This spreadsheet supports STUDENT analysis of the case Sun Microsystems (Case 48)

This spreadsheet was prepared by Assistant Professor of Business Administration Elena Loutskina. Copyright 2010 by the University of Virginia Darden School Foundation, Charlottesville,
VA. All rights reserved. For customer service inquiries, send an e-mail tosales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system,
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Rev. Nov. 2, 2012

 Exhibit 1
SUN MICROSYSTEMS
Global Computer Hardware Sales

Global Computer Hardware Sales: 200408

500 8.0%

400
6.0%

Sales ($ billions)
300 Growth (% )
4.0%
200

2.0%
100

0 0.0%
2004 2005 2006 2007 2008

Sales Growth

Global Computer Hardware Sales by Product: 2008

Other
Monitors 4%
8%

Printers
10%

PCs
48%

Servers and Networking

29%

Data source: Datamonitor, Global Computer Hardware: Industry Profile, December 2008.
0%

0%
Growth (% )
0%

0%

0%
 Exhibit 2
SUN MICROSYSTEMS
Global Software & Services Sales

Global Software & Services Sales: 200408

2,500 15.0%

2,000 12.0%

Sales ($ billions)
1,500 9.0% Growth (% )

1,000 6.0%

500 3.0%

0 0.0%
2004 2005 2006 2007 2008

Sales Growth

Global Software & Services Sales by Product: 2008

IT Services
12%

Internet Software and Services Software

33% 55%

Data source: Datamonitor, Global Software & Services: Industry Profile, March 2009.
.0%

.0%

0% Growth (% )

0%

0%

0%
 Exhibit 3
SUN MICROSYSTEMS
Global Software & Services Sales

Global Software & Services Sales by Share: 2008

IBM MSFT EDS1 ORCL

4% 3% 1% 1%

Other
92%
1
EDS was acquired by HP in 2008.
Data source: Datamonitor, Global Software & Services: Industry Profile, March 2009.
 Exhibit 4
SUN MICROSYSTEMS
IT Industry Companies

Primarily Hardware Description

Advanced Micro Devices Develops and manufactures semiconductors and
microprocessors
Apple Designs, manufactures and markets personal computers, related
software and mobile communication and entertainment devices

Dell Offers a wide range of computers and related products

EMC Provides enterprise storage systems, software, networks and

services
Hewlett-Packard Provides imaging and printing systems, computing systems, and
information technology for business and home

Intel Designs and manufactures computing and communications

components and platforms
International Business Offers computer solutions through the use of advanced
Machines information technology
NetApp Provides storage and data management solutions
Sun Microsystems Provides products, services and support for building and
maintaining network computing environments

Primarily Software
Adobe Systems Develops, markets and supports computer software products and
technology
Microsoft Develops, manufactures, licenses, sells and supports software
products
Novell Provides network and Internet directory software and services

Oracle Supplies software for enterprise information management

Red Hat Develops and provides open source software and services

Sources: Industry reports and Bloomberg.

 Exhibit 4
SUN MICROSYSTEMS
IT Industry Companies

Key Products Notable Acquisitions

x86 microprocessors, microprocessors for computers and *ATI Technologies (2006)
servers
Macintosh computers, iPhones, iPods, music related products

Desktop and laptop computers, software and peripherals, *EqualLogic (2008)

servers
Information storage, VMware

Consulting services, enterprise storage and servers, personal *Compaq (2002)

computers, digital cameras, printers and ink *EDS (2008)

Microprocessors, chipsets, motherboards, platforms

Consulting services, middleware, servers, laptops

Filers
Enterprise systems and services, storage and software *MySQL (2008)
platforms Java, Solaris and MySQL

Creative solutions, Acrobat

Windows, business and server software, gaming and

handheld devices
Enterprise networking software

Relational databases, middleware software, applications, *PeopleSoft (2005)

related services *Siebel Systems (2006)
*Hyperion Solutions (2007)
*BEA Systems (2008)
Linux
 Exhibit 5
SUN MICROSYSTEMS
Relative Sales Growth, 200008

Primarily Hardware Companies

400.0%

300.0%

200.0%

100.0%

0.0%
2000 2001 2002 2003 2004 2005 2006 2007 20

-100.0%

Primarily Software Companies

600.0%

450.0%

300.0%

150.0%

0.0%
2000 2001 2002 2003 2004 2005 2006 2007 20

-150.0%

Data source: Compustat.

