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SUN MICROSYSTEMS
Q109 QUARTERLY
RESULTS RELEASE

Investor Relations
http://www.sun.com/investors

                               1
Speakers

• Ron Pasek – VP, Corporate Treasurer
• Jonathan Schwartz – CEO & President
• Mike Lehman – CFO & Executive VP,
                Corporate Resources




                                        2
Top Level P&L
                                        Q108             Q408             Q109              Q-Q                  Y-Y
                                       Actuals          Actuals          Actuals           Change               Change

    Revenue                                3,219             3,780           2,990               (790)                (229)

    Gross Margin                           1,561            1,673            1,201               (472)                (360)

    Gross Margin %                         48.5%            44.3%            40.2%                (4.1) Pts            (8.3) Pts

    Operating Expenses *                    1,498            1,610            2,851              1,241                1,353

    Operating Income                            63               63         (1,650)            (1,713)              (1,713)

    Net Income                                  89               88         (1,677)            (1,765)              (1,766)

    Operating Margin %                       2.0%            1.7%          (55.2%)               (56.9) Pts           (57.2) Pts

    EPS GAAP                                $0.10            $0.11          ($2.24)            ($2.35)              ($2.34)

    Non-GAAP Net Income **                    285              275              (65)             (340)                (350)

    EPS Non-GAAP **                         $0.32            $0.35          ($0.09)            ($0.44)              ($0.41)


    * Total Operating Expenses includes SG&A, R&D, Purchase IPRD, Restructuring, and Intangible Impairment charges.
    ** See Slide 15 for a reconciliation of GAAP Net Income and EPS GAAP to Non-GAAP Net Income and EPS Non-GAAP, respectively.



                                                                                                                                   3
Revenue                                                                         Products Revenue down (11)% Y/Y
                                                                              ●


                                                                                  Services Revenue down (1)% Y/Y
                                                                              ●

    PRODUCTS/SERVICES
    Ye a r/ Ye a r C h a n g e

                                                          0%                                        (1)%
                     $4,000                                                   1%
                                      7%
                                                3%                                       (1)%
                              17%                                       1%
                                                                                                               (7)%
                                                          35%                                       37%
                                                                              38%
                     $3,000          37%
Revenue (millions)




                                                                                        39%
                                              37%                      38%
                              39%
                                                                                                               41%

                     $2,000


                              61%    63%      63%         65%          62%    62%       61%         63%        59%
                     $1,000


                        $0
                              Q107   Q207     Q307       Q407          Q108   Q208      Q308       Q408       Q109

                                                              Fiscal Quarter
                                                                                     Services Revenue (% of Total)
                                       Products Revenue (% of Total)

                                                                                                                      4
Revenue
               PR OD UC TS/SERV IC ES
              Ye a r / Ye a r C h a n g e
                       50%
                                                                                                                                                       Products Revenue
                                                                                                                                                       Services Revenue
                       40%
Revenue Y/Y Change %




                                                                                                           31%
                       30%
                                                                                                           25%
                                                                                             23%
                                                                                                    21%           20%
                       20%
                                                                                             15%                  15%

                       10%
                                                  7%                                 7%                                  7%     7%
                                                         6%     6%                                                       6%
                               4% 5%       5%                                                                                                        5%            4%
                                                  3%     3%                                                                            3%                   3%
                                                                                     2%                                         1%            1%
                                                                        0%    0%                                                                     -1%
                                                                                                                                       -1%                                -1%
                        0%                                             -2%
                                    -3%                                                                                                                     -3%    -4%
                                                                -5%
                                                                              -7%
                                           -10%                                                                                                                           -11%
                       -10%
                               -13%


                       -20%
                             Q104   Q204   Q304   Q404   Q105   Q205   Q305   Q405   Q106    Q206   Q306   Q406   Q107   Q207   Q307   Q407   Q108   Q208   Q308   Q408   Q109



                                                                                            Fiscal Quarter
                                                                                                                                                                                 5
Billings Disclosure by Category*
($Millions )                                                                                                                 Q107              Q207               Q307            Q407               FY07            Q108              Q208              Q308             Q408               FY08             Q109
Systems Billings
Solaris SPARC Enterpris e Servers                                                                                               642              908                762           1,076            3,388                793               978               702              939            3,413                576
     Change % Y/Y                                                                                                                    2               16                 -9                1                 2               23                 8                -8              -13                 1              -27
Solaris SPARC CMT Servers                                                                                                       109              138                142              220               608              185               282               299              353            1,119                338
     Change % Y/Y                                                                                                                                   743               218                84              237                70              105               110                61                84               83
X64 Servers                                                                                                                     153              176                162              192               684              169               157               186              195               707               176
     Change % Y/Y                                                                                                                  79                47                 36               28               44                10              -11                14                 1                 3                    4
Other Sys tems Products                                                                                                         421              466                388              462           1,737                356               367               282              286            1,292                156
     Change % Y/Y                                                                                                                 -17               -14                -21              -23              -19               -15               -21              -27               -38               -26              -56
Subtotal***                                                                                                                  1,326            1,687              1,455            1,950            6,418             1,503             1,785            1,469             1,774             6,530             1,246
     Change % Y/Y                                                                                                                    8               15                 -3                1                5                13                 6                 1                -9                2              -17

