Exhibit 99.1

PRESS RELEASE

Sun Microsystems Reports Final Results for Full Fiscal Year and Fourth Quarter 2008

Announces Additional $1 Billion Share Repurchase Authorization

SANTA CLARA, Calif. – August 1, 2008 – Sun Microsystems, Inc. (NASDAQ: JAVA) reported results today for its full fiscal year and fourth quarter, which ended June 30, 2008.

For the full fiscal year, Sun reported revenues of $13.880 billion, an increase of 0.1 percent over fiscal year 2007. Revenues for the fourth quarter of fiscal 2008 were $3.780 billion, a decrease of 1.4 percent from $3.835 in the fourth quarter of fiscal 2007. Total gross margin as a percent of revenues for the full fiscal year was 46.5 percent, an increase of 1.3 percentage points over fiscal year 2007. Gross margin for the fourth quarter of fiscal 2008 was 44.3 percent, a decrease of 2.9 percentage points from the fourth quarter of fiscal 2007.

Net income on a GAAP basis for the full fiscal year was $403 million, or $0.49 per share on a diluted basis, as compared with net income of $473 million, or $0.52 per share on a diluted basis, for fiscal year 2007. Net income for the fourth quarter of fiscal 2008 was $88 million, or $0.11 per share on a diluted basis, as compared with net income of $329 million, or $0.36 per share on a diluted basis, for the fourth quarter of fiscal 2007.

Non-GAAP net income for the full fiscal year was $1.101 billion, or $1.34 per share on a diluted basis, as compared with non-GAAP net income of $1.003 billion, or $1.11 per share on a diluted basis, for fiscal year 2007. Non-GAAP net income for the fourth quarter of fiscal 2008 was $275 million, or $0.35 per share on a diluted basis, as compared with non-GAAP net income of $458 million, or $0.50 per share on a diluted basis, for the fourth quarter of fiscal 2007. Non-GAAP net income excludes purchased-in-process research and development, amortization of acquisition related intangibles, stock-based compensation, restructuring and related impairment of long-lived assets, net gain or loss on equity investments, settlement income and the tax effect of these non-GAAP adjustments.

Cash generated from operations for the full fiscal year was $1.3 billion, and the cash and marketable debt securities balance at the end of the year was approximately $3.3 billion.

“On a year-over-year basis, we saw significant improvements across a number of key operating metrics ranging from gross margins to non-GAAP earnings per share and cash flow from operations,” said Jonathan Schwartz, CEO of Sun Microsystems. “Despite this progress and strong growth in international geographies, slowing performance in the U.S. impacted top line revenue growth. Looking forward, we remain confident in open source innovation as the accelerant to our growth strategy through increased adoption of our open source offerings – from the OpenSolaris^TM operating system and the MySQL^TM database to the Lustre ^TM and ZFS^TM storage systems, the foundation of our open storage platforms.”

Full Fiscal Year & Fourth Quarter 2008 Highlights:

• On an annual basis, Sun improved gross margins by 1.3 percentage points, decreased total R&D and SG&A expenses by $70 million, improved non-GAAP net income per share on a diluted basis by 21 percent and increased cash flow from operations by $371 million.

• Sun reported double-digit annual revenue growth in key international markets including Brazil, India, Russia and Greater China.

• Global demand for MySQL continued to accelerate, with billings growth in the fourth quarter of over 44 percent year-over-year.

• Sun’s energy-efficient, Solaris^TM -based Chip Multi-Threading (CMT) systems delivered 61 percent year-over-year billings growth in Q4, and for fiscal year 2008 was a $1.1 billion dollar business for Sun.

• ZFS, the foundation of Sun’s Open Storage product line, saw increased adoption across the globe during the quarter, and along with the Sun Fire^TM x4500 server – the world’s first hybrid server/storage data server – helped customers reduce costs through the use of open source software on industry standard systems.

During the fourth quarter, Sun continued to leverage its cash position, spending $464 million to repurchase 35.7 million shares of its common stock. Currently, $36 million remains of the $3 billion share repurchase program announced in Sun’s fourth quarter of fiscal 2007. Sun also announced today that its Board of Directors authorized an additional repurchase of up to $1 billion of the company’s outstanding common shares. For more information about this share repurchase, please see the press release issued by Sun today which can be found at www.sun.com/investors.

Sun has scheduled a conference call today to discuss its financial results for the full fiscal year and fourth quarter 2008 at 5:00 a.m. (PT) / 8:00 a.m. (ET), 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.

