SCIENCE

PALO ALTO, CA -- Sun Microsystems, Inc., (Nasdaq: SUNW), a leading provider of hardware, software and services that power enterprises and network computing, today reported annual and fourth quarter results for fiscal year 2001, which ended June 30, 2001. "Despite unprecedented economic challenges, during the year we continued to take share from our principal competitors," stated Scott McNealy, Chief Executive Officer of Sun Microsystems. McNealy continued, "Our product and services portfolio, led by the introduction of our Sun(TM) Open Net Environment (Sun ONE) architecture, is the best it's ever been. During the past year, we strengthened Sun's Professional Services and Services business, improved product quality, enhanced our software business, introduced UltraSPARC(TM) III microprocessors, and made numerous additions to a powerful hardware lineup. In software, Sun made key developments in the iPlanet(TM) product line and Java(TM) technologies, and expanded solutions for managing open storage networks through the HighGround and LSC acquisitions, while the Solaris(TM) 8 platform continued to win awards as the best mission critical server operating system on the planet. New hardware introductions included the Sun Blade(TM) 1000 line of workstations, Netra(TM) servers, the Sun StorEdge(TM) T3 arrays, Sun Cobalt(TM) appliances, and the Sun Fire(TM) mid-range servers. With the new, high-end Sun Fire(TM) enterprise server due out later this year, followed by additional UltraSPARC(TM) III technology-based products, Sun's lead in product innovation continues to strengthen." McNealy concluded, "We have an absolutely unbeatable team of employees making all these great things happen. Their flexibility and commitment to the business has kept Sun a leading provider of products, technologies, and services for enabling the networked economy." For fiscal year 2001, Sun reported revenues of $18.25 billion, up from last year's revenues of $15.72 billion. Pro forma net income was $1.45 billion for the fiscal year, compared with last year's pro forma net income of $1.86 billion. Pro forma earnings per share for the fiscal year was $0.42, compared with last year's pro forma earnings per share of $0.55. Pro forma earnings and per share information is prepared in accordance with generally accepted accounting principles (GAAP) except that the following GAAP-required charges are excluded: realized gains or losses on Sun's equity portfolio, acquisition-related items, and any unusual one time items and the related tax effects of these items. Reported GAAP information includes these items. 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. On a GAAP basis, Sun reported net income for fiscal year 2001 of $927 million or $0.27 per share, compared with $1.85 billion or $0.55 per share in fiscal year 2000. Michael E. Lehman, Sun's Executive Vice President of Corporate Resources and Chief Financial Officer, commented, "Long term, we've been strongly focused on lowering our fundamental cost structure while continuing to invest for the future. For example, Sun's SG&A expenses this last quarter were 10% below those of fourth quarter fiscal 2000. Overall, we decreased our operating expenses from the fourth quarter of fiscal 2000 to the fourth quarter of fiscal 2001 while simultaneously expanding our employee base. And during the same time period, we were able to increase our R&D investment by over 17%." Lehman concluded, "Our balance sheet remains strong, with more than $6 billion in cash. Going forward, we intend to intensify our efforts to streamline our business model and generate even more cash to provide flexibility for our long-term growth." Revenues for the fourth quarter of fiscal 2001 were $4.00 billion, compared with $5.02 billion in the fourth quarter of the prior fiscal year. Orders for the fourth quarter of fiscal 2001 were $3.65 billion. Pro forma net income for the fourth quarter of fiscal 2001 was $134 million, compared with $717 million for the same period a year ago. Fourth quarter fiscal 2001 pro forma earnings per share was $0.04, compared with $0.21 for the fourth quarter of fiscal 2000. On a GAAP basis, Sun reported a fourth quarter loss for fiscal 2001 of $88 million or $(0.03) per share, compared with earnings of $720 million or $0.21 per share for the same period a year ago.