Sun Microsystems Reports Results for Second Quarter Fiscal Year 2006
Saturday, 28 January 2006 Sun Microsystems, Inc., (Nasdaq: SUNW) reported results today for its fiscal second quarter, which ended December 25, 2005.
Revenues for the second quarter of fiscal 2006 were $3.337 billion, an increase of 17 percent as compared with $2.841 billion for the second quarter of fiscal 2005. The year over year revenue increase was driven by recent acquisitions. Total gross margin as a percent of revenues was 42.6 percent, an increase of 0.4 percentage points, as compared with the second quarter of fiscal 2005.
Net loss for the second quarter of fiscal 2006 on a GAAP basis was $223 million or a net loss of ($0.07) per share, as compared with net income of $4 million, or earnings per share of $0.00, for the second quarter of fiscal 2005.
GAAP net loss for the second quarter of fiscal 2006 includes: $145 million of purchase price accounting adjustments and intangible asset amortization relating to our recent acquisitions, $10 million of restructuring charges, $14 million of a gain on equity investments, and a $3 million benefit for related tax effects. The net impact of these four items is approximately ($0.04) cents per share. In addition, GAAP net loss also includes stock-based compensation charges relating to the implementation of SFAS 123R of $55 million.
Cash flow used in operations for the second quarter was $191 million and cash and marketable debt securities balance at the end of the quarter was $4.276 billion.
"The backlog is the highest in years and this increase in bookings and demand is driving improved business fundamentals," said Scott McNealy, chairman and CEO, Sun Microsystems. "The uptick in demand is due to the game changing technologies we've delivered to market over the last several quarters that are setting new standards for performance, price and efficiency. From our x64 Sun Fire(TM) servers and the Sun Fire T2000 server based on the CoolThreads(TM) T1 processor, to UltraSPARC(R) IV+, to Solaris(TM) Operating System demand has clearly improved as a result of our investment in R&D."
Steve McGowan, Sun's chief financial officer and executive vice president, corporate resources, said, "we saw positive demand in bookings and backlog growth across numerous server and data management product areas. Our gross margin performance of 42.6 percent continued to be strong and we came directly in line with our operating expense guidance for the quarter. We continue to be pleased with the overall strength of our balance sheet including a cash and marketable debt securities balance of approximately $4.3 billion."
Sun has scheduled a conference call today to discuss its earnings for Q2 fiscal year 2006 at 1:30 p.m. (PT), which is being broadcast live at http://www.sun.com/investors.
About Sun Microsystems, Inc.
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 make the Net work. Sun can be found in more than 100 countries and on the World Wide Web at http://www.sun.com.
FOR MORE INFORMATION
INVESTOR CONTACT:
Bret Schaefer (650) 786-0123
bret.schaefer@sun.com
MEDIA CONTACT:
Stephanie Vonallmen (650) 786-8589
stephanie.vonallmen@sun.com
INDUSTRY ANALYST CONTACT:
Joanne Masters (650) 786-0847
joanne.masters@sun.com
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the future results and performance of Sun Microsystems, Inc., including statements regarding an increase in bookings and demand driving improved business fundamentals. 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 actual results to differ materially from those contained in our projections and forward-looking statements include: increased competition; failure to rapidly and successfully develop and introduce new products; our reliance on single-source suppliers; risks associated with our international customers and operations; delays in product development or customer acceptance and implementation of new products and technologies; pricing pressures; our dependence on significant customers and specific industries; our dependence on channel partners; and failure to successfully integrate acquisition candidates. Please also refer to Sun's periodic reports that are filed from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2005 and our Quarterly Report on Form 10-Q for the fiscal quarter ended September 25, 2005. Sun assumes no obligation and does not intend to update these forward-looking statements.
To supplement Sun's consolidated financial statements presented in accordance with GAAP, Sun provides non-GAAP net income (loss) and non-GAAP net income (loss) per share data. The presentation of these non-GAAP financial measures should be considered in addition to our GAAP results and is 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 our performance by excluding certain charges, gains and tax effects that may not be indicative of our 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 our competitors' operating results. We include these non-GAAP financial measures because we believe 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 "Non-GAAP Calculation of Net Income (Loss) Excluding Special Items" following the text of this press release.
