Sun Microsystems Reports Record Second Quarter Revenues and Earnings Second Quarter Earnings Grew 60% on Revenue Growth of 44%



    PALO ALTO, Calif., Jan. 18 /PRNewswire/ --
 Sun Microsystems, Inc., (Nasdaq:   SUNW), a leading provider of hardware,
 software and services that power the Internet, today reported results for the
 second quarter of fiscal year 2001, which ended December 31, 2000.
     Revenues for the second quarter were $5.115 billion, up 44 percent
 compared with the second quarter of fiscal 2000.  Orders for the second
 quarter were $4.953 billion, representing a year over year increase of
 32 percent.  Net income for the second quarter was $552 million, up 56 percent
 compared with last year's net income of $354 million (excluding gains on the
 sale of equity investments and acquisition-related charges for fiscal year
 2001).  Second quarter earnings per share was $0.16, an increase of 60 percent
 compared with $0.10 per share for the same period a year ago (excluding gains
 on the sale of equity investments and acquisition-related charges for fiscal
 year 2001).
     During the second quarter of fiscal 2001, Sun completed the acquisition of
 Cobalt Networks, Inc. for $2.061 billion in Sun common stock and stock
 options.  Sun recognized during the second quarter of fiscal 2001
 approximately $130 million in accounting charges related to this acquisition
 or $0.04 per share, on an after tax basis.
     Including gains on the sale of equity investments and acquisition related
 charges, reported net income for the second quarter of fiscal 2001 was
 $423 million or $0.12 per share, compared with $354 million or $0.10 per share
 for the same period a year ago.
     For the first six months of fiscal 2001, Sun reported revenues of
 $10.160 billion, up 52% over the corresponding period a year ago.  Net income
 was $1.062 billion or $0.31 per share, compared with net income of
 $629 million or $0.19 per share for the first six months of fiscal 2000,
 increases of 69% and 63%, respectively (excluding gains on the sale of equity
 investments and  acquisition-related charges for fiscal years 2000 and 2001).
     Including gains on the sale of equity investments and acquisition related
 charges, reported net income for the first six months of fiscal 2001 was
 $933 million or $0.27 per share, compared with $625 million or $0.19 per share
 in fiscal 2000.
     "Even with the market dynamics the way they are, we still gained more
 market share this quarter than in previous quarters," said Scott McNealy,
 Chief Executive Officer of Sun Microsystems.  "The numbers continue to tell
 the story, regarding customer acceptance of our products, service and support
 on a global basis."
     McNealy added, "Our new UltraSPARC(TM) III based system products are
 rolling out in volume.  Recently, we formally announced a new line of server
 appliance products as well as an extension to the Netra(TM) product family,
 the Netra(TM) X1, the first Solaris(TM) server incorporating the Sparc(TM)
 Microprocessor, selling for under $1000.  In addition, we announced the Sun
 StorEdge(TM) T3 array support for the Windows, NT, HP-UX, IBM AIX, and Linux
 system platforms."
     McNealy concluded, "With our geographically diversified base and our
 leading market position, we are poised to take advantage of the market
 opportunities available to us. Current market conditions will clearly separate
 the leaders from the followers."
     Michael E. Lehman, Sun's Executive Vice President of Corporate Resources
 and Chief Financial Officer, commented, "In a quarter that was a clear example
 of the volatile dynamics of our industry, our team really delivered like no
 one else in the industry can."  Lehman added, "The strength of our world wide
 business was clearly evident with significant revenue growth in all of our
 major geographies, particularly Europe and many parts of Asia."
     Lehman concluded, "Going forward, we have not changed our message
 regarding our intention to invest aggressively for market share while, at the
 same time, delivering on our commitment to generating competitive earnings for
 our shareholders."
     Sun has scheduled a conference call today to discuss its earnings for the
 second quarter of fiscal 2001 at 1:30 p.m. (PST), which is being broadcast
 live at www.sun.com.
     All references to earnings per share set forth in this press release are
 diluted earnings per share as defined within Statement of Financial Accounting
 Standards No. 128.
     This news release contains forward-looking statements, including
 statements relating to Sun's expectations to take advantage of market
 opportunities and its position in the market and Sun's intentions to invest
 for market share while delivering competitive earnings, which are based on
 current expectations that involve risks and uncertainties.  Sun's actual
 results may differ materially from the results discussed in these
 forward-looking statements.  Factors that might cause such a difference
 include risks related to adverse changes in general economic conditions,
 failure to reduce costs, lack of success in technical advancements, the timely
 development, production and acceptance of new products and services, and Sun's
 ability to compete in the highly competitive and rapidly changing marketplace.
 These and other risks are detailed from time to time in Sun's periodic reports
 filed with the Securities and Exchange Commission, including, but not limited
 to, its annual report on Form 10-K for its fiscal year ended June 30, 2000 and
 its quarterly report on Form 10-Q for the quarter ended October 1, 2000.
     Since its inception in 1982, a singular vision -- "The Network Is The
 Computer(TM)" -- has propelled Sun Microsystems, Inc. to its position as a
 leading provider of industrial-strength hardware, software and services that
 power the Internet and allow companies worldwide to dot-com their businesses.
 With $15.7 billion in annual revenues, Sun can be found in more than
 170 countries and on the World Wide Web at http://www.sun.com .
     NOTE:  Sun, Sun Microsystems, the Sun logo, Sun StorEdge, Solaris, Netra
 and The Network is The Computer are trademarks or registered trademarks of Sun
 Microsystems, Inc. in the United States and other countries.  All SPARC
 trademarks are used under license and are trademarks or registered trademarks
 of SPARC International, Inc. in the United States and other countries.
 Products bearing SPARC trademarks are based upon an architecture developed by
 Sun Microsystems, Inc.
 