8

Apple

NetApp

HP
Dell
EMC
AMD
IBM
Intel
2006 2007 Sun
2008

Red Hat

Adobe
Microsoft
Oracle

2006 2007 Novell

2008
 Exhibit 6
SUN MICROSYSTEMS
Selected Acquisitions Completed by Oracle,

Target Completion Date Deal Size ($MM)

PeopleSoft January 2005 10,300.0

Retek Inc. April 2005 630.0

G-Log September 2005 N/A
Siebel Systems Inc. January 2006 5,946.5

360Commerce January 2006 N/A

Portal Software Inc. April 2006 233.7

Mantas Inc. October 2006 122.6

Stellent Inc. November 2006 398.7
MetaSolv Inc. October 2006 217.7

Hyperion Solutions Corp. March 2007 3,292.1

Agile Software Corp. May 2007 480.1

BEA Systems Inc. January 2008 8,056.0

Skywire Software LLC June 2008 N/A

Primavera Software Inc. October 2008 N/A

Source: SDC Platinum.

 Exhibit 6
SUN MICROSYSTEMS
cquisitions Completed by Oracle, 200508

Product Catgory Core Products

Applications Human resource management systems and customer relationship management
software
Industry Solutions Management software for the retail industry
Industry Solutions Logistics and transportation management software
Applications Customer relationship management, business intelligence and data integration
software
Industry Solutions Open-store and multil-channel solutions software
Industry Solutions Billing and revenue management solutions for communications and media
industry
Industry Solutions Fraud and compliance software for financial institutions
Middleware Content management software solutions
Industry Solutions Customer relationship software for the communications industry

Applications Performance management software

Applications Product life cycle software for the industrial products, electronics and high-
tech, and life science industries
Middleware Enterprise infrastructure software
Industry Solutions Web-based insurance, financial and enterprise management software

Applications Project, program and portfolio management software

 Exhibit 7
SUN MICROSYSTEMS
Relative Stock Performance, January 3, 2006, to April 16, 2009

100.0% 3/14/08: Fed bails out Bear

Stearns

75.0%

50.0%

25.0%

0.0%

-25.0%

-50.0%

-75.0% 3/16/09: Rumors of IBM

acquisition of Sun surface

-100.0% 2006 2007

Sun Oracle S&P 500

Data sources: Yahoo! Finance and Wharton Research Database Service.

to April 16, 2009

9/14/08: Collapse of Lehman

Brothers

51.3%

-31.5%

-61.3%
ors of IBM
Sun surface

2008 2009

S&P 500
 Exhibit 8
SUN MICROSYSTEMS
Comparing Oracle and Sun Microsystems
(in billions of U.S. dollars)

ORACLE SUN M
Employees 86,500 30,000
FY08 Revenue $22.43 billion $13.88 billion

4.6
6.2

11.6

FY08 Profit $5.52 billion $403 million

Key Products Databases, business software from Siebel, Server computers, storage
PeopleSoft Solaris technology

Data source: Don Clark and Ben Worthen, Oracle Snatches Sun, Foiling IBM, Wall Street Journal, April 21, 2009.
stems

SUN MICROSYSTEMS

13.88 billion

5.3

403 million

erver computers, storage devices, Java, and

olaris technology

009.
 Exhibit
SUN MICROS
IT Companies Fin

Stock Shares
Price Out
Ticker ($) (MM)
Primarily Hardware
Advanced Micro Devices AMD 3.56 609
Apple AAPL 123.42 889
Dell DELL 11.06 1,944
EMC EMC 12.81 2,041
Hewlett-Packard HPQ 36.30 2,416
Intel INTC 15.60 2,562
International Business Machines IBM 101.27 1,343
NetApp NTAP 17.59 330
Sun Microsystems JAVA 6.69 739

Primarily Software
Adobe Systems ADBE 24.70 524
Microsoft MSFT 19.20 8,896
Novell NOVL 3.94 343
Oracle ORCL 19.06 5,046
Red Hat RHT 18.32 190

Market data as of April 17, 2009

Data sources: Yahoo! Finance, Moodys, Bloomberg, and company filings.
 Exhibit 9
SUN MICROSYSTEMS
IT Companies Financial Data