Sun, Sun Microsystems, the Sun logo, Sun Fire, Solaris, Cool Threads and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and in other countries. All SPARC trademarks are used under license and are trademarks or registered trademarks of SPARC International, Inc. in the US and other countries. Products bearing SPARC trademarks are based upon an architecture developed by Sun Microsystems, Inc.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)
Three Months Ended Six Months Ended
Dec. 25, Dec. 26, Dec. 25, Dec. 26,
2005 2004 2005 2004
Net revenues:
Products $2,108 $1,840 $3,812 $3,516
Services 1,229 1,001 2,251 1,953
Total net revenues 3,337 2,841 6,063 5,469
Cost of sales:
Cost of sales-products (including
stock-based compensation expense
of $3 and $5) (1) 1,223 1,065 2,189 2,069
Cost of sales-services (including
stock-based compensation expense
of $7 and $14) (1) 693 578 1,251 1,129
Total cost of sales 1,916 1,643 3,440 3,198
Gross margin 1,421 1,198 2,623 2,271
Operating expenses:
Research and development
(including stock-based
compensation expense of $18
and $35) (1) 541 447 980 863
Selling, general and administrative
(including stock-based
compensation expense of $27
and $51) (1) 1,056 726 1,884 1,396
Restructuring charges 10 24 22 132
Purchased in-process research
and development -- -- 60 --
Total operating expenses 1,607 1,197 2,946 2,391
Operating income (loss) (186) 1 (323) (120)
Gain on equity investments, net 14 9 27 5
Interest and other income, net 25 33 69 64
Income (loss) before income taxes (147) 43 (227) (51)
Provision for income taxes 76 39 119 78
Net income (loss) $(223) $4 $(346) $(129)
Net income (loss) per common
share - basic $(0.07) $-- $(0.10) $(0.04)
Net income (loss) per common
share - diluted $(0.07) $-- $(0.10) $(0.04)
Shares used in the calculation of
net income (loss) per common
share - basic 3,424 3,360 3,415 3,349
Shares used in the calculation of
net income (loss) per common
share - diluted 3,424 3,400 3,415 3,349
(1) For the three and six months ended December 25, 2005, respectively.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 25, June 30,
2005 2005*
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $1,193 $2,051
Short-term marketable debt securities 1,256 1,345
Accounts receivable, net 2,289 2,231
Inventories 550 431
Deferred and prepaid tax assets 275 255
Prepaid expenses and other current assets 658 878
Total current assets 6,221 7,191
Property, plant and equipment, net 1,914 1,769
Long-term marketable debt securities 1,827 4,128
Goodwill 2,472 441
Other acquisition-related intangible assets, net 1,181 113
Other non-current assets, net 693 548
$14,308 $14,190
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and short-term
borrowings $508 $--
Accounts payable 1,214 1,167
Accrued payroll-related liabilities 673 713
Accrued liabilities and other 990 1,014
Deferred revenues 1,541 1,648
Warranty reserve 242 224
Total current liabilities 5,168 4,766
Long-term debt 593 1,123
Long-term deferred revenues 469 544
Other non-current obligations 1,585 1,083
Total stockholders' equity 6,493 6,674
$14,308 $14,190
* Derived from audited financial statements.
SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
Six Months Ended
December 25, December 26,
2005 2004
Cash flows from operating activities:
Net loss $(346) $(129)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 301 329
Amortization of other intangible assets 153 36
Deferred taxes 4 (3)
Stock-based compensation expense 105 13
Purchased in-process research and development 60 --
Gain on investments, net (27) (5)
Changes in operating assets and liabilities:
Accounts receivable, net 236 510
Inventories 66 37
Prepaid and other assets 232 (79)
Accounts payable (88) (88)
Other liabilities (663) (445)
Net cash provided by operating activities 33 176
Cash flows from investing activities:
Increase in restricted cash (54) --
Purchases of marketable debt securities (1,227) (2,943)
Proceeds from sales of marketable debt
securities 3,440 2,287
Proceeds from maturities of marketable debt
securities 163 508
Proceeds from sales of equity investments, net 14 13
Purchases of property, plant and equipment, net (130) (141)
Purchases of spare parts and other assets (40) (42)
Payments for acquisitions, net of cash acquired (3,150) --
Net cash used in investing activities (984) (318)
Cash flows from financing activities:
Proceeds from issuance of common stock, net 93 114
Principal payments on borrowings and other
obligations -- (250)
Net cash provided by (used in) financing activities 93 (136)
Net decrease in cash and cash equivalents (858) (278)
Cash and cash equivalents, beginning of period 2,051 2,141
Cash and cash equivalents, end of period $1,193 $1,863
SUN MICROSYSTEMS, INC.
NON-GAAP CALCULATION OF NET INCOME (LOSS) EXCLUDING SPECIAL ITEMS
(unaudited)
(in millions, except per share amounts)
Three Months Ended Six Months Ended
Dec. 25, Dec. 26, Dec. 25, Dec. 26,
2005 2004 2005 2004
Calculation of net income (loss)
excluding special items:
Net income (loss)**, *** $(223) $4 $(346) $(129)
Restructuring charges 10 24 22 132
Purchased in-process research and
development -- -- 60 --
Gain on equity investments, net (14) (9) (27) (5)
Settlement of litigation* -- -- -- 55
Related tax effects (3) (6) (7) (13)
Net income (loss) excluding special
items $(230) $13 $(298) $40
Net income (loss) excluding special
items per common share - basic $(0.07) $-- $(0.09) $0.01
Net income (loss) excluding special
items per common share - diluted $(0.07) $-- $(0.09) $0.01
Shares used in the calculation of
net income (loss) excluding special
items per common share - basic 3,424 3,360 3,415 3,349
Shares used in the calculation of
net income (loss) excluding special
items per common share - diluted 3,424 3,400 3,415 3,378
* Included in Cost of sales - products
** Net loss for the three and six months ended December 25, 2005 included $55 million and $105 million of stock-based compensation expense or approximately $0.02 per share and $0.03 per share, respectively.
*** Net loss for the three and six months ended December 25, 2005 included $145 million and $267 million of purchase price accounting adjustments and intangible asset amortization relating to our recent acquisitions or approximately $0.04 per share and $0.08 per share, respectively.
Source: prnewswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
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