This press release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements regarding Sun’s confidence in open source innovation as the accelerant to its growth strategy, the rate of adoption of Sun’s open source offerings and the offerings constituting the foundation of Sun’s open storage platforms. 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 Reports on Form 10-Q for the fiscal quarters ended September 30, 2007, December 30, 2007 and March 30, 2008. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements.

To supplement Sun’s financial results presented in accordance with GAAP, Sun provides non-GAAP net income and non-GAAP net income per share on a diluted basis. The presentation of these non-GAAP financial measures should be considered in addition to Sun’s GAAP results and are 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 Sun’s performance by excluding certain gains, losses and charges 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 “Calculation of Non-GAAP Net Income” following the text of this press release.

#     #     #    

Sun, Sun Microsystems, the Sun logo, OpenSolaris, MySQL, Lustre, ZFS, Solaris, Sun Fire and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. or its subsidiaries in the United States and other countries.

Investor Contact:

Ron Pasek

650-786-8008

ron.pasek@sun.com

Press Contact:

Kristi Rawlinson

650-786-6933

kristi.rawlinson@sun.com

Industry Analyst Contact:

Kathy Engle

415-294-4368

kathy.engle@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, 2008		June 30, 2007			June 30, 2008		June 30, 2007
Net revenues:
Products	$	2,386	$	2,492		$	8,618	$	8,771
Services		1,394		1,343			5,262		5,102
Total net revenues		3,780		3,835			13,880		13,873
Cost of sales:
Cost of sales-products (1)		1,372		1,312			4,668		4,811
Cost of sales-services (1)		735		711			2,757		2,797
Total cost of sales		2,107		2,023			7,425		7,608
Gross margin		1,673		1,812			6,455		6,265
Operating expenses:
Research and development (1)		468		514			1,834		2,008
Selling, general and administrative (1)		1,032		958			3,955		3,851
Restructuring charges and related impairment of long-lived assets		104		15			263		97
Purchased in-process research and development		6		—			31		—
Total operating expenses		1,610		1,487			6,083		5,956
Operating income		63		325			372		309
Gain on equity investments, net		10		1			32		6
Interest and other income, net		16		59			161		214
Settlement income		45		—			45		54
Income before income taxes		134		385			610		583
Provision for income taxes		46		56			207		110
Net income	$	88	$	329		$	403	$	473
Net income per common share-basic	$	0.11	$	0.37	(2)	$	0.50	$	0.54	(2)
Net income per common share-diluted	$	0.11	$	0.36	(2)	$	0.49	$	0.52	(2)
Shares used in the calculation of net income per common share-basic		772		889	(2)		809		883	(2)
Shares used in the calculation of net income per common share-diluted		776		908	(2)		822		902	(2)
(1)    Includes stock-based compensation expense as follows:
Cost of sales-products	$	4	$	3		$	12	$	13
Cost of sales-services	$	10	$	8		$	38	$	31
Research and development	$	20	$	14		$	67	$	64
Selling, general and administrative	$	23	$	23		$	97	$	106

(2) Amounts have been restated to reflect the one-for-four reverse stock split effective November 12, 2007.

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions)

	June 30, 2008		June 30, 2007 (1)
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,272	$	3,620
Short-term marketable debt securities		429		962
Accounts receivable, net		3,019		2,964
Inventories		680		524
Deferred and prepaid tax assets		372		200
Prepaid expenses and other current assets, net		1,218		1,058
Total current assets		7,990		9,328
Property, plant and equipment, net		1,611		1,533
Long-term marketable debt securities		609		1,360
Goodwill		3,215		2,514
Other acquisition-related intangible assets, net		566		633
Other non-current assets, net		477		470
	$	14,468	$	15,838
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,387	$	1,381
Accrued payroll-related liabilities		734		842
Accrued liabilities and other		1,105		961
Deferred revenues		2,236		2,047
Warranty reserve		206		220
Total current liabilities		5,668		5,451
Long-term debt		1,265		1,264
Long-term deferred revenues		683		659
Other non-current obligations		1,264		1,285
Total stockholders’ equity		5,588		7,179
	$	14,468	$	15,838

(1) Derived from audited financial statements.

