Exhibit 99.1

PRESS RELEASE

Sun Microsystems Reports Second Quarter Fiscal Year 2008 Results

Improved Margins and Bookings Growth Signal Strength in Customer Demand

SANTA CLARA, Calif.—January 24, 2008—Sun Microsystems, Inc. (NASDAQ: JAVA) reported results today for its fiscal second quarter, which ended December 30, 2007.

Revenues for the second quarter of fiscal 2008 were $3.615 billion, an increase of approximately 1.4 percent as compared with $3.566 billion for the second quarter of fiscal 2007. Total gross margin as a percent of revenues was 48.5, an increase of 3.5 percentage points, as compared with the second quarter of fiscal 2007.

Net income for the second quarter of fiscal 2008 on a GAAP basis was $260 million, or $0.31 per share⁽¹⁾, as compared with a net income of $133 million, or $0.15 per share, for the second quarter of fiscal 2007. GAAP net income for the second quarter of fiscal 2008 included a $32 million restructuring charge.

Cash generated from operations for the second quarter of fiscal 2008 was $336 million, and the cash and marketable debt securities balance at the end of the quarter was $4.677 billion.

“Today’s results clearly demonstrate steady progress against our financial targets and highlight the accelerating demand set to fuel growth in the back half of the fiscal year,” said Jonathan Schwartz, CEO of Sun Microsystems. “Headlining the results were improved margins and strong bookings along with double digit growth in emerging markets including India, China, Latin America, Eastern Europe, the Middle East and Africa. Adding to the momentum were the Solaris^TM Operating System OEM agreement with Dell and our introduction of the industry's first open source datacenter virtualization and management platform, Sun xVM.”

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

Sun’s Annual Analyst Summit (SAS) will be held February 4-6 in San Francisco, Calif. Financial analysts and portfolio managers who wish to attend in person are invited to register at www.cplan.com/sunanalyst2008. The general public is invited to attend online 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

⁽¹⁾ Basic and diluted net income per share have been retrospectively restated to reflect the one-for-four reverse stock split effective November 12. 2007.

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.

This press release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements regarding demand and expectations for growth in the second half of the fiscal year. 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 and its Quarterly Report on Form 10-Q for the fiscal quarter ended September 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				Six Months Ended
	December 30, 2007		December 31, 2006		December 30, 2007		December 31, 2006
Net revenues:
Products	$	2,249	$	2,260	$	4,229	$	4,219
Services		1,366		1,306		2,605		2,536
Total net revenues		3,615		3,566		6,834		6,755
Cost of sales:
Cost of sales-products (including stock-based compensation expense of $3, $4, $6 and $6) (1)		1,161		1,228		2,190		2,351
Cost of sales-services (including stock-based compensation expense of $9, $8, $17 and $16) (1)		701		734		1,330		1,412
Total cost of sales		1,862		1,962		3,520		3,763
Gross margin		1,753		1,604		3,314		2,992
Operating expenses:
Research and development (including stock-based compensation expense of $16, $17, $31 and $34) (1)		463		507		909		980
Selling, general and administrative (including stock-based compensation expense of $24, $29, $46 and $59) (1)		995		978		1,934		1,936
Restructuring and related impairment of long-lived assets		32		26		145		47
Purchased in-process research and development		1		—		1		—
Total operating expenses		1,491		1,511		2,989		2,963
Operating profit		262		93		325		29
Gain on equity investments, net		—		—		22		—
Interest and other income, net		53		63		111		105
Income before income taxes		315		156		458		134
Provision for income taxes		55		23		109		57
Net income	$	260	$	133	$	349	$	77
Net income per common share-basic (2)	$	0.32	$	0.15	$	0.42	$	0.09
Net income per common share-diluted (2)	$	0.31	$	0.15	$	0.41	$	0.09
Shares used in the calculation of net income per common share-basic (2)		806		881		836		878
Shares used in the calculation of net income per common share-diluted (2)		826		907		855		892

(1) For the three months ended December 30, 2007 and December 31, 2006, respectively.

