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Sun Microsystems Reports Third Quarter Fiscal Year 2008 Results
SANTA CLARA, Calif. (Business Wire EON) May 1, 2008 -- Revenues for the third quarter of fiscal 2008 were $3.266 billion, a decrease of 0.5 percent as compared with $3.283 billion for the third quarter of fiscal 2007. Total gross margin as a percent of revenues was 44.9, an increase of 0.4 percentage points, as compared with the third quarter of fiscal 2007.
Net loss for the third quarter of fiscal 2008 on a GAAP basis was $34 million, or $(0.04) per share, as compared with net income of $67 million, or $0.07 per share, for the third quarter of fiscal 2007. In the third quarter of fiscal 2008, the company recorded a $52 million dollar tax provision, as compared to a tax benefit of $3 million in the third quarter of fiscal 2007. Net loss for the third quarter included charges related to the acquisition of MySQL, which reduced earnings per share by approximately $0.04.
Cash generated from operations for the third quarter of fiscal 2008 was $329 million, and the cash and marketable debt securities balance at the end of the quarter was $3.801 billion. During the third quarter, Sun continued to leverage its cash position, spending $300 million to repurchase 17.5 million shares of its common stock. There is currently $500 million remaining of the $3 billion share repurchase program announced in the company's fiscal fourth quarter of 2007.
"The U.S. economy presented Sun with significant challenges in the third quarter, masking our progress in developing nations and economies across the world," said Jonathan Schwartz, CEO of Sun Microsystems. "With double digit year-over-year growth in India and Brazil, and triple digit year-over-year billings growth in our energy-efficient, Solaris(TM)-based Chip Multi-Threading (CMT) systems, Sun made considerable progress during the quarter. We continue to invest in the future created by open alternatives to proprietary technologies, best exemplified by the acquisition of MySQL. The world is moving to open source innovation, and Sun continues to lead that revolution."
Third Quarter Highlights
-- Sun reported year-over-year revenue growth in 12 out of its 16 sales geographies during the third quarter, with double-digit revenue growth in key international markets across EMEA, Asia Pacific and the International Americas.
-- From a product perspective, Solaris(TM)-based Chip Multi-Threading (CMT) systems billings more than doubled year-over-year, with the Company's blade systems also delivering impressive billings growth fueled by Sun's comprehensive portfolio spanning AMD Opteron(TM), Intel Xeon(R) and Sun UltraSPARC(R) offerings.
-- Furthering its presence in the open source software marketplace, Sun announced the close of two significant acquisitions: MySQL, the world's most popular open source database provider, and innotek, whose VirtualBox(TM) products provide free desktop virtualization.
-- Sun signed a landmark collaboration agreement with The People's Republic of China Ministry of Education to cultivate integrated circuit engineering talent and industry development based upon Sun's OpenSPARC(TM) open source silicon platform.
-- Sun was awarded significant contracts including funding from the Defense Advanced Research Projects Agency (DARPA) for a five and a half year research project focused on microchip interconnectivity via on-chip optical networks enabled by silicon photonics and proximity communication.
Sun has scheduled a conference call today to discuss its financial results for the third 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, Sun Fire, Java, innotek, VirtualBox, MySQL and The Network is the Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and other countries.
AMD and Opteron are trademarks or registered trademarks of Advanced Micro Devices.
Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation 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 United States and other countries. Products bearing SPARC trademarks are based upon an architecture developed by Sun Microsystems, Inc.
UNIX is a registered trademark in the United States and other countries, exclusively licensed through X/Open Company, Ltd.
-------------------------
Billings represents amounts invoiced to customers in a period.