Software Billings
Java                                                                                                                              24                41                60               94              219                29                45                57               88              220                 34
     Change % Y/Y                                                                                                                  41                 3                  5              17                13                21                10                -4                -6                1               18
MySQL / Infras tructure                                                                                                           30                45                50               74              198                25                52                40               91              208                 52
     Change % Y/Y                                                                                                                 100                  9                79              35                43               -17                16               -20               24                 5              111
Solaris , Management and Virtualization                                                                                           50                65                52               55              221                44                59                49               64              216                 38
     Change % Y/Y                                                                                                                                    -1                  3                2               12               -12               -10                -4               16                -2              -14
Subtotal***                                                                                                                     104              151                162              223               639                97              156               147              244               644               124
     Change % Y/Y                                                                                                                  73                 3                 20              18                20                -6                 3                -9                9                 1               27

Computer Systems Reserves and Adjustments **                                                                                      39            -204               -117             -320               -602            -126              -347             -142              -295              -910             -114
Total Computer Systems Revenue***                                                                                            1,468            1,634              1,500            1,853            6,455             1,475             1,594            1,473             1,722             6,264             1,257

Storage Billings
Dis ks & Storage Arrays                                                                                                         294              386                345              387           1,412                302               407               350              468            1,528                311
     Change % Y/Y                                                                                                                    6                7                 -2               -7                1                 3                 6                 1               21                 8                    3
Open Storage                                                                                                                                        17                  9              24                50                 9               26                23               33                91                25
     Change % Y/Y                                                                                                                                                                                                                            55              155                 37                83              162
Tape                                                                                                                            204              277                242              266               990              196               282               195              279               953               188
     Change % Y/Y                                                                                                                    1              -25                 14               -8                -8               -4                 2              -19                 5                -4                -4
Other Storage                                                                                                                       8               12                 -4              22                37               14                17                16               12                58                11
     Change % Y/Y                                                                                                                   -5               20               -128             153               -12                69                41              458               -44               55               -16
Storage Reserves and Adjustments **                                                                                              -15              -65                -32              -60              -172              -17               -77              -54             -128              -276                -28
Total Storage Revenue***                                                                                                        491              626                560              639           2,316                505               655               530              664            2,354                507

Total Products Revenue                                                                                                       1,959            2,260              2,060            2,492            8,771             1,980             2,249            2,003             2,386             8,618             1,764

Services Revenue
Hardware, Software Support (Including Solaris & Other Software)                                                                 987           1,001                 950           1,024            3,962                979            1,041                961           1,042             4,023                963
     Change % Y/Y                                                                                                                  18                 5                  5                4                 8               -1                 4                 1                2                 2                -2
Professional and Education Services                                                                                             243              305                273              319           1,140                260               325               302              352            1,239                263
     Change % Y/Y                                                                                                                  30                11                15                 0               12                 7                 7               11                10                 9                    1
Total Services Revenue                                                                                                       1,230            1,306              1,223            1,343            5,102             1,239             1,366            1,263             1,394             5,262             1,226

Total Sun Revenue                                                                                                            3,189            3,566              3,283            3,835          13,873              3,219             3,615            3,266             3,780           13,880              2,990
Notes:
                                                                                                                                     8               20                 26              43                96                55                44                69               73              241                61
Blade Servers Billings (includes CMT, X64, and Netra)
                                                                                                                                     0                 0                 0                0                 0              638              122               162                71              151                11
     Change % Y/Y

● Solaris SPARC Enterprise Servers includes the Datacenter & Midrange server systems                                                                       ● Solaris SPARC CMT Servers includes all CMT Servers, including CMT Blades and CMT Netra products
● X64 Servers includes X64 Rack, X64 Blades and X64 Netra products and excludes products categorized under Open Storage                                    ● Other Systems Products includes Workstations, Volume SPARC, Netra SPARC, Integrated Products and Networking products
● Open Storage includes the Sun Fire X4500, Sun Fire X4540, J4200, J4400 and J4500 products                                                                ● Other Storage includes the NAS products
*Billings represent the amount invoiced to customers for products and are subject to cancellation. Billings is not a GAAP financial measurement, and therefore is not an audited number. Billings differs from revenue in that billings are not adjusted for any reserves and are not subject to any of the conditions
under GAAP that must be met before revenue is recognized. Accordingly, amounts billed may not lead to revenue and billings should not be viewed as equivalent to, or a substitute for, GAAP revenue.
 Reserves and adjustments represent deferrals, reserves and other reductions of invoiced amounts required under GAAP before revenue is recognized.
**