SUN MICROSYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

	Fiscal Years Ended
	June 30, 2008			June 30, 2007
Cash flows from operating activities:
Net income	$	403		$	473
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		476			517
Amortization of acquisition-related intangible assets		310			313
Stock-based compensation expense		214			214
Purchased in-process research and development		31			—
Gain on investments and other, net		(68	)		(42	)
Impairment of long-lived assets		—			16
Tax provisions for employee stock plans		—			29
Deferred taxes		2			74
Changes in operating assets and liabilities:
Accounts receivable, net		(9	)		(241	)
Inventories		(148	)		(6	)
Prepaid and other assets, net		(295	)		(191	)
Accounts payable		(15	)		(8	)
Other liabilities		428			(190	)
Net cash provided by operating activities		1,329			958
Cash flows from investing activities:
Decrease (increase) in restricted cash		17			(5	)
Purchases of marketable debt securities		(1,333	)		(3,088	)
Proceeds from sales of marketable debt securities		1,550			1,335
Proceeds from maturities of marketable debt securities		1,058			725
Proceeds from sales of equity investments, net		32			16
Purchases of property, plant and equipment, net		(520	)		(488	)
Proceeds from sales of property, plant and equipment		79			451
Payments for acquisitions, net of cash acquired		(949	)		(23	)
Net cash used in investing activities		(66	)		(1,077	)
Cash flows from financing activities:
Purchase of common stock call options		—			(228	)
Sale of common stock warrants		—			145
Purchase of common stock under 2007 Stock Repurchase Plan		(2,764	)		(200	)
Proceeds from issuance of options and ESPP purchases, net		177			244
Proceeds from issuance of convertible notes, net		—			692
Principal payments on borrowings and other obligations		(24	)		(483	)
Net cash (used in) provided by financing activities		(2,611	)		170
Net decrease in cash and cash equivalents		(1,348	)		51
Cash and cash equivalents, beginning of period		3,620			3,569
Cash and cash equivalents, end of period	$	2,272		$	3,620

SUN MICROSYSTEMS, INC.

CALCULATION OF NON-GAAP NET INCOME

(unaudited)

(in millions, except per share amounts)

	Three Months Ended						Fiscal Years Ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Calculation of non-GAAP net income:
GAAP net income	$	88		$	329		$	403		$	473
Purchased in-process research and development		6			—			31			—
Amortization of acquisition related intangibles		86			74			310			313
Stock-based compensation		57			48			214			214
Restructuring and related impairment of long-lived assets		104			15			263			97
Gain on equity investments, net		(10	)		(1	)		(32	)		(6	)
Settlement income		(45	)		—			(45	)		(54	)
Tax effect of non-GAAP adjustments		(11	)		(7	)		(43	)		(34	)
Non-GAAP net income	$	275		$	458		$	1,101		$	1,003
Diluted non-GAAP net income per share	$	0.35		$	0.50		$	1.34		$	1.11
Shares used in the calculation of non-GAAP net income per common share – diluted		776			908			822			902

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)