(2) Basic and diluted shares and basic and diluted net income per share have been retrospectively restated to reflect the one-for-four reverse stock split effective November 12, 2007

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

	December 30, 2007		June 30, 2007(1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,214	$	3,620
Short-term marketable debt securities		1,219		962
Accounts receivable, net		2,789		2,964
Inventories		631		524
Deferred and prepaid tax assets		213		200
Prepaid expenses and other current assets		1,093		1,058
Total current assets		8,159		9,328
Property, plant and equipment, net		1,569		1,533
Long-term marketable debt securities		1,244		1,360
Goodwill		2,496		2,514
Other acquisition-related intangible assets, net		493		633
Other non-current assets		518		470
	$	14,479	$	15,838
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,312	$	1,381
Accrued payroll-related liabilities		730		842
Accrued liabilities and other		1,133		961
Deferred revenues		2,049		2,047
Warranty reserve		211		220
Total current liabilities		5,435		5,451
Long-term debt		1,273		1,264
Long-term deferred revenues		640		659
Other non-current obligations		1,259		1,285
Total stockholders’ equity		5,872		7,179
	$	14,479	$	15,838

(1) Derived from audited financial statements

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

	Six Months Ended
	December 30, 2007			December 31, 2006
Cash flows from operating activities:
Net income	$	349		$	77
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and other amortization		241			257
Amortization of other acquisition related intangible assets		148			161
Deferred taxes		8			(20	)
Impairment of long-lived assets		—			12
Gain on investments and other, net		(23	)		—
Stock-based compensation expense		100			116
Write-off of purchased in-process research and development		1			—
Changes in operating assets and liabilities:
Accounts receivable, net		187			390
Inventories		(104	)		(89	)
Prepaid and other assets		(30	)		(7	)
Accounts payable		(110	)		(106	)
Other liabilities		143			(539	)
Net cash provided by operating activities		910			252
Cash flows from investing activities:
Increase in restricted cash, net		(19	)		(10	)
Purchases of marketable debt securities		(1,030	)		(1,894	)
Proceeds from sales of marketable debt securities		509			662
Proceeds from maturities of marketable debt securities		379			296
Proceeds from sales of equity investments, net		27			7
Proceeds from sales (purchases of) property, plant and equipment, net		(235	)		79
Payments for acquisitions, net of cash acquired		(41	)		(10	)
Net cash used in investing activities		(410	)		(870	)
Cash flows from financing activities:
Purchase of common stock under 2007 Stock Repurchase Plan		(2,000	)		—
Proceeds from issuance of common stock, net		102			138
Principal payments on borrowings and other obligations		(8	)		(476	)
Net cash used in financing activities		(1,906	)		(338	)
Net decrease in cash and cash equivalents		(1,406	)		(956	)
Cash and cash equivalents, beginning of period		3,620			3,569
Cash and cash equivalents, end of period	$	2,214		$	2,613

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)