*** Excludes service revenue attributable to Systems, Software, and Storage including maintenance and support shown in the Hardware, Software Support line under Services Revenue



                                                                                                                                                                                                                                                                                                                     6
Billings Trends*

                                                                                                                                                                       Growth Categories
                              Traditional Categories
                      2,250                                                                                                                                  1,125

                      2,000                                                                                                                                  1,000
                      1,750
                                                                                                                                                              875




                                                                                                                                       Billings (millions)
Billings (millions)




                                                                                                                                                                                                                                      Open Storage
                                                                                                           Other Storage
                      1,500
                                                                                                                                                              750                                                                     Solaris, Manage-
                                                                                                           Tape
                                                                                                                                                                                                                                      ment and Virtualiza-
                      1,250                                                                                Disks & Storage                                                                                                            tion
                                                                                                                                                              625
                                                                                                           Arrays                                                                                                                     MySQL / Infrastruc-
                      1,000                                                                                Other Systems                                                                                                              ture
                                                                                                                                                              500
                                                                                                           Products                                                                                                                   Java
                       750
                                                                                                           Solaris SPARC                                                                                                              X64 Servers
                                                                                                                                                              375
                                                                                                           Enterprise                                                                                                                 Solaris SPARC
                       500
                                                                                                           Servers                                                                                                                    CMT Servers
                                                                                                                                                              250
                       250
                                                                                                                                                              125
                         0
                             Q1     Q2      Q3       Q4       Q1       Q2       Q3      Q4       Q1                                                             0
                             07     07      07       07       08       08       08      08       09                                                              Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109


                                                Fiscal Quarter                                                                                                              Fiscal Quarter

                * Billings represent the amount invoiced to customers for products and are subject to cancellation. Billings is not a GAAP financial measurement, and therefore is not an audited number. Billings differs from revenue in that billings are
                 not adjusted for any reserves and are not subject to any of the conditions under GAAP that must be met before revenue is recognized. Accordingly, amounts billed may not lead to revenue and billings should not be viewed as equivalent
                 to, or a substitute for, GAAP revenue.



                                                                                                                                                                                                                                                               7
Services Revenue                                                          Support Services down (2)% Y/Y
                                                                        ●


                                                                            Professional Services/Edu Services up 1% Y/Y
                                                                        ●

  TOTAL SERVIC ES REVENUE
  Ye a r/ Ye a r C h a n g e


                     $1,500                                                                             4%
                                                                                   5%
                                                             3%
                                        6%
                                                                                             3%
                              20%                                       1%
                                                  7%                                                               (1)%
                                                                                                       25%
                                                                                  24%
                                       23%                  24%
Revenue (millions)




                                                                        21%
                              20%                                                            24%
                                                 22%                                                               21%
                     $1,000




                      $500
                                                                        79%       76%       76%        75%         79%
                              80%     77%        78%        76%



                        $0
                              Q107    Q207       Q307       Q407        Q108     Q208       Q308       Q408       Q109
                                                                 Fiscal Quarter
                                                                                        Professional Services/Edu Services
                                 Support Services Revenue (% of Total
                                                                                        Revenue (% of Total Services)
                                 Services)
                                                                                                                             8
Products Margin down (12.8) pts Y/Y
Gross Margin
                                                                                           ●



                                                                                               Services Margin down (1.9) pts Y/Y
                                                                                           ●



                                                                                               Total Margin down (8.3) pts Y/Y
                                                                                           ●

PRODUCTS/SERVICES
                                                                                  48.5%
                                                                         48.5%
                                                               47.2%
                                                                                               44.9%
                                           45.0%                                                         44.3%
                                                   44.5%
                                   43.5%
                          $2,000                                1,812                                                 40.2%
                                                                                   1,753
                                                                                                         1,673
                                           1,604                         1,561
Gross Margin (millions)




                                                                                               1,468
                                                       1,461     47.1%
                                   1,388                                           48.7%
                          $1,500                                                                         47.3%
                                           43.8%                                                                    1,201
                                                                          49.2%                45.2%
                                                       44.9%
                                   44.9%
                                                                                                                    47.3%
                          $1,000


                                                                          48.0% 48.4% 44.8% 42.5% 35.2%
                                   42.7% 45.7% 44.3% 47.4%
                           $500