STATEMENTS OF OPERATIONS	FY 2008										FY 2007										FY 2006
(in millions except per share amounts)	Q1		Q2		Q3		Q4		FY08		Q1		Q2		Q3		Q4		FY07		Q4		FY06
NET REVENUES
Products	1,980		2,249		2,003		2,386		8,618		1,959		2,260		2,060		2,492		8,771		2,524		8,371
Services	1,239		1,366		1,263		1,394		5,262		1,230		1,306		1,223		1,343		5,102		1,304		4,697
TOTAL	3,219		3,615		3,266		3,780		13,880		3,189		3,566		3,283		3,835		13,873		3,828		13,068
Growth vs. prior year (%)	0.9	%	1.4	%	-0.5	%	-1.4	%	0.1	%	17.0	%	6.9	%	3.3	%	0.2	%	6.2	%	28.7	%	18.0	%
Growth vs. prior quarter (%)	-16.1	%	12.3	%	-9.7	%	15.7	%			-16.7	%	11.8	%	-7.9	%	16.8	%			20.5	%
COST OF SALES
Products	1,029		1,161		1,106		1,372		4,668		1,123		1,228		1,148		1,312		4,811		1,486		4,827
Services	629		701		692		735		2,757		678		734		674		711		2,797		703		2,612
TOTAL	1,658		1,862		1,798		2,107		7,425		1,801		1,962		1,822		2,023		7,608		2,189		7,439
% of revenue	51.5	%	51.5	%	55.1	%	55.7	%	53.5	%	56.5	%	55.0	%	55.5	%	52.8	%	54.8	%	57.2	%	56.9	%
GROSS MARGIN
Products	951		1,088		897		1,014		3,950		836		1,032		912		1,180		3,960		1,038		3,544
% of product revenue	48.0	%	48.4	%	44.8	%	42.5	%	45.8	%	42.7	%	45.7	%	44.3	%	47.4	%	45.1	%	41.1	%	42.3	%
Services gross margin	610		665		571		659		2,505		552		572		549		632		2,305		601		2,085
% of service revenue	49.2	%	48.7	%	45.2	%	47.3	%	47.6	%	44.9	%	43.8	%	44.9	%	47.1	%	45.2	%	46.1	%	44.4	%
TOTAL GROSS MARGIN	1,561		1,753		1,468		1,673		6,455		1,388		1,604		1,461		1,812		6,265		1,639		5,629
% of revenue	48.5	%	48.5	%	44.9	%	44.3	%	46.5	%	43.5	%	45.0	%	44.5	%	47.2	%	45.2	%	42.8	%	43.1	%
R&D	446		463		457		468		1,834		473		507		514		514		2,008		543		2,046
% of revenue	13.9	%	12.8	%	14.0	%	12.4	%	13.2	%	14.8	%	14.2	%	15.7	%	13.4	%	14.5	%	14.2	%	15.7	%
PURCHASED IN PROCESS R&D	—		1		24		6		31		—		—		—		—		—		—		60
% of revenue	0.0	%	0.0	%	0.7	%	0.2	%	0.2	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.5	%
SG&A	939		995		989		1,032		3,955		958		978		957		958		3,851		1,135		4,039
% of revenue	29.2	%	27.5	%	30.3	%	27.3	%	28.5	%	30.0	%	27.4	%	29.2	%	25.0	%	27.8	%	29.6	%	30.9	%
RESTRUCTURING CHARGES	113		32		14		104		263		21		26		35		15		97		226		284
% of revenue	3.5	%	0.9	%	0.4	%	2.8	%	1.9	%	0.7	%	0.7	%	1.1	%	0.4	%	0.7	%	5.9	%	2.2	%
IMPAIRMENT EXPENSE	—		—		—		—		—		—		—		—		—		—		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		1,484		1,610		6,083		1,452		1,511		1,506		1,487		5,956		1,974		6,499
% of revenue	46.5	%	41.2	%	45.4	%	42.6	%	43.8	%	45.5	%	42.4	%	45.9	%	38.8	%	42.9	%	51.6	%	49.7	%
OPERATING INCOME (LOSS)	63		262		(16	)	63		372		(64	)	93		(45	)	325		309		(335	)	(870	)
Operating margin	2.0	%	7.2	%	-0.5	%	1.7	%	2.7	%	-2.0	%	2.6	%	-1.4	%	8.5	%	2.2	%	-8.8	%	-6.7	%
Interest and other income, net	58		53		34		16		161		42		63		50		59		214		19		114
Gain (loss) on equity investments, net	22		—		—		10		32		—		—		5		1		6		(4	)	27