 
     SUN MICROSYSTEMS, INC.
     CONDENSED CONSOLIDATED STATEMENTS OF INCOME*/**
     (In thousands, except per share amounts)
 
                                    Three Months Ended     Six Months Ended
                                  (unaudited)           (unaudited)
                                    Dec. 31,   Dec. 26,   Dec. 31,   Dec. 26,
                                      2000       1999       2000       1999
 
     Net revenues                  5,115,000  3,554,000 10,160,000  6,700,000
 
     Costs and expenses:
       Cost of sales               2,671,000  1,719,000  5,286,000  3,232,000
       Research and development      497,000    398,000    987,000    755,000
       Selling, general and
        administrative             1,236,000    941,000  2,478,000  1,835,000
       In-process research and
        development                   71,000                71,000      4,000
 
         Total costs and expenses  4,475,000  3,058,000  8,822,000  5,826,000
 
     Operating income                640,000    496,000  1,338,000    874,000
 
     Interest income, net             91,000     32,000    166,000     61,000
 
     Gain on sale of investments       1,000                 1,000
 
     Income before income taxes      732,000    528,000  1,505,000    935,000
 
     Provision for income taxes      309,000    174,000    572,000    310,000
 
     Net income                      423,000    354,000    933,000    625,000
 
     Net income per common
      share - basic                     0.13       0.11       0.29       0.20
 
     Net income per common
      share - diluted                   0.12       0.10       0.27       0.19
 
     Shares used in the
      calculation of net income
      per common share - basic     3,229,000  3,148,000  3,217,000  3,128,000
 
     Shares used in the
      calculation of net income
      per common share - diluted   3,430,000  3,382,000  3,433,000  3,354,000
 
     *  On October 19, 1999, Sun completed its merger with Forte Software, Inc.
     This merger was accounted for as a pooling of interestsand,
     accordingly, historical consolidated financial statemements of Sun have
     been restated to include Forte for all periods.
     ** Share and per share amounts for all periods presented have been
     adjusted to reflect two-for-one splits (effected in the form of stock
     dividends) through December 31, 2000.
 