                             $0
                                   Q107    Q207        Q307      Q407     Q108     Q208        Q308      Q408       Q109
                                                                   Fiscal Quarter
                                      Gross Margin %             Gross Margin %-Products         Gross Margin %-Services
                                                                                                                                     9
Gross Margin %
       PRODUCTS/SERVICES
                 50.0%
                                                       49.2%
                                                                  48.7%
                                                       48.5%      48.5%
                 49.0%                                            48.4%
                                                       48.0%
                 48.0%                       47.4%
                                             47.2%                                            47.3%       47.3%
                                             47.1%
                 47.0%
                             45.7%
                 46.0%
                                                                          45.2%
                             45.0%                                        44.9%
                     44.9%           44.9%                                44.8%
                 45.0%               44.5%                                                    44.3%
                                     44.3%
Gross Margin %




                             43.8%
                     43.5%
                 44.0%
                     42.7%
                 43.0%                                                                        42.5%
                 42.0%
                 41.0%                                                                                    40.2%
                 40.0%
                 39.0%
                 38.0%
                                                                                  Products Gross Margin
                 37.0%                                                            Services Gross Margin
                                                                                  Total Gross Margin
                 36.0%
                                                                                                          35.2%
                 35.0%
                      Q107    Q207    Q307    Q407      Q108       Q208    Q308                Q408        Q109




                                                 Fiscal Quarter
                                                                                                                  10
R&D / SG&A Expense*
 Ye a r/ Ye a r C h a n g e                                                                          (3)% Y/Y decrease
                                                                                                 ●




               $1,800
                                          (7)%         (5)%        (12)%                                                   2%
                                                                                               (2)%         (2)%
                             13%                                                 (3)%
               $1,500                                                                                                                  (3)%

               $1,200
  (millions)




                                          $978         $957         $958                                    $989 $1,032
                                                                                               $995
                            $958                                                 $939
                $900                                                                                                                   $920

                $600

                $300                                   $514         $514
                                          $507
                            $473                                                               $463                       $468
                                                                                                            $457
                                                                                  $446                                                 $423
                    $0
                            Q107         Q207         Q307          Q407         Q108          Q208         Q308         Q408          Q109
                                                                         Fiscal Quarter
                                                                                                SG&A
                                                                              R&D
                 * Total Operating Expenses differ from SG&A and R&D Expenses because Total Operating Expenses includes IPRD, Restructuring,
                  & Intangible Impairment charges.
                                                                                                                                               11
Demand Metrics

Book to Bill Ratio & Backlog                                                    Deferred Revenue at $2.8B
                                                                                  Ye a r / Ye a r G r o w t h
                                                                                                                                       8%
                                                                                3,000                           9%          24%             9%
                                                                                                                                  6%
                                                                                                                     14%
                                Q108 Q408 Q109                                                         15%




                                                           Balance (millions)
                                                                                         10%
                                                                                2,500            9%
      Book to Bill Ratio*       0.98 1.00 0.99                                  2,000
                                                                                1,500
      Product & Services                                                        1,000
      Backlog ($M) **          $1,931 $1,919 $1,900                              500
                                                                                    0
                                                                                        Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109
                                                                                                           Fiscal Quarter
* Book to Bill Ratio assumes Services ratio 1:1.
** Services Backlog based on three month backlog horizon




                                                                                                                                             12
Deferred Revenue                                                        Products Deferred Revenue up 49% Y/Y
                                                                  ●


                                                                        Services Deferred Revenue down (3)% Y/Y
                                                                  ●

  PRODUCTS/SERVICES
  Ye a r/ Ye a r C h a n g e

                                                                                                   8%      9%
                                                        9%                   24%
                     $2,800                                                             6%
                                                                  14%
                                             15%
                              10%     9%
Revenue (millions)




                     $2,100

                                                                  78%
                                                        78%
                              78%            77%                                        72%
                                      75%                                    71%                  70%     70%
                     $1,400


                      $700

                              22%    25%     23%        22%                  29%        28%       30%     30%
                                                                  22%
                        $0
                              Q107   Q207   Q307       Q407      Q108       Q208       Q308      Q408     Q109
                                                           Fiscal Quarter
                                                                              Services Deferred Revenue
                                            Products Deferred Revenue
                                                                              (% of Total)
                                            (% of Total)
                                                                                                                  13
Revenue - Geo                                                                                                                     North America down (12)% Y/Y
                                                                                                                                 ●


                                                                                                                                       Europe down (8)% Y/Y
                                                                                                                                 ●


      North America/ Europe/                                                                                                           Emerging Markets up 12% Y/Y
                                                                                                                                 ●


      Emerging Markets/ APAC*                                                                                                          APAC down (4)% Y/Y
                                                                                                                                 ●



                                                                                          3,835                                                                3,780
                                     $4,000
                                                                                                                            3,615
                                                        3,566
                                                                        3,283                                                                  3,266
          Revenue – Geo (millions)