STATEMENTS OF OPERATIONS	FY 2008						FY 2007										FY 2006
(in millions except per share amounts)	Q1		Q2		FY08		Q1		Q2		Q3		Q4		FY07		Q2		Q3		Q4		FY06
NET REVENUES
Products	1,980		2,249		4,229		1,959		2,260		2,060		2,492		8,771		2,108		2,035		2,524		8,371
Services	1,239		1,366		2,605		1,230		1,306		1,223		1,343		5,102		1,229		1,142		1,304		4,697
TOTAL	3,219		3,615		6,834		3,189		3,566		3,283		3,835		13,873		3,337		3,177		3,828		13,068
Growth vs. prior year (%)	0.9	%	1.4	%	1.2	%	17.0	%	6.9	%	3.3	%	0.2	%	6.2	%	17.5	%	20.9	%	28.7	%	18.0	%
Growth vs. prior quarter (%)	-16.1	%	12.3	%			-16.7	%	11.8	%	-7.9	%	16.8	%			22.4	%	-4.8	%	20.5	%
COST OF SALES
Products	1,029		1,161		2,190		1,123		1,228		1,148		1,312		4,811		1,223		1,152		1,486		4,827
Services	629		701		1,330		678		734		674		711		2,797		693		658		703		2,612
TOTAL	1,658		1,862		3,520		1,801		1,962		1,822		2,023		7,608		1,916		1,810		2,189		7,439
% of revenue	51.5	%	51.5	%	51.5	%	56.5	%	55.0	%	55.5	%	52.8	%	54.8	%	57.4	%	57.0	%	57.2	%	56.9	%
GROSS MARGIN
Products	951		1,088		2,039		836		1,032		912		1,180		3,960		885		883		1,038		3,544
% of product revenue	48.0	%	48.4	%	48.2	%	42.7	%	45.7	%	44.3	%	47.4	%	45.1	%	42.0	%	43.4	%	41.1	%	42.3	%
Services gross margin	610		665		1,275		552		572		549		632		2,305		536		484		601		2,085
% of service revenue	49.2	%	48.7	%	48.9	%	44.9	%	43.8	%	44.9	%	47.1	%	45.2	%	43.6	%	42.4	%	46.1	%	44.4	%
TOTAL GROSS MARGIN	1,561		1,753		3,314		1,388		1,604		1,461		1,812		6,265		1,421		1,367		1,639		5,629
% of revenue	48.5	%	48.5	%	48.5	%	43.5	%	45.0	%	44.5	%	47.2	%	45.2	%	42.6	%	43.0	%	42.8	%	43.1	%
R&D	446		463		909		473		507		514		514		2,008		541		523		543		2,046
% of revenue	13.9	%	12.8	%	13.3	%	14.8	%	14.2	%	15.7	%	13.4	%	14.5	%	16.2	%	16.5	%	14.2	%	15.7	%
PURCHASED IN PROCESS R&D	0		1		1		0		0		0		0		0		0		0		0		60
% 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	%
SG&A	939		995		1,934		958		978		957		958		3,851		1,056		1,020		1,135		4,039
% of revenue	29.2	%	27.5	%	28.3	%	30.0	%	27.4	%	29.2	%	25.0	%	27.8	%	31.6	%	32.1	%	29.6	%	30.9	%
RESTRUCTURING CHARGES	113		32		145		21		26		35		15		97		10		36		226		284
% of revenue	3.5	%	0.9	%	2.1	%	0.7	%	0.7	%	1.1	%	0.4	%	0.7	%	0.3	%	1.1	%	6.0	%	2.2	%
IMPAIRMENT EXPENSE	0		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	%	0.0	%	1.8	%	0.5	%
TOTAL OPERATING EXPENSES	1,498		1,491		2,989		1,452		1,511		1,506		1,487		5,956		1,607		1,579		1,974		6,499
% of revenue	46.5	%	41.2	%	43.7	%	45.5	%	42.4	%	45.9	%	38.8	%	42.9	%	48.2	%	49.7	%	51.6	%	49.7	%
OPERATING INCOME (LOSS)	63		262		325		(64	)	93		(45	)	325		309		(186	)	(212	)	(335	)	(870	)
Operating margin	2.0	%	7.2	%	4.8	%	-2.0	%	2.6	%	-1.4	%	8.5	%	2.2	%	-5.6	%	-6.7	%	-8.8	%	-6.7	%
Interest and other income, net	58		53		111		42		63		50		59		214		25		26		19		114
Gain (loss) on equity investments, net	22		0		22		0		0		5		1		6		14		4		(4	)	27
Settlement income	0		0		0		0		0		54		0		54		0		0		54		54
PRETAX INCOME (LOSS)	143		315		458		(22	)	156		64		385		583		(147	)	(182	)	(266	)	(675	)
Pretax income (loss) margin	4.4	%	8.7	%	6.7	%	-0.7	%	4.4	%	1.9	%	10.0	%	4.2	%	-4.4	%	-5.7	%	-6.9	%	-5.2	%
INCOME TAX PROVISION (BENEFIT)	54		55		109		34		23		(3	)	56		110		76		35		35		189
NET INCOME (LOSS) (Reported)	89		260		349		(56	)	133		67		329		473		(223	)	(217	)	(301	)	(864	)
Growth vs. prior year (%)	258.9	%	95.5	%	353.2	%	54.5	%	159.6	%	130.9	%	209.3	%	154.7	%	-5675.0	%	-675.0	%	-702.0	%	-707.5	%
Growth vs. prior quarter (%)	-72.9	%	192.1	%			81.4	%	337.5	%	-49.6	%	391.0	%			-81.3	%	2.7	%	-38.7	%
Net income (loss) margin	2.8	%	7.2	%	5.1	%	-1.8	%	3.7	%	2.0	%	8.6	%	3.4	%	-6.7	%	-6.8	%	-7.9	%	-6.6	%
EPS (Diluted) (Reported)(1)	0.10		0.31		0.41		(0.06	)	0.15		0.07		0.36		0.52		(0.26	)	(0.25	)	(0.35	)	(1.01	)
Growth vs. prior year (%)	266.7	%	106.7	%	355.6	%	57.1	%	157.7	%	128.0	%	202.9	%	151.5	%	-100.0	%	-733.3	%	-683.3	%	676.9	%
Growth vs. prior quarter (%)	-72.2	%	210.0	%			82.9	%	350.0	%	-53.3	%	414.3	%			-85.7	%	3.8	%	-40.0	%
SHARES (CSE)(Basic)(1)	866		806		836		874		881		887		889		883		856		861		869		859
SHARES (CSE)(Diluted)(1)	884		826		855		874		907		915		908		902		856		861		869		859
OUTSTANDING SHARES(1)	824		792		792		878		885		889		884		884		865		868		876		876