     SUN MICROSYSTEMS, INC.
     CONDENSED CONSOLIDATED STATEMENTS OF INCOME*/**
     EXCLUDING ACQUISITION-RELATED CHARGES AND
     GAIN ON SALE OF INVESTMENTS
     (In thousands, except per share amounts)
 
                                    Three Months Ended     Six Months Ended
                                  (unaudited)           (unaudited)
                                    Dec. 31,   Dec. 26,   Dec. 31,   Dec. 26,
                                      2000       1999       2000       1999
 
     Net revenues                  5,115,000  3,554,000 10,160,000  6,700,000
 
     Costs and expenses:
       Cost of sales               2,668,000  1,719,000  5,283,000  3,232,000
       Research and development      497,000    398,000    987,000    755,000
       Selling, general and
        administrative             1,204,000    941,000  2,446,000  1,835,000
 
         Total costs and expenses  4,369,000  3,058,000  8,716,000  5,822,000
 
     Operating income                746,000    496,000  1,444,000    878,000
 
     Interest income, net             91,000     32,000    166,000     61,000
 
     Income before income taxes      837,000    528,000  1,610,000    939,000
 
     Provision for income taxes      285,000    174,000    548,000    310,000
 
     Net income                      552,000    354,000  1,062,000    629,000
 
     Net income per common
      share - basic                     0.17       0.11       0.33       0.20
 
     Net income per common
      share - diluted                   0.16       0.10       0.31       0.19
 
     Shares used in the
      calculation of net income
      per common share - basic     3,229,000  3,148,000  3,217,000  3,128,000
 
     Shares used in the
      calculation of net income
      per common share - diluted   3,430,000  3,382,000  3,433,000  3,354,000
 
     Adjustments to net income
      under GAAP:
       In-process research and
        development                   71,000                71,000      4,000
       Gain on sale of investments    -1,000                -1,000
       Acquisition-related charges
        for Cobalt Networks, Inc.     35,000                35,000
       Acquisition-related tax        24,000                24,000
 
     Total adjustments               129,000               129,000      4,000
 
     * The above Normalized Condensed Consolidated Statements of Income are
     Presented for illustrative purposes only and are not prepared in
     accordance with generally accepted accounting principles.
     ** On October 19, 1999, Sun completed its merger with Forte Software, Inc.
     This merger was accounted for as a pooling of interests and, accordingly,
     historical consolidated financial statemements of Sun have been restated
     to include Forte for all periods.  Share and per share amounts for all
     periods presented have been adjusted to reflect two-for-one splits
     (effected in the form of stock dividends) through December 31, 2000.
 
 
     SUN MICROSYSTEMS, INC.
     CONDENSED CONSOLIDATED BALANCE SHEETS
      (In thousands)
 
                                                         Dec. 31,    June 30,
                                                           2000        2000
     ASSETS                                             (unaudited) (audited)
 
     Current assets:
 
       Cash, cash equivalents and short-term
        investments                                      2,140,000  2,475,000
 
       Accounts receivable, net                          3,215,000  2,690,000
 
       Inventories                                         792,000    557,000
 
       Other current assets                              1,593,000  1,155,000
 
         Total current assets                            7,740,000  6,877,000
 
     Property, plant and equipment, net                  2,382,000  2,095,000
 
     Long-term investments                               5,302,000  4,496,000
 
     Other assets, net                                   2,656,000    684,000
 
                                                        18,080,000 14,152,000
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
 
       Short-term borrowings                                 2,000      7,000
 
       Accounts payable                                  1,219,000    924,000
 
       Accrued liabilities                               2,339,000  2,117,000
 
       Income taxes payable                                134,000    422,000
 
       Deferred revenues and customer deposits           1,454,000  1,289,000
 
         Total current liabilities                       5,148,000  4,759,000
 
     Long-term debt and other obligations                2,183,000  2,084,000
 
     Stockholders' equity                               10,749,000  7,309,000
 
                                                        18,080,000 14,152,000
 
     * On October 19, 1999, Sun completed its merger with Forte Software, Inc.
     This merger was accounted for as a pooling ofinterests and, accordingly,
     historical consolidated financial statemements of Sun have been restated
     to include Forte for all periods.
 
 

SOURCE Sun Microsystems, Inc.

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