                                                                                             12%           3,219                                                  12%
                                               3,189                                                                           12%                                                2,990
                                                          12%
                                     $3,000                               13%                                                                    13%              14%
                                                                                                             12%
                                                                                             13%
                                                12%                                                                            15%
                                                          13%                                                                                                                       12%
                                                                                                             13%
                                                                           13%                                                                    14%
                                                12%
                                                                                                                                                                                    15%
                                                                                             31%
                                     $2,000               33%                                                                                                     33%
                                                                                                                               34%
                                                                                                              32%
                                                31%                       33%                                                                                                       32%
                                                                                                                                                  34%


                                     $1,000
                                                45%       42%             41%                                                  39%               39%
                                                                                             44%             43%                                                  41%               41%


                                        $0
                                               Q107      Q207           Q307              Q407             Q108              Q208              Q308             Q408              Q109
                                                                                               Fiscal Quarter
                                                                                                                                                                  Revenue-APAC
                                                                                                                Revenue-Emerging
                                       Revenue-North                    Revenue-Europe
                                                                                                                                                                  (% of Total)
                                                                                                                Markets (% of Total)
                                       America (% of Total)               (% of Total)
* Effective Q1FY09, we began utilizing revised geographic groupings. Percentage of total revenue figures have been adjusted to reflect the change in the compilation of the countries that make up each of our
geographic regions.
Geographic revenue reported for Q1FY07 and Q2FY07 has been adjusted to reflect a correction in intercompany revenue to properly report country of origin.
                                                                                                                                                                                                             14
Non-GAAP Calculation of Net Income
                                            Q107       Q207       Q307       Q407       Q108       Q208       Q308       Q408       Q109
                                           Actuals    Actuals    Actuals    Actuals    Actuals    Actuals    Actuals    Actuals    Actuals
 GAAP net income (Loss)                        (56)        133         67        329         89       260        (34)         88     (1,677)

 Non-GAAP adjustments:
 Purchased IPRD                                   0         0          0          0          0          1         24           6          0
 Amortization of acquisition related
 intangibles                                     81         80         78         74         74        74         76          86         80
 Stock based compensation                        58         58         50         48         48        52         57          57         49
 Restructuring and related impairment of
                                                 21         26         35         15        113        32         14         104         63
 long-lived assets
 Impairment of Goodwill                           0         0          0          0          0          0          0           0      1,445
 (Gain) loss on equity investments, net           0         0         (5)        (1)       (22)         0          0        (10)         (8)
 Settlement Income                                0         0        (54)         0          0          0          0        (45)          0
 Tax effect of non-GAAP adjustments            (10)        (7)       (10)        (7)       (17)       (10)        (5)       (11)        (17)
 Non-GAAP net income (loss)                      94        290        161        458        285       409        132         275        (65)
 Diluted Non-GAAP net income (loss)
 per share                                    $0.11      $0.32      $0.18      $0.50      $0.32      $0.50      $0.17      $0.35     ($0.09)
    Change vs. prior year (%)                266.7%     500.0%     357.1%     455.6%     190.9%     56.3%       -5.6%     -30.0%    -128.1%
    Change vs. prior quarter (%)              22.2%     190.9%     -43.8%     177.8%     -36.0%     56.3%      -66.0%     105.9%    -125.7%



                                                                                                                                               15
Server Metrics
                        Total Server Units
                              Ye a r / Ye a r C h a n g e
                               120
                                                                    (11)%                                  2%
                               100                                                       1%




         Total Server Units
                                                    4%                                            6%
                                         11%                (5)%                                                  2%
                                                                              (5)%




            (thousands)
                                 80
                                 60
                                 40
                                 20
                                  0
                                         Q107     Q207      Q307     Q407     Q108      Q208     Q308 Q408        Q109
                                                                    Fiscal Quarter

                     x64* Server Units
                     Ye a r / Ye a r C h a n g e
                                                                                                           28% 39%
                                                                                                  26%
                                 35
                                                                       0%                13%
             x64* Server Units




                                 30
                                                    22% 10%                      7%
               (thousands)




                                 25        55%
                                 20
                                 15
                                 10
                                  5
                                  0
                                          Q107     Q207      Q307     Q407     Q108     Q208      Q308     Q408   Q109
                                                                    Fiscal Quarter
                                      * x64 servers include x86 32-bit and x64 64-bit servers and blades