Settlement income	—		—		—		45		45		—		—		54		—		54		54		54
PRETAX INCOME (LOSS)	143		315		18		134		610		(22	)	156		64		385		583		(266	)	(675	)
Pretax income (loss) margin	4.4	%	8.7	%	0.6	%	3.5	%	4.4	%	-0.7	%	4.4	%	1.9	%	10.0	%	4.2	%	-6.9	%	-5.2	%
INCOME TAX PROVISION (BENEFIT)	54		55		52		46		207		34		23		(3	)	56		110		35		189
NET INCOME (LOSS) (Reported)	89		260		(34	)	88		403		(56	)	133		67		329		473		(301	)	(864	)
Growth vs. prior year (%)	258.9	%	95.5	%	-150.7	%	-73.3	%	-14.8	%	54.5	%	159.6	%	130.9	%	209.3	%	154.7	%	-702.0	%	-433.3	%
Growth vs. prior quarter (%)	-72.9	%	192.1	%	-113.1	%	358.8	%			81.4	%	337.5	%	-49.6	%	391.0	%			-38.7	%
Net income (loss) margin	2.8	%	7.2	%	-1.0	%	2.3	%	2.9	%	-1.8	%	3.7	%	2.0	%	8.6	%	3.4	%	-7.9	%	-6.6	%
EPS (Diluted) (Reported)(1)	0.10		0.31		(0.04	)	0.11		0.49		(0.06	)	0.15		0.07		0.36		0.52		(0.35	)	(1.01	)
Growth vs. prior year (%)	266.7	%	106.7	%	-157.1	%	-69.4	%	-5.8	%	57.1	%	157.7	%	128.0	%	202.9	%	151.5	%	-683.3	%	-431.6	%
Growth vs. prior quarter (%)	-72.2	%	210.0	%	-112.9	%	375.0	%			82.9	%	350.0	%	-53.3	%	414.3	%			-40.0	%
SHARES (CSE)(Basic)(1)	866		806		785		772		809		874		881		887		889		883		869		859
SHARES (CSE)(Diluted)(1)	884		826		785		776		822		874		907		915		908		902		869		859
OUTSTANDING SHARES(1)	824		792		782		751		751		878		885		889		884		884		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		Q3		Q4		FY08		Q1		Q2		Q3		Q4		FY07		Q4		FY06
REVENUE BY GEOGRAPHY(3)
UNITED STATES ($M)	1,303		1,302		1,159		1,434		5,198		1,361		1,415		1,283		1,582		5,641		1,610		5,535
Growth vs. prior year (%)	-4.3	%	-8.0	%	-9.7	%	-9.4	%	-7.9	%	16.5	%	1.1	%	-5.5	%	-1.7	%	1.9	%	37.0	%	26.0	%
Growth vs. prior quarter (%)	-17.6	%	-0.1	%	-11.0	%	23.7	%			-15.5	%	4.0	%	-9.3	%	23.3	%			18.6	%
INTERNATIONAL AMERICAS ($M)	204		286		225		287		1,002		197		230		195		241		863		242		755
Growth vs. prior year (%)	3.6	%	24.3	%	15.4	%	19.1	%	16.1	%	42.8	%	21.1	%	5.4	%	-0.4	%	14.3	%	41.5	%	28.0	%
Growth vs. prior quarter (%)	-15.4	%	40.2	%	-21.3	%	27.6	%			-18.6	%	16.8	%	-15.2	%	23.6	%			30.8	%
EMEA ($M)	1,161		1,406		1,264		1,416		5,247		1,109		1,311		1,212		1,367		4,999		1,341		4,646
Growth vs. prior year (%)	4.7	%	7.2	%	4.3	%	3.6	%	5.0	%	14.8	%	7.1	%	8.7	%	1.9	%	7.6	%	18.4	%	11.9	%
Growth vs. prior quarter (%)	-15.1	%	21.1	%	-10.1	%	12.0	%			-17.3	%	18.2	%	-7.6	%	12.8	%			20.3	%
APAC ($M)	551		621		618		643		2,433		522		610		593		645		2,370		635		2,132
Growth vs. prior year (%)	5.6	%	1.8	%	4.2	%	-0.3	%	2.7	%	15.0	%	16.6	%	14.0	%	1.6	%	11.2	%	28.3	%	10.1	%
Growth vs. prior quarter (%)	-14.6	%	12.7	%	-0.5	%	4.0	%			-17.8	%	16.9	%	-2.8	%	8.8	%			22.1	%
% of Total Revenue
UNITED STATES (%)	40.5	%	36.0	%	35.5	%	37.9	%	37.4	%	42.7	%	39.7	%	39.1	%	41.3	%	40.7	%	42.1	%	42.4	%
INTERNATIONAL AMERICAS ($M)	6.3	%	7.9	%	6.9	%	7.6	%	7.2	%	6.2	%	6.4	%	5.9	%	6.3	%	6.2	%	6.3	%	5.8	%
EMEA (%)	36.1	%	38.9	%	38.7	%	37.5	%	37.8	%	34.7	%	36.8	%	36.9	%	35.6	%	36.0	%	35.0	%	35.5	%