(1) Basic, diluted and outstanding shares have been retroactively restated to reflect the one-for-four reverse stock split effective November 12, 2007. Accordingly, basic and diluted EPS has also been retroactively restated to reflect the reverse stock split.

	FY 2008						FY 2007										FY 2006
(in millions)	Q1		Q2		FY08		Q1		Q2		Q3		Q4		FY07		Q2		Q3		Q4		FY06
REVENUE BY GEOGRAPHY(3)
UNITED STATES ($M)	1,303		1,302		2,605		1,361		1,415		1,283		1,582		5,641		1,400		1,357		1,610		5,535
Growth vs. prior year (%)	-4.3	%	-8.0	%	-6.2	%	16.5	%	1.1	%	-5.5	%	-1.7	%	1.9	%	23.9	%	38.2	%	37.0	%	26.0	%
Growth vs. prior quarter (%)	-17.6	%	-0.1	%			-15.5	%	4.0	%	-9.3	%	23.3	%			19.9	%	-3.1	%	18.6	%
INTERNATIONAL AMERICAS ($M)	204		286		490		197		230		195		241		863		190		185		242		755
Growth vs. prior year (%)	3.6	%	24.3	%	14.8	%	42.8	%	21.1	%	5.4	%	-0.4	%	14.3	%	15.2	%	28.5	%	41.5	%	28.0	%
Growth vs. prior quarter (%)	-15.4	%	40.2	%			-18.6	%	16.8	%	-15.2	%	23.6	%			37.7	%	-2.6	%	30.8	%
EMEA ($M)	1,161		1,406		2,567		1,109		1,311		1,212		1,367		4,999		1,224		1,115		1,341		4,646
Growth vs. prior year (%)	4.7	%	7.2	%	6.1	%	14.8	%	7.1	%	8.7	%	1.9	%	7.6	%	18.0	%	10.5	%	18.4	%	11.9	%
Growth vs. prior quarter (%)	-15.1	%	21.1	%			-17.3	%	18.2	%	-7.6	%	12.8	%			26.7	%	-8.9	%	20.3	%
APAC ($M)	551		621		1,172		522		610		593		645		2,370		523		520		635		2,132
Growth vs. prior year (%)	5.6	%	1.8	%	3.5	%	15.0	%	16.6	%	14.0	%	1.6	%	11.2	%	2.8	%	5.7	%	28.3	%	10.1	%
Growth vs. prior quarter (%)	-14.6	%	12.7	%			-17.8	%	16.9	%	-2.8	%	8.8	%			15.2	%	-0.6	%	22.1	%
% of Total Revenue
UNITED STATES (%)	40.5	%	36.0	%	38.1	%	42.7	%	39.7	%	39.1	%	41.3	%	40.7	%	42.0	%	42.7	%	42.1	%	42.4	%
INTERNATIONAL AMERICAS (%)	6.3	%	7.9	%	7.2	%	6.2	%	6.4	%	5.9	%	6.3	%	6.2	%	5.7	%	5.8	%	6.3	%	5.8	%
EMEA (%)	36.1	%	38.9	%	37.6	%	34.7	%	36.8	%	36.9	%	35.6	%	36.0	%	36.6	%	35.1	%	35.0	%	35.5	%
APAC (%)	17.1	%	17.2	%	17.1	%	16.4	%	17.1	%	18.1	%	16.8	%	17.1	%	15.7	%	16.4	%	16.6	%	16.3	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)	1,475		1,594		3,069		1,468		1,634		1,500		1,853		6,455		1,438		1,474		1,811		5,997
Growth vs. prior year (%)	0.5	%	-2.4	%	-1.1	%	15.2	%	13.6	%	1.8	%	2.3	%	7.6	%	-4.5	%	6.0	%	14.9	%	2.9	%
Growth vs. prior quarter (%)	-20.4	%	8.1	%			-18.9	%	11.3	%	-8.2	%	23.5	%			12.9	%	2.5	%	22.9	%