                                                                                                                         16
Major News from Sun's Q1 FY09
• Focused on Long-term Growth & Profitability
   > According to the IDC Quarterly Disk Storage Systems Tracker for Q2CY08, Sun outpaced all
       major storage vendors to see a 29.2% year-over-year increase in factory revenue for the
       second quarter of 2008, outperforming the market by nearly three times.
       Released 20% growth adoption numbers for the Open Storage community, specifically
   >
       highlighting OurStage's use of OpenSolarisTM, Solaris ZFS and advanced open storage
       technologies.
       Announced that shipments of Sun RayTM Thin Clients nearly doubled quarter-over-quarter. Sun
   >
       Ray unit shipments were growing faster than the entire thin client industry, highlighting the
       appeal of thin client and desktop virtualization.
       Announced a new version of Sun xVM VirtualBoxTM as well as xVM VirtualBox Software
   >
       Enterprise Subscription, offering 24/7 premium support for enterprise users. Achieved
       milestone of xVM VirtualBox surpassing 6.5 million downloads worldwide and 15,000
       downloads a day.
       Announced that the JavaTM Platform Micro Edition is integrated in the new HP iPAQ 900 series
   >
       Business Messenger smartphone. Based on the Sun Java Wireless Client software - Sun's
       Java ME implementation for wireless handsets - and enhanced with custom features designed
       specifically for HP, the new HP 3G smartphone delivers a flexible wireless e-mail experience,
       including convenient voice control and hands-free operation.
       Launched Sun Open Suite for SWIFT, software and hardware integration for financial
   >
       institutions and corporate treasuries.

                                                                                                       17
Major News from Sun's Q1 FY09
• Delivered Ground-Breaking Innovations to the Market
       Released the Sun StorageTekTM T10000B, the industry's first one terabyte tape storage drive.
   >
     Introduced the Sun Storage J4000, a new line of economical storage arrays, and the Sun FireTM X4540,
   >
     a new highly efficient, high-performance addition to the popular Sun Fire X4500 quot;Thumperquot; family.
   > Announced the Sun Fire X4600 M2 server, equipped with eight Quad-Core AMD OpteronTM processors,
     set the World Record score of 683,542 SPECjbb2005 bops for fastest x86 JavaTM Server.
       Extended the family of Intel XeonTM-based Sun Fire servers with two new High Performance Computing
   >
       offerings, the Sun Fire X2250 and Sun Fire X4250 servers, representing the fastest Xeon-based 1U
       server for technical computing workloads and the most expandable Xeon-based 2U server for
       enterprise-class systems, respectively. Also introduced the Intel Xeon-based Sun Fire X4450 server and
       Sun Blade X6450 server, each with up to six processors.
       With Xilinx introduced a 64-bit open-source, multi-core, multi-threaded OpenSPARCTM evaluation
   >
       platform, continuing the expansion of the UltraSPARC® ecosystem.
       Expanded virtualization with Sun xVMTM Server software and Sun xVM Ops Center 2.0.
   >
       Announced the addition of VMware Virtual Desktop Manager and VMware Virtual Desktop Infrastructure
   >
       to Sun's line-up of virtualization solutions. Certified Sun Ray thin clients as VMware Ready for VMware
       VDI and allowed secure connection with VMware Virtual Desktop Manager.
       Introduced the following additions to Sun NetraTM carrier-grade server family, driving performance,
   >
       efficiency and scalability: Sun Netra X4250 server, Sun Netra X4450 server, Sun Netra T5540 server.
       Partnered with Fujitsu on a new enhanced line of SPARC Enterprise® servers that delivers a
   >
       virtualization and consolidation platform with up to 80 percent better performance on commercial
       applications and 2x better performance on HPC workloads and using 44 percent less energy per core.
                                                                                                                 18
Q1 FY09 Sample Customer Momentum
• Based on Sun's strong Services and storage hardware offering, The BMW Group selected
  Sun to provide managed storage on demand services and SAN infrastructure in Europe, the
  U.S., South Africa and Asia Pacific for the next five years. Sun was also chosen to provide
  disk and tape infrastructure for the mainframe environment in the Munich headquarters.


• City Bank, one of Bangladesh’s top commercial banks, has purchased and deployed the Sun
  SPARC Enterprise M5000, Sun SPARC Enterprise T5220 server, Sun StorageTek 6540
  modular array and Sun StorageTek SL24 autoloader running on the Solaris 10 Operating
  System (OS) to support the bank’s ambitious plans for growth.


• Stésud, a Belgium-based ERP provider with eGovernment clients that include the Belgian
  government, looked to Java when it identified that its existing software infrastructure needed
  refreshing. Stésud evaluated several solutions and selected Sun's GlassFishTM application
  server. As part of this multi-million dollar deal, Stésud also employed Sun's MySQL
  EnterpriseTM subscription, allowing the company to dependably migrate to a more scalable and
  reliable Web database architecture for the future.




