GOVERNMENT

Revenues for the second quarter of fiscal 2009 were $3.220 billion, a decrease of 10.9 percent as compared with $3.615 billion for the second quarter of fiscal 2008, and an increase of 7.7 percent as compared with $2.990 billion for the first quarter of fiscal 2009. Total gross margin as a percent of revenues was 41.9, a decrease of 6.6 percentage points as compared with the second quarter of fiscal 2008 and an increase of 1.7 percentage points as compared with the first quarter of fiscal 2009.

Net loss for the second quarter of fiscal 2009 on a GAAP basis was $209 million, or $(0.28) per share on a diluted basis, as compared with a net income of $260 million, or $0.31 per share, for the second quarter of fiscal 2008, and compared with a net loss of $1.677 billion, or $(2.24) per share, for the first quarter of fiscal 2009. GAAP net loss per share includes a restructuring charge of $222 million primarily related to the restructuring announcement of November 2008.

On a non-GAAP basis, net income for the second quarter of fiscal 2009 was $114 million, or $0.15 per share on a diluted basis, as compared with a non-GAAP net income of $409 million, or $0.50 per share, for the second quarter of fiscal 2008, and compared with a non-GAAP net loss of $65 million, or $(0.09) per share, for the first quarter of fiscal 2009. Non-GAAP net income per share excludes purchased in-process research and development, amortization of acquisition-related intangibles, stock-based compensation, restructuring and related impairment of long-lived assets, impairment of goodwill, net gain or loss on equity investments and the tax effect of these non-GAAP adjustments.

Sun ended the quarter with a cash and marketable debt securities balance of $3.008 billion and generated cash flow from operations for the second quarter of fiscal 2009 of $36 million.

"It's great to see customers so aggressively embracing open source software, from Solaris to MySQL, alongside Sun's new open source storage platforms as a means of radical cost reduction," said Jonathan Schwartz, CEO of Sun Microsystems.

Second Quarter Highlights

• Grew billings at double-digit rates year over year in key growth categories, which accounted for more than one-third of total products billings in the second quarter of fiscal 2009 versus 23 percent in the second quarter of fiscal 2008:
  • The category of Solaris-based Chip Multi-Threading systems grew 31 percent year over year, and is now at an approximately $1.4 billion annual run rate, based on first and second quarter fiscal 2009 results.
  • The category of Total Software grew 21 percent year over year, and is now at an approximately $600 million annual run rate, based on first and second quarter fiscal 2009 results.
  • The category of X64 servers grew 11 percent year over year, and is now at an approximately $700 million annual run rate, based on first and second quarter fiscal 2009 results.
  • The category of Open Storage grew 21 percent year over year, and is now at an approximately $100 million annual run rate, based on first and second quarter fiscal 2009 results.
• Increased products gross margin 4 percentage points sequentially, primarily due to lower component costs, disciplined pricing and discounting, and a slightly positive mix impact.
• Launched the flash-based, Sun Storage 7000 family (Amber Road) in November 2008, built upon the popular ZFS file system. Download ZFS here: www.solaris.com/get.
• Announced a restructuring initiative in November 2008 that is expected to reduce total costs by $700-800 million annually; most of this benefit is expected to be realized in fiscal 2010.

Sun will host a conference call today to review the complete financial results beginning at 1:30 p.m. PT / 4:30 p.m. ET. The general public can access the financial results and listen to the call via Sun's Investor Relations website at www.sun.com/investors.

Financials

Condensed Consolidated Statements of Operations
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Cash Flows
Calculation of Non-GAAP Net Income (unaudited)