STORAGE PRODUCTS ($M)	505		655		1,160		491		626		560		639		2,316		670		561		713		2,374
Growth vs. prior year (%)	2.9	%	4.6	%	3.8	%	14.2	%	-6.6	%	-0.2	%	-10.4	%	-2.4	%	100.0	%	92.1	%	103.1	%	82.6	%
Growth vs. prior quarter (%)	-21.0	%	29.7	%			-31.1	%	27.5	%	-10.5	%	14.1	%			55.8	%	-16.3	%	27.1	%
SUPPORT SERVICES ($M)	979		1,041		2,020		987		1,001		950		1,024		3,962		953		904		986		3,678
Growth vs. prior year (%)	-0.8	%	4.0	%	1.6	%	18.2	%	5.0	%	5.1	%	3.9	%	7.7	%	23.1	%	23.2	%	26.7	%	21.3	%
Growth vs. prior quarter (%)	-4.4	%	6.3	%			0.1	%	1.4	%	-5.1	%	7.8	%			14.1	%	-5.1	%	9.1	%
PROFESSIONAL SERVICES & EDUCATIONAL SERVICES ($M)	260		325		585		243		305		273		319		1,140		276		238		318		1,019
Growth vs. prior year (%)	7.0	%	6.6	%	6.8	%	29.9	%	10.5	%	14.7	%	0.3	%	11.9	%	21.6	%	13.3	%	18.2	%	11.6	%
Growth vs. prior quarter (%)	-18.5	%	25.0	%			-23.6	%	25.5	%	-10.5	%	16.8	%			47.6	%	-13.8	%	33.6	%
NET BOOKINGS ($M)(2)	3,149		3,868		7,017		3,036		3,603		3,238		3,909		13,786		3,018		2,680		3,376		11,487
Growth vs. prior year (%)	3.7	%	7.4	%	5.7	%	25.8	%	19.4	%	20.8	%	15.8	%	20.0	%	1.4	%	5.7	%	9.7	%	4.0	%
Growth vs. prior quarter (%)	-19.4	%	22.8	%			-10.1	%	18.7	%	-10.1	%	20.7	%			25.1	%	-11.2	%	26.0	%
BOOK TO BILL RATIO	0.98		1.07				0.95		1.01		0.99		1.02				1.11		0.99		1.04
PRODUCT BACKLOG ($M)(1), (2)	980		1,233				994		1,021		975		1,051				1,021		980		1,099
SERVICES BACKLOG ($M)	951		772				875		729		820		624				580		608		752
TOTAL BACKLOG ($M)	1,931		2,005				1,869		1,750		1,795		1,675				1,601		1,588		1,851
DEFERRED REVENUES
PRODUCTS DEFERRED REVENUES ($M)	564		793				486		538		577		603				500		502		602
Growth vs. prior year (%)	16.0	%	47.4	%			11.0	%	7.6	%	14.9	%	0.2	%			15.5	%	23.3	%	11.7	%
Growth vs. prior quarter (%)	-6.5	%	40.6	%			-19.3	%	10.7	%	7.2	%	4.5	%			14.2	%	0.4	%	19.9	%
SERVICES DEFERRED REVENUES ($M)	1,977		1,896				1,746		1,630		1,881		2,103				1,491		1,629		1,873
Growth vs. prior year (%)	13.2	%	16.3	%			9.4	%	9.3	%	15.5	%	12.3	%			6.6	%	7.8	%	13.3	%
Growth vs. prior quarter (%)	-6.0	%	-4.1	%			-6.8	%	-6.6	%	15.4	%	11.8	%			-6.6	%	9.3	%	15.0	%
TOTAL DEFERRED REVENUES ($M)	2,541		2,689				2,232		2,168		2,458		2,706				1,991		2,131		2,475
Growth vs. prior year (%)	13.8	%	24.0	%			9.7	%	8.9	%	15.3	%	9.3	%			8.7	%	11.1	%	12.9	%
Growth vs. prior quarter (%)	-6.1	%	5.8	%			-9.8	%	-2.9	%	13.4	%	10.1	%			-2.1	%	7.0	%	16.1	%