Market BV Cash & LTM

Cap Debt Levered Bond Investments Sales
($MM) ($MM) Beta Rating ($MM) ($MM)

2,168 4,988 2.19 B 933 5,808

109,713 - 1.11 - 24,490 37,096
21,505 2,011 1.12 A2 9,546 61,101
26,142 3,404 1.39 - 6,446 14,876
87,708 20,458 1.25 A2 10,140 118,697
39,967 1,988 1.20 A1 8,840 37,586
136,052 33,925 0.93 A1 12,907 103,630
5,808 1,265 1.80 - 2,604 3,464
4,941 1,257 1.73 Ba1 3,061 13,438

12,944 350 1.32 - 2,018 3,476

170,795 2,000 0.99 Aaa 31,447 61,981
1,353 122 1.50 B1 1,067 940
96,180 11,238 1.27 A2 12,624 23,630
3,482 - 1.20 BB 663 628
 LTM LTM LTM
EBIT EBITDA Earnings
($MM) ($MM) ($MM)

(1,955) (732) (3,098)

7,984 8,739 5,728
3,190 3,959 2,478
1,569 2,626 1,346
10,354 14,175 8,050
8,954 13,570 5,292
16,715 22,165 12,334
116 286 101
(2,231) (1,757) n/a

961 1,231 809

22,128 24,485 17,232
10 55 (15)
8,406 10,291 5,739
80 119 85
 Exhibit 10
SUN MICROSYSTEMS
Relevant Security Yields, April 2009

Corporate Bond Yields

AAA 5.50%
AA 5.77%
A+ 6.27%
A 6.35%
A- 6.50%
BBB+ 7.54%
BBB 7.62%
BBB- 8.64%
BB+ 11.42%
BB 11.49%
BB- 11.70%
B+ 13.28%
B 14.70%
B- 15.46%

U.S. Treasury Yields

180-Day 0.34%
1-Year 0.54%
3-Year 1.22%
5-Year 1.71%
10-Year 2.82%
30-Year 3.66%

Data sources: Bloomberg, U.S. Treasury, and Ibbotson Associates.

 Exhibit 11
SUN MICROSYSTEMS
Sun Microsystems Historical and Projected Balance Sheet
(in millions of U.S. dollars)

Fiscal Year-End June 30

## ##
Assets
Current Assets
Cash(1) 3,620 2,272
Marketable Debt Securities 2,322 1,038
Net Receivables 2,964 3,019
Inventory 524 680
Deferred Prepaid Taxes(2) 200 216
Other Current Assets 1,058 1,218
Total Current Assets 10,688 8,443
Property, Plant, & Equipment, Net 1,504 1,611
Goodwill 2,514 3,215
Intangible Assets 633 565
Other Noncurrent Assets 499 506
Total Assets 15,838 14,340

Liabilities & Equity

Current Liabilities
Accounts Payable Including Accrued Payroll 2,222 2,121
Short/Current Long-Term Debt 1 -
Deferred Taxes(2) 2,047 2,236
Other Current Liabilities Including Warranty Reserve 1,182 1,311
Total Current Liabilities 5,451 5,668
Long-Term Debt 1,264 1,265
Deferred Long-Term Charges(2) 659 683
Other Noncurrent Liabilities (3)
1,285 1,136
Total Liabilities 8,659 8,752

Stockholders Equity
Common Stock 6,987 7,391
Treasury Stock (311) (2,726)
Retained Earnings 189 430
Other Stockholders Equity 314 493
Total Stockholders Equity 7,179 5,588

Total Liabilities & Equity 15,838 14,340

Data sources: Company filings and case writer estimates.

 (Sun Microsystems') long-term strategy is to maintain a minimum amount of cash and cash equivalents in subsidiaries for operational
(1)

purposes and to invest the remaining amount of our cash in interest-bearing and highly liquid cash equivalents and marketable debt
securities.

