Last Year’s Cuts Hamper Sun Results

As expected, officials at Sun Microsystems, Inc. ,
didn’t have good numbers to report to investors at their second quarter
2002 conference call Friday morning, announcing a net loss of $431 million
and a slight climb in revenues.

Investors and analysts are well aware of Sun’s problems, mainly because the
network computing company gave Wall Street a foreshadowing of times to come
with their first quarter 2002 report, which blamed the Sept. 11 events and
a shaky environment for computer purchases.

Investors were well aware the second would likely be worse than the first,
with an expected half-billion charge from last October’s restructuring
moves getting added to the financial sheets.

Michael Lehman, Sun executive vice president of corporate resources and
chief financial officer, said, all things considered, this second quarter
is much better than the first.

“Compared with Sun’s first fiscal quarter, bookings and revenue in the
second fiscal quarter are up sequentially and inventory reductions are in
excess of $200 million,” he said. “We generated cash in the quarter on an
operating basis, even with the payments we’ve made on our restructuring,
and Sun’s cash and liquid marketable investment position remains strong at
approximately $6 billion.”

Sun’s problems extend back well before September of last year, with an
inevitable downturn in the market after years of high-tech success
exacerbating current events. As a result, Sun executives were forced to
restructure and retool their business, cutting 4,000 jobs in October 2001.

Even as they revised their first quarter 2002 projections, Sun officials told
they would charge the one-time $500 million restructuring fee
in the second quarter and look for June 2002 as their due date for a
“return to profitability.”

Revenues of $5.9 billion for the first six months of fiscal 2002 point to
decreased spending, a 41 percent drop from 2001. Still, despite the
overall loss, $3.1 billion of that revenue came in the second quarter,
showing a slight nine percent increase over the first quarter of 2001.

“We are showing signs of progress. Despite economic uncertainties, Sun
still is investing in product development and core competencies to promote
the long-term growth of the company,” Lehman said.

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