(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) (4)	FY 2008						FY 2007										FY 2006
(in millions)	Q1		Q2				Q1		Q2		Q3		Q4				Q2		Q3		Q4
CASH & ST INVESTMENTS	3,819		3,433				3,971		3,456		4,114		4,582				2,449		2,872		4,065
ACCOUNTS RECEIVABLE, NET	2,203		2,789				2,036		2,331		2,458		2,964				2,289		2,301		2,702
RAW MATERIALS	130		152				119		126		106		125				95		49		68
WORK IN PROCESS	110		96				92		106		101		95				134		125		97
FINISHED GOODS	331		383				373		373		360		304				321		400		375
TOTAL INVENTORIES	571		631				584		605		567		524				550		574		540
OTHER CURRENT ASSETS	1,297		1,306				961		970		1,023		1,258				933		966		966
TOTAL CURRENT ASSETS	7,890		8,159				7,552		7,362		8,162		9,328				6,221		6,713		8,273
PP&E, NET	1,556		1,569				1,583		1,579		1,586		1,533				1,914		1,880		1,812
GOODWILL	2,466		2,496				2,566		2,571		2,571		2,514				2,472		2,487		2,610
LT MARKETABLE DEBT SECURITIES	1,374		1,244				700		1,381		1,372		1,360				1,827		1,557		783
OTHER NON-CURRENT ASSETS	1,072		1,011				1,493		1,409		1,359		1,103				1,874		1,733		1,604
TOTAL ASSETS	14,358		14,479				13,894		14,302		15,050		15,838				14,308		14,370		15,082
ACCOUNTS PAYABLE	1,140		1,312				1,263		1,296		1,187		1,381				1,214		1,315		1,446
ACCRUED LIABILITIES & OTHER	1,943		2,074				2,020		2,092		1,979		2,023				2,432		2,448		2,750
DEFERRED REVENUES	1,911		2,049				1,674		1,601		1,869		2,047				1,522		1,659		1,969
TOTAL CURRENT LIABILITIES	4,994		5,435				4,957		4,989		5,035		5,451				5,168		5,422		6,165
LT DEBT	1,270		1,273				582		579		1,270		1,264				593		585		575
LT DEFERRED REVENUES	630		640				558		567		589		659				469		472		506
OTHER NON-CURRENT OBLIGATIONS	1,271		1,259				1,388		1,396		1,264		1,285				1,585		1,504		1,492
STOCKHOLDERS’ EQUITY	6,193		5,872				6,409		6,771		6,892		7,179				6,493		6,387		6,344
TOTAL LIABILITIES & SE	14,358		14,479				13,894		14,302		15,050		15,838				14,308		14,370		15,082
CASH FLOW(2)	Q1		Q2		FY08		Q1		Q2		Q3		Q4		FY07		Q2		Q3		Q4		FY06
OPERATING ACTIVITIES	574		336		910		123		129		142		564		958		(211	)	184		390		567
INVESTING ACTIVITIES	(211	)	(199	)	(410	)	143		(1,013	)	(110	)	(97	)	(1,077	)	(194	)	230		1,366		652
FINANCING ACTIVITIES	(1,231	)	(675	)	(1,906	)	(473	)	135		647		(139	)	170		90		34		172		299
KEY METRICS	Q1		Q2				Q1		Q2		Q3		Q4				Q2		Q3		Q4
DAYS SALES OUTSTANDING (DSO)	62		69				57		59		67		70				62		65		64
DAYS OF SUPPLY ON HAND (DOS)	31		30				29		28		28		23				26		29		22
DAYS PAYABLES OUTSTANDING (DPO)	(62	)	(63	)			(63	)	(59	)	(59	)	(61	)			(57	)	(65	)	(59	)
CASH CONVERSION CYCLE (CCC)	31		36				23		28		36		32				31		29		26
L-T DEBT/EQUITY (%)	20.5	%	21.7	%			9.1	%	8.6	%	18.4	%	17.6	%			9.1	%	9.2	%	9.1	%
INVENTORY TURNS-PRODUCT ONLY (hist.)	8.2		7.5				8.8		8.6		8.7		9.0				8.8		9.3		9.9
ROE (12 mo. avg.)(%)	9.1	%	11.4	%			-12.4	%	-6.8	%	-2.4	%	6.9	%			-4.9	%	-7.8	%	-13.4	%
ROA (12 mo. avg.)(%)	4.2	%	5.0	%			-5.5	%	-3.1	%	-1.1	%	3.2	%			-2.3	%	-3.6	%	-5.9	%
ROIC (12 mo. avg.)(%)	1.7	%	2.8	%			-5.5	%	-3.7	%	-2.5	%	4.5	%			-4.0	%	-4.2	%	-26.0	%
DEPREC. & AMORT. ($M)	193		196				204		214		209		203				265		228		224
CAPITAL INVESTMENTS, NET ($M)(1)	127		108				(160	)	81		152		(36	)			82		63		122
NUMBER OF EMPLOYEES	33,904		33,350				36,250		34,667		34,494		34,219				38,802		38,312		38,061
REVENUE PER EMPLOYEE (12 mo. Avg.) ($K)	405		410				357		374		387		397				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.

