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 OpenSolarisTM operating system and the MySQLTM database to the LustreTM and ZFSTM 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, SolarisTM -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 FireTM 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 atwww.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 atwww.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 ComputerTM” – 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 athttp://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.