ACADEMIA

Sun Microsystems reported results 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 servers and the Sun Fire T2000 server based on the CoolThreads T1 processor, to UltraSPARC IV+, to Solaris 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."