APAC (%)	17.1	%	17.2	%	18.9	%	17.0	%	17.6	%	16.4	%	17.1	%	18.1	%	16.8	%	17.1	%	16.6	%	16.3	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)	1,475		1,594		1,473		1,722		6,264		1,468		1,634		1,500		1,853		6,455		1,811		5,997
Growth vs. prior year (%)	0.5	%	-2.4	%	-1.8	%	-7.1	%	-3.0	%	15.2	%	13.6	%	1.8	%	2.3	%	7.6	%	14.9	%	2.9	%
Growth vs. prior quarter (%)	-20.4	%	8.1	%	-7.6	%	16.9	%			-18.9	%	11.3	%	-8.2	%	23.5	%			22.9	%
STORAGE PRODUCTS ($M)	505		655		530		664		2,354		491		626		560		639		2,316		713		2,374
Growth vs. prior year (%)	2.9	%	4.6	%	-5.4	%	3.9	%	1.6	%	14.2	%	-6.6	%	-0.2	%	-10.4	%	-2.4	%	103.1	%	82.6	%
Growth vs. prior quarter (%)	-21.0	%	29.7	%	-19.1	%	25.3	%			-31.1	%	27.5	%	-10.5	%	14.1	%			27.1	%
SUPPORT SERVICES ($M)	979		1,041		961		1,042		4,023		987		1,001		950		1,024		3,962		986		3,678
Growth vs. prior year (%)	-0.8	%	4.0	%	1.2	%	1.8	%	1.5	%	18.2	%	5.0	%	5.1	%	3.9	%	7.7	%	26.7	%	21.3	%
Growth vs. prior quarter (%)	-4.4	%	6.3	%	-7.7	%	8.4	%			0.1	%	1.4	%	-5.1	%	7.8	%			9.1	%
PROFESSIONAL SERVICES & EDUCATIONAL SERVICES ($M)	260		325		302		352		1,239		243		305		273		319		1,140		318		1,019
Growth vs. prior year (%)	7.0	%	6.6	%	10.6	%	10.3	%	8.7	%	29.9	%	10.5	%	14.7	%	0.3	%	11.9	%	18.2	%	11.6	%
Growth vs. prior quarter (%)	-18.5	%	25.0	%	-7.1	%	16.6	%			-23.6	%	25.5	%	-10.5	%	16.8	%			33.6	%
NET BOOKINGS ($M) (2)	3,149		3,868		3,180		3,767		13,964		3,036		3,603		3,238		3,909		13,786		3,376		11,487
Growth vs. prior year (%)	3.7	%	7.4	%	-1.8	%	-3.6	%	1.3	%	25.8	%	19.4	%	20.8	%	15.8	%	20.0	%	9.7	%	4.0	%
Growth vs. prior quarter (%)	-19.4	%	22.8	%	-17.8	%	18.5	%			-10.1	%	18.7	%	-10.1	%	20.7	%			26.0	%
BOOK TO BILL RATIO	0.98		1.07		0.97		1.00				0.95		1.01		0.99		1.02				1.04
PRODUCT BACKLOG ($M) (1),(2)	980		1,233		1,149		1,136				994		1,021		975		1,051				1,099
SERVICES BACKLOG ($M) (4)	951		772		754		783				875		729		820		879				752
TOTAL BACKLOG ($M)	1,931		2,005		1,903		1,919				1,869		1,750		1,795		1,930				1,851
DEFERRED REVENUES
PRODUCTS DEFERRED REVENUES ($M)	564		793		740		876				486		538		577		603				602
Growth vs. prior year (%)	16.0	%	47.4	%	28.2	%	45.3	%			11.0	%	7.6	%	14.9	%	0.2	%			11.7	%
Growth vs. prior quarter (%)	-6.5	%	40.6	%	-6.7	%	18.4	%			-19.3	%	10.7	%	7.2	%	4.5	%			19.9	%
SERVICES DEFERRED REVENUES ($M)	1,977		1,896		1,866		2,043				1,746		1,630		1,881		2,103				1,873
Growth vs. prior year (%)	13.2	%	16.3	%	-0.8	%	-2.9	%			9.4	%	9.3	%	15.5	%	12.3	%			13.3	%
Growth vs. prior quarter (%)	-6.0	%	-4.1	%	-1.6	%	9.5	%			-6.8	%	-6.6	%	15.4	%	11.8	%			15.0	%
TOTAL DEFERRED REVENUES ($M)	2,541		2,689		2,606		2,919				2,232		2,168		2,458		2,706				2,475
Growth vs. prior year (%)	13.8	%	24.0	%	6.0	%	7.9	%			9.7	%	8.9	%	15.3	%	9.3	%			12.9	%
Growth vs. prior quarter (%)	-6.1	%	5.8	%	-3.1	%	12.0	%			-9.8	%	-2.9	%	13.4	%	10.1	%			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.