(2)
Deferred taxes and related accounts are not expected to vary with sales or continue to accumulate as a company growth.
Includes deferred settlement income from Microsoft as of June 30, 2009, 2008, 2007, and 2006, long-term tax liabilities as of June 30,
(3)

2009, 2008, 2007, and 2006, and long-term restructuring liabilities.

ear-End June 30
2009E

1,876
1,185
2,258
566
188
995
7,068
1,616
1,743
269
536
11,232

1,600
554
2,341
1,126
5,621
695
635
976
7,927

7,582
(2,569)
(2,055)
347
3,305

11,232
ubsidiaries for operational
s and marketable debt

pany growth.
tax liabilities as of June 30,
 Exhibit 12
SUN MICROSYSTEMS
Oracle Historical and Projected Balance Sheet
(in millions of U.S. dollars)

Fiscal Year-End May 31

2007 2008 2009E
Assets
Current Assets
Cash & Cash Equivalents 7,020 11,043 12,624
Net Receivables 4,589 5,799 4,430
Inventory - - -
Other Current Assets 1,274 1,261 1,527
Total Current Assets 12,883 18,103 18,581
Property, Plant, & Equipment, Net 1,603 1,688 1,922
Goodwill 13,479 17,991 18,842
Intangible Assets 5,964 8,395 7,269
Other Noncurrent Assets 643 1,091 802
Total Assets 34,572 47,268 47,416

Liabilities & Equity

Current Liabilities
Accounts Payable 315 383 271
Short/Current Long-Term Debt 1,358 1,001 1,001
Other Current Liabilities 7,714 8,645 7,877
Total Current Liabilities 9,387 10,029 9,149
Long-Term Debt 6,235 10,235 9,237
Deferred Long-Term Charges 1,121 1,218 480
Other Noncurrent Liabilities 910 2,761 3,460
Total Liabilities 17,653 24,243 22,326

Stockholders Equity
Common Stock 10,293 12,446 12,980
Treasury Stock - - -
Retained Earnings 6,223 9,961 11,894
Other Stockholders Equity 403 618 216
Total Stockholders Equity 16,919 23,025 25,090

Total Liabilities & Equity 34,572 47,268 47,416

Data sources: Company filings and case writer estimates.

 Exhibit 13
SUN MICROSYSTEMS
Oracle Historical and Projected Income Statement
(in millions of U.S. dollars)

Fiscal Year-End May 31

2007 2008 2009E
Software Revenues 14,211 17,843 18,877
Services Revenues 3,785 4,587 4,375
Net Revenue 17,996 22,430 23,252
Selling, General, & Administrative 8,790 10,468 10,217
Research & Development 2,195 2,741 2,767
Amortization of Intangible Assets 878 1,212 1,713
Other Operating Expense 159 165 234
Total Operating Expense 12,022 14,586 14,931
Operating Income 5,974 7,844 8,321
Income Tax on Operations 1,709 2,316 2,380
Net Operating Profit After Tax 4,265 5,528 5,941

Effective Corporate Tax Rate 28.6% 29.5% 28.6%

Data sources: Company filings and case writer estimates.

 Exhibit 14
SUN MICROSYSTEMS
Sun Microsystems Historical and Projected Income State
(in millions of U.S. dollars)

Fiscal Year-
2007 2008 2009
Net Revenue 13,873 13,880 11,449
Cost of Sales 7,608 7,425 6,718
Gross Margin 6,265 6,455 4,731
Selling, General, & Administrative 3,851 3,955 3,461
Research & Development 2,008 1,834 1,648
Impairment of Goodwill - - 1,460
Other Operating Expense 97 294 398
Total Operating Expense 5,956 6,083 6,967
Operating Income 309 372 (2,236)

Depreciation & Amortization 517 476 474

as % of Prior Year PP&E 34.4% 29.5% 29.3%
Net PP&E 1,611 1,616 1,788
as % of Sales 11.6% 11.6% 15.6%
Data sources: Company filings and case writer estimates.
 ibit 14
ROSYSTEMS
and Projected Income Statement
of U.S. dollars)

Fiscal Year-End June 30

2010 2011 2012 2013 2014E
12,665 13,047 13,526 13,885 14,243
7,685 7,583 7,735 7,889 8,075
4,980 5,464 5,791 5,996 6,168

4,839 4,992 5,121 5,249 5,372

141 472 670 747 796

536 456 470 487 500

30.0% 30.0% 30.0% 30.0% 30.0%
1,520 1,566 1,623 1,666 1,709
12.0% 12.0% 12.0% 12.0% 12.0%