                                                                                                   19
Industry Analyst Recognition
 •   “Sun Microsystems' acquisition of MySQL further validated the open source database market's
     worthiness, and enterprises can now expect even more reliability and improved support in the
     coming years.”
                            - “Market Update: Open Source Databases”, Forrester Research, Inc., July 2008
 •   “Sun continues to invest in its UltraSPARC T2 line, and it unveiled two new models with strong
     performance improvements over the existing line in April.”
                    - Sun Microsystems Server Residual Value Analysis, August 2008, Susan Middleton, IDC,
                     Doc #213754
 •   “With their recent announcement, Sun and Fujitsu put a new spark into SPARC-based platforms.
     They have increased performance, lowered energy consumption, lowering the total cost of
     ownership (TCO) in SPARC, and preserved the investment that legacy data centers have made in
     Sun products.”
                   - in The Clipper Group Navigator, quot;Sun and Fujitsu Ignite Enterprise Systems with a
                       New SPARCquot;, August 11, 2008
 •   “The Sun J4000 products, with their leading scalability and density among current SAS subsystems,
     can serve as ideal hardware components for open storage solutions. J4000 systems attach to
     servers via the LSI-made SAS HBAs.”
                - IDEAS International Inc., Aug. 14, 2008, J. Zhou, IDEAS Insight Blog: The Real Story Behind
                  Sun’s Breakthrough Economics with Sun Storage J4000 (Part 2)
 •   “This new announcement [OpenSSO] is a very good step forward for Sun’s customers. Customers
     have the best of both worlds – a very innovative product with a large and active engineering base,
     together with professional support.”
                    - Kuppinger Cole, July 24, 2008, Felix Gaehtgens, Sun unveils new models for OpenSSO
Praise for Sun's Continued Innovation
       Strong Sun Q1 FY09
         Product Reviews               Installing Sun OpenSolaris                                                    Sun Server Delivers Heavyweight Performance
                                       By Tory Skyers                                                                By Jeff Ballard
                                       ZFS takes quite a bit of worry out of my day. I don't have to worry about     Sun crams a lot of gear into this 1U device. To put it in perspective, a
                                       purchasing expensive RAID controllers. I can use the SATA ports on my
                                                                                                                     standard rack can hold as many as 40 of these servers. Thus, a rack full
                                       motherboard and get great redundancy and fault tolerance. I can take
    Sun's virtualization activity                                                                                    of the units as we tested would give you a whopping 320 processor
●
                                       snapshots, and revert from snapshots via a browser interface. I can
                                                                                                                     cores, 320 hot-swappable hard drives, 640 DIMM slots, 120 PCI-E slots,
    received strong feedback from      create ZFS volumes and manipulate those volumes via the same
                                                                                                                     and 160 Gigabit Ethernet connections.
                                       browser-based interface. Couple all that with the ability to segregate my
    InformationWeek, InfoWeek, PC      server into logical partitions like IBM's LPARS, and you have some
                                                                                                                     Worries about Sun's support of operating systems other than Solaris are
                                       serious potential. Once this thing is set up, I don't foresee much care and
    World, Macworld and CRN.                                                                                         unfounded. The X4150 provides more bang for your server buck than
                                       feeding outside of critical security patches.
                                                                                                                     comparable offerings from Dell, Hewlett-Packard, and IBM.
    Computerworld said that the Sun
●

    Fire X4150 was “very powerful
    for what is a singe U high pizza   Hands On With JavaFX - First Impressions
    box” and is “decidedly capable”.   By Andrew Trice
                             TM
    InfoWorld gave NetBeans 6.1        Performance-wise, I was very happy with the smoothness of the
●
                                                                                                                     A First Look at OpenOffice.org 3.0
                                       animations inside the runtime (although i didn't put it through rigorous
    a 9/10 rating, saying “NetBeans                                                                                  By Jason Fitzpatrick
                                       tests). After all, it is Java, and Java has very mature graphics APIs.
    may well be the overall pick of                                                                                  Mac OS X users will be pleased with 3.0, because support for OS X is
                                       Overall, I think this is a great step for RIAs in general. Sun/Java has the
    this review group”.                potential to become a major player in the RIA game. Flex/AIR is still         even more robust. OpenOffice.org 3.0 works right out of the box with
                                       undoubtedly my quot;weapon of choicequot;, but I'll be keeping a close eye on         minimal fuss. Another bonus for OS X users: features that were dropped
                                       JavaFX.                                                                       from the Mac version of Microsoft Office such as the spreadsheet Solver
    TechTarget advised readers to
●
                                                                                                                     and VBA support are included in the Mac version of OpenOffice.org.
    “keep a close eye on the                                                                                         Like other great open source projects such as Firefox, OpenOffice has
    development of”OpenSolaris.                                                                                      support for extensions to allow you to tweak the software as you see fit.
                                                                                                                     The OpenOffice Extension Repository is filled with everything from
                                       Get Started With Virtual Machines
    The O'Reillly Network reviewed                                                                                   dictionaries to templates to file import wizards to code formatting tools.
●
                                       By Scott Spanbauer
    the JavaFX preview SDK, saying
    “Sun/Java has the potential to     Sun Microsystems should rename its free, open-source virtualization
                                       utility VersatileBox. Not only does it run on Windows, Linux, Mac, and
    become a major player in the       Sun's OpenSolaris, but it also supports an even wider array of guest
                                       OSs, including just about any version of Windows.
    RIA game”.
    OpenOffice.org 3.0 launch
●
                                                                                                                     Sun Microsystems Sun Fire X4450 server
    received major praise from                                                                                       By Michael Palamountain
                                       Lab test: Climb aboard Ruby on Rails
    mainstream, IT and online news     By Martin Heller
    sources, including ZDNet                                                                                  For raw power this is the gutsiest server we have seen. The benchmark
                                                                                                              results are the best we have seen in high end servers — particularly the
    Australia's Editors' Choice        NetBeans may well be the overall pick of this review group, at least SunGard score — although we cannot claim to have tested such a
                                       based on the numbers. Whether it should be your own pick, however, machine with specs quite like this before.
    award.                             depends on your personal preferences.
                                                                                                              Sun compares this machine against an IBM x3850 and a Dell R900 in its
                                       If you already use NetBeans for Java and/or C/C++ development, then it
                                                                                                              features description. These are both 4 RU machines (the Sun Fire is just
                                       should probably be your top choice as a Rails IDE as well. Delivering
                                       strong editing and navigation along with good debugging and profiling, 2 RU in size), yet Sun manages to pack just as much inside the case.
                                       it's a very capable and highly integrated Rails IDE. And it's free.
New Record-breaking Results for Q1FY09
                    350+ World Records and counting
       Model                                                Benchmark