-------------------------
This press release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements regarding future investments and industry trends. 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 and December 30, 2007. Sun assumes no obligation to, and does not currently intend to, update these forward-looking statements.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)
Three Months Ended Nine Months Ended
------------------ -------------------
March 30, April 1, March 30, April 1,
2008 2007 2008 2007
--------- -------- --------- --------
Net revenues:
Products $ 2,003 $ 2,060 $ 6,232 $ 6,279
Services 1,263 1,223 3,868 3,759
--------- -------- --------- ---------
Total net revenues 3,266 3,283 10,100 10,038
Cost of sales:
Cost of sales-products
(1) 1,106 1,148 3,296 3,499
Cost of sales-services
(1) 692 674 2,022 2,086
--------- -------- --------- ---------
Total cost of sales 1,798 1,822 5,318 5,585
--------- -------- --------- ---------
Gross margin 1,468 1,461 4,782 4,453
Operating expenses:
Research and
development (1) 457 514 1,366 1,494
Selling, general and
administrative (1) 989 957 2,923 2,893
Restructuring charges
and related impairment
of long-lived assets 14 35 159 82
Purchased in-process
research and
development 24 - 25 -
--------- -------- --------- ---------
Total operating
expenses 1,484 1,506 4,473 4,469
--------- -------- --------- ---------
Operating income
(loss) (16) (45) 309 (16)
Gain on equity
investments, net - 5 22 5
Interest and other
income, net 34 104 145 209
--------- -------- --------- ---------
Income before income
taxes 18 64 476 198
Provision (benefit) for
income taxes 52 (3) 161 54
--------- -------- --------- ---------
Net income (loss) $ (34) $ 67 $ 315 $ 144
========= ======== ========= =========
Net income (loss) per
common share-basic $ (0.04) $ 0.08 (2) $ 0.38 $ 0.16 (2)
========= ======== ========= =========
Net income (loss) per
common share-diluted $ (0.04) $ 0.07 (2) $ 0.38 $ 0.16 (2)
========= ======== ========= =========
Shares used in the
calculation of net
income (loss) per common
share-basic 785 887 (2) 821 881 (2)
--------- -------- --------- ---------
Shares used in the
calculation of net
income (loss) per common
share-diluted 785 915 (2) 837 900 (2)
--------- -------- --------- ---------
(1) Includes stock-
based compensation
expense as follows:
Cost of sales-
products $ 3 $ 3 $ 8 $ 10
Cost of sales-
services $ 10 $ 8 $ 28 $ 24
Research and
development $ 17 $ 15 $ 47 $ 49
Selling, general and
administrative $ 27 $ 24 $ 74 $ 83
(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)
March 30, June 30,
2008 2007(1)
----------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,363 $ 3,620
Short-term marketable debt securities 664 962
Accounts receivable, net 2,405 2,964
Inventories 735 524
Deferred and prepaid tax assets 223 200
Prepaid expenses and other current assets 1,106 1,058
----------- ----------
Total current assets 7,496 9,328
Property, plant and equipment, net 1,584 1,533
Long-term marketable debt securities 774 1,360
Goodwill 3,288 2,514
Other acquisition-related intangible assets,
net 611 633
Other non-current assets 509 470
----------- ----------
$ 14,262 $ 15,838
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,306 $ 1,381
Accrued payroll-related liabilities 724 842
Accrued liabilities and other 1,128 961
Deferred revenues 1,979 2,047
Warranty reserve 204 220
----------- ----------
Total current liabilities 5,341 5,451
Long-term debt 1,275 1,264
Long-term deferred revenues 627 659
Other non-current obligations 1,229 1,285
Total stockholders' equity 5,790 7,179
----------- ----------
$ 14,262 $ 15,838
=========== ==========
(1) Derived from audited financial statements.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
Nine Months Ended
------------------
March 30, April 1,
2008 2007
--------- --------
Cash flows from operating activities:
Net income $ 315 $ 144
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and other amortization 353 388
Amortization of acquisition related intangible
assets 225 239
Deferred taxes 8 (20)
Impairment of long-lived assets - 16
Gain on investments and other, net (54) -
Stock-based compensation expense 157 166
Purchased in-process research and development 25 -
Changes in operating assets and liabilities:
Accounts receivable, net 603 265
Inventories (205) (51)
Prepaid and other assets (105) (104)
Accounts payable (114) (222)
Other liabilities 31 (427)
--------- --------
Net cash provided by operating activities 1,239 394
--------- --------
Cash flows from investing activities:
Decrease (increase) in restricted cash, net 22 (4)
Purchases of marketable debt securities (1,292) (2,465)
Proceeds from sales of marketable debt securities 1,404 1,041
Proceeds from maturities of marketable debt
securities 764 523
Proceeds from sales of equity investments, net 25 8
Purchases of property, plant and equipment, net (297) (73)
Payments for acquisitions, net of cash acquired (923) (10)
--------- --------
Net cash used in investing activities (297) (980)
--------- --------
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 (2,300) -
Proceeds from the exercise of common stock
options, net 121 176
Proceeds from issuance of convertible notes, net - 692
Principal payments on borrowings and other
obligations (20) (476)
--------- --------
Net cash (used in) provided by financing activities (2,199) 309
--------- --------
Net decrease in cash and cash equivalents (1,257) (277)
Cash and cash equivalents, beginning of period 3,620 3,569
--------- --------
Cash and cash equivalents, end of period $ 2,363 $ 3,292
========= ========
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