, gain on equity investments, net, and settlement income to determine Adjusted EBITDA. These measures are used by some investors when assessing the performance of Sun. Sun believes the assessment of its operations excluding these items is relevant to the assessment of internal operations and comparisons to industry performance.

Reasons for Presenting Non-GAAP Measures. Sun believes these non-GAAP measures help indicate Sun’s baseline performance before gains, losses or charges that are considered by Sun to be outside on-going operating results. Accordingly, Sun uses these non-GAAP measures to gain a better understanding of Sun’s comparative operating performance from period-to-period and as a basis for planning and forecasting future periods. Sun believes these non-GAAP measures, when read in conjunction with Sun’s GAAP financials, provide useful information to investors by offering:

• the ability to make more meaningful period-to-period comparisons of Sun’s on-going operating results;

• the ability to better identify trends in Sun’s underlying business and perform related trend analysis;

• a better understanding of how management plans and measures Sun’s underlying business; and

• an easier way to compare Sun’s most recent results of operations against investor and analyst financial models.

Items Excluded From Non-GAAP Measures. As described above, the calculation of Adjusted EBITDA (and, in some cases, EBITDA) excludes items in the following general categories, which are discussed in more detail below:

Stock-based Compensation. Stock-based compensation is a key incentive offered to our employees, and Sun believes such compensation contributed to the revenues earned during the periods presented and also believes it will contribute to the generation of future period revenues. Nevertheless, Sun believes that the exclusion of non-cash stock-based compensation allows management and investors to compare Sun’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use to account for stock-based compensation under FAS 123R, Sun’s management believes that providing a non-GAAP financial measure that excludes stock-based compensation allows investors to make meaningful comparisons between Sun’s recurring core business operating results and those of other companies, as well as providing Sun’s management with an important tool for financial and operational decision making and for evaluating Sun’s own recurring core business operating results over different periods of time. In addition, Sun prepares and maintains its budgets and forecasts for future periods excluding stock-based compensation. Stock-based compensation expenses will recur in future periods.

Amortization of Acquisition Related Intangibles. Sun excludes amortization of intangible assets resulting from acquisitions to allow more accurate comparisons of its financial results to its historical operations, forward-looking guidance and the financial results of peer companies. In recent years, Sun has completed the acquisition of StorageTek and the acquisition of other assets and technologies, which resulted in operating expenses that would not otherwise have been incurred. Sun believes that providing non-GAAP information for amortization of intangible assets allows the users of its financial statements to review both the GAAP expenses in the period, as well as the non-GAAP expenses, thus providing for enhanced understanding of historic and future financial results and facilitating comparisons to peer companies. Additionally, had Sun internally developed these intangible assets, the amortization of intangible assets would have been expensed historically, and Sun believes the assessment of its operations excluding these costs is relevant to the assessment of internal operations and comparisons to industry performance. Amortization of Acquisition Related Intangibles will recur in future periods.

Net Interest Expense, Taxes, Other Depreciation and Amortization, Net Gain (Loss) on Equity Investments and Settlement Income. Sun excludes these items because it believes that they are not directly related to the underlying performance of Sun’s core business operations. Each of these items are expected to recur in future periods.

Limitations. Each of the non-GAAP financial measures described above, and used in this operations analysis and the related conference call, should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP. Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in Sun’s financial results for the foreseeable future. In addition, other companies, including other companies in Sun’s industry, may calculate non-GAAP financial measures differently than Sun does, limiting their usefulness as a comparative tool. Sun compensates for these limitations by providing specific information in the reconciliation included in this press release regarding the GAAP amounts excluded from the non-GAAP financial measures. In addition, as noted above, Sun evaluates the non-GAAP financial measures together with the most directly comparable GAAP financial information.