(4) The Services backlog number presented in Q4FY07 has been adjusted to reflect a correction.

BALANCE SHEETS(2) (3) (4)	FY 2008										FY 2007										FY 2006
(in millions)	Q1		Q2		Q3		Q4				Q1		Q2		Q3		Q4				Q4
CASH & ST INVESTMENTS	3,819		3,433		3,027		2,701				3,971		3,456		4,114		4,582				4,065
ACCOUNTS RECEIVABLE, NET	2,203		2,789		2,405		3,019				2,036		2,331		2,458		2,964				2,702
RAW MATERIALS	130		152		159		154				119		126		106		125				68
WORK IN PROCESS	110		96		99		90				92		106		101		95				97
FINISHED GOODS	331		383		477		436				373		373		360		304				375
TOTAL INVENTORIES	571		631		735		680				584		605		567		524				540
OTHER CURRENT ASSETS	1,297		1,306		1,329		1,590				1,153		1,158		1,221		1,258				1,153
TOTAL CURRENT ASSETS	7,890		8,159		7,496		7,990				7,744		7,550		8,360		9,328				8,460
PP&E, NET	1,556		1,569		1,584		1,611				1,583		1,579		1,586		1,533				1,812
GOODWILL	2,466		2,496		3,288		3,215				2,566		2,571		2,571		2,514				2,610
LT MARKETABLE DEBT SECURITIES	1,374		1,244		774		609				700		1,381		1,372		1,360				783
OTHER NON-CURRENT ASSETS, NET	1,072		1,011		1,120		1,043				1,301		1,221		1,161		1,103				1,417
TOTAL ASSETS	14,358		14,479		14,262		14,468				13,894		14,302		15,050		15,838				15,082
ACCOUNTS PAYABLE	1,140		1,312		1,306		1,387				1,263		1,296		1,187		1,381				1,446
ACCRUED LIABILITIES & OTHER	1,943		2,074		2,056		2,045				2,020		2,092		1,979		2,023				2,750
DEFERRED REVENUES	1,911		2,049		1,979		2,236				1,674		1,601		1,869		2,047				1,969
TOTAL CURRENT LIABILITIES	4,994		5,435		5,341		5,668				4,957		4,989		5,035		5,451				6,165
LT DEBT	1,270		1,273		1,275		1,265				582		579		1,270		1,264				575
LT DEFERRED REVENUES	630		640		627		683				558		567		589		659				506
OTHER NON-CURRENT OBLIGATIONS	1,271		1,259		1,229		1,264				1,388		1,396		1,264		1,285				1,492
STOCKHOLDERS’ EQUITY	6,193		5,872		5,790		5,588				6,409		6,771		6,892		7,179				6,344
TOTAL LIABILITIES & SE	14,358		14,479		14,262		14,468				13,894		14,302		15,050		15,838				15,082
CASH FLOW(2)	Q1		Q2		Q3		Q4		FY08		Q1		Q2		Q3		Q4		FY07		Q4		FY06
OPERATING ACTIVITIES	574		336		329		90		1,329		123		129		142		564		958		390		567
INVESTING ACTIVITIES	(211	)	(199	)	113		231		(66	)	143		(1,013	)	(110	)	(97	)	(1,077	)	1,366		652
FINANCING ACTIVITIES	(1,231	)	(675	)	(293	)	(412	)	(2,611	)	(473	)	135		647		(139	)	170		172		299
KEY METRICS	Q1		Q2		Q3		Q4				Q1		Q2		Q3		Q4				Q4
DAYS SALES OUTSTANDING (DSO)	62		69		66		72				57		59		67		70				64
DAYS OF SUPPLY ON HAND (DOS)	31		30		37		29				29		28		28		23				22
DAYS PAYABLES OUTSTANDING (DPO)	(62	)	(63	)	(65	)	(59	)			(63	)	(59	)	(59	)	(61	)			(59	)
CASH CONVERSION CYCLE (CCC)	31		36		38		42				23		28		36		32				27
L-T DEBT/EQUITY (%)	20.5	%	21.7	%	22.0	%	22.6	%			9.1	%	8.6	%	18.4	%	17.6	%			9.1	%
INVENTORY TURNS-PRODUCT ONLY (hist.)	8.2		7.5		7.1		7.8				8.8		8.6		8.7		9.0				9.9
ROE (12 mo. avg.)(%)	9.1	%	11.4	%	10.3	%	6.9	%			-12.4	%	-6.8	%	-2.4	%	6.9	%			-13.4	%
ROA (12 mo. avg.)(%)	4.2	%	5.0	%	4.4	%	2.8	%			-5.5	%	-3.1	%	-1.1	%	3.2	%			-5.9	%
ROIC (12 mo. avg.)(%)	8.1	%	11.8	%	10.7	%	4.0	%			-24.9	%	-16.9	%	-11.6	%	5.2	%			-26.2	%
DEPREC. & AMORT. ($M)	193		196		189		208				204		214		209		203				224
CAPITAL INVESTMENTS, NET ($M)(1)	127		108		62		144				(160	)	81		152		(36	)			122
NUMBER OF EMPLOYEES	33,904		33,350		34,440		34,909				36,250		34,667		34,494		34,219				38,061
REVENUE PER EMPLOYEE (12 mo. Avg.) ($K)	405		410		410		406				357		374		387		397				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 of fiscal 2008 balance sheets have been reclassified from deferred revenues to accrued liabilities and other.