     Sun SPARC                 Best ever OpenMP result on SPECompL2001 benchmark
                                                                                                                                 HPC
     Enterprise M9000 with Solaris 10 OS and Sun Studio 12 compiler software
     Sun SPARC                 Best result ever recorded on SAP SD 2-tier benchmark
                                                                                                                                 ERP
     Enterprise M9000 with Solaris 10 OS and Oracle Database Server 10g
     Sun SPARC                 The highest floating point result in the world with Solaris 10
                                                                                                                                 HPC
     Enterprise M8000 OS and Sun Studio 12 compiler on SPECfp2006 benchmark
     Sun Fire X2250            Best 2 socket x86 results -SPECompM2001, SPECcpu2006
                                                                                                                                 HPC
                               with OpenSolaris OS and Sun Studio Express compilers
     Sun Fire X4600            The fastest x86 Java server in the industry with Solaris 10
                                                                                                                                 Java
                               and latest Java Platform, Standard Edition (J2SE) software
     Sun Fire X4450            4-socket champion on Enterprise Java benchmark
                                                                                                                                 Java
     Sun Fire X4450            Best result on brand new SPECjvm2008 benchmark
               Results were posted during Q1FY09 (July-Sept. 2008). See Benchmark Disclosure slide for additional information.
Benchmark Disclosure
SPEC and the benchmark names SPECweb, SPEComp, SPECfp, SPECint, SPECjAppServer and SPECjbb are registered
trademarks of the Standard Performance Evaluation Corporation. Competitive data obtained from http://www.spec.org as of
the date located above the paragraph. See respective websites for the latest results. For comparison purposes, the terms
CPU, chip and processor are used interchangeably. Each socket can accommodate one chip. SAP, R/3, mySAP reg TM of
SAP AG in Germany and other countries. For the latest results and additional information visit www.sap.com/benchmark.

As of 7/14/2008:
Two-tier SAP Sales and Distribution (SD) standard SAP ERP 2005 application benchmark: SPARC Enterprise M9000, 64 proc.
/ 256 cores / 512 threads, UltraSPARC64 VII 2.52 GHz running Solaris 10, Oracle 10g and the SAP ERP application Release
6.0 (2005) – 39,100 SAP SD Benchmark users, 196,564 SAPS. Certification Number 2008042.
Sun SPARC Enterprise M9000 (256 cores, 64 chips, 192/256 OMP threads, 2.52GHz) 1456653 SPECompL2001, 1250890
SPECompLbase2001
Sun SPARC Enterprise M8000 Server(SPARC64 VII 2.5GHz) 28.8 SPECfp2006,
As of 8/19/2008:
Sun Fire X2250 (2xIntel Xeon X5272, 4 cores, 2 cores/chip, OpenSolaris 2008.05): World Record x86 result of SPECfp2006
26. Sun Fire X2250 (2xIntel Xeon X5272, 4 cores, 2 cores/chip, SLES 10): World Record result of SPECint2006 28.5. Sun Fire
X2250 (2xIntel Xeon X5472, 8 cores, 4 cores/chip, SLES 10) World Record for all 2-chip x86 systems of SPECint_rate