(4) Certain numbers presented in the fiscal 2007, fiscal 2006 and first quarter balance sheets have been reclassified from deferred revenues to accrued liabilities and other.

SUN MICROSYSTEMS, INC.

ADJUSTED EBITDA – NON-GAAP(1)	FY2008						FY2007										FY 2006
(in millions)	Q1		Q2		FY08		Q1		Q2		Q3		Q4		FY07		Q2		Q3		Q4		FY06
Net income (loss), as reported	89		260		349		(56	)	133		67		329		473		(223	)	(217	)	(301	)	(864	)
Interest (income) expense, net	(58	)	(53	)	(111	)	(42	)	(63	)	(50	)	(59	)	(214	)	(25	)	(26	)	(19	)	(114	)
Taxes	54		55		109		34		23		(3	)	56		110		76		35		35		189
Amortization of acquisition related intangibles	74		74		148		81		80		78		74		313		107		89		89		331
Depreciation and amortization	119		122		241		123		134		131		129		517		158		139		135		575
EBITDA	278		458		736		140		307		223		529		1,199		93		20		(61	)	117
Adjustments:
Stock based compensation	48		52		100		58		58		50		48		214		58		50		48		214
(Gain) loss on equity investments, net	(22	)	—		(22	)	—		—		(5	)	(1	)	(6	)	(14	)	(4	)	4		(27	)
Settlement (income) loss	—		—		—		—		—		(54	)	—		(54	)	—		—		(54	)	(54	)
Adjusted EBITDA	304		510		814		198		365		214		576		1,353		137		66		(63	)	250
Adjusted EBITDA % of revenue	9.4	%	14.1	%	11.9	%	6.2	%	10.2	%	6.5	%	15.0	%	9.8	%	4.1	%	2.1	%	-1.6	%	1.9	%
Growth vs. prior year (%)	53.5	%	39.7	%	44.6	%	80.0	%	166.4	%	224.2	%	1014.3	%	441.2	%	-45.2	%	-33.3	%	-148.1	%	-58.6	%
Growth vs. prior quarter (%)	-47.2	%	67.8	%			414.3	%	84.3	%	-41.4	%	169.2	%			24.5	%	-51.8	%	-195.5	%

(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.