SUN MICROSYSTEMS, INC.

OPERATIONS ANALYSIS – CONSOLIDATED (UNAUDITED)

CALCULATION OF NON-GAAP NET INCOME (LOSS)	FY 2008										FY 2007										FY 2006
(in millions except per share amounts)	Q1		Q2		Q3		Q4		FY08		Q1		Q2		Q3		Q4		FY07		Q4		FY06
GAAP net income (loss)	89		260		(34	)	88		403		(56	)	133		67		329		473		(301	)	(864	)
Non-GAAP adjustments:
Purchased in-process research and development	—		1		24		6		31		—		—		—		—		—		—		60
Amortization of acquisition related intangibles	74		74		76		86		310		81		80		78		74		313		89		331
Stock-based compensation	48		52		57		57		214		58		58		50		48		214		63		225
Restructuring and related impairment of long-lived assets	113		32		14		104		263		21		26		35		15		97		296		354
(Gain) loss on equity investments, net	(22	)	—		—		(10	)	(32	)	—		—		(5	)	(1	)	(6	)	4		(27	)
Settlement income	—		—		—		(45	)	(45	)	—		—		(54	)	—		(54	)	(54	)	(54	)
Tax effect of non-GAAP adjustments	(17	)	(10	)	(5	)	(11	)	(43	)	(10	)	(7	)	(10	)	(7	)	(34	)	(17	)	(45	)
Non-GAAP net income (loss)	285		409		132		275		1,101		94		290		161		458		1,003		80		(20	)
Diluted non-GAAP net income (loss) per share	0.32		0.50		0.17		0.35		1.34		0.11		0.32		0.18		0.50		1.11		0.09		(0.02	)
Growth vs. prior year (%)	190.9	%	56.3	%	-5.6	%	-30.0	%	20.7	%	266.7	%	500.0	%	357.1	%	455.6	%	-3800.0	%	-47.1	%	-120.0	%
Growth vs. prior quarter (%)	-36.0	%	56.3	%	-66.0	%	105.9	%			22.2	%	190.9	%	-43.8	%	177.8	%			228.6	%

This operations analysis contains 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. The non-GAAP financial measures Sun uses include non-GAAP net income and diluted non-GAAP net income per share. Non-GAAP net income is defined as net income excluding purchased in-process research and development, amortization of acquisition related intangibles, stock-based compensation, restructuring and related impairment of long-lived assets, gain or loss on equity investments, net, settlement income and the tax effect of these non-GAAP adjustments. 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 illustrate Sun’s baseline performance before gains, losses or charges that are considered by Sun to be outside of 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 non-GAAP net income excludes items in the following categories:

Purchased In-Process Research and Development and Amortization of Acquisition Related Intangibles. Sun excludes purchased in-process research and development and 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 acquisitions of MySQL and 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 a non-GAAP financial measure that excludes purchased in-process research and development and the amortization of acquisition related intangible assets provides the users of its financial statements an enhanced understanding of historic and future financial results and facilitates comparisons to peer companies. Additionally, with respect to the amortization of acquisition related intangible assets, had Sun internally developed these intangible assets, the amortization of such 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. Although purchased in-process research and development expenses are not recurring with respect to past acquisitions, Sun will incur these expenses in connection with any future acquisitions.

Stock-Based Compensation. Stock-based compensation is a key incentive offered to Sun’s 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.

Restructuring and Related Impairment of Long-Lived Assets, Gain or Loss on Equity Investments, Net, Settlement Income and Tax Effect of Non-GAAP Adjustments. Sun excludes these items because management 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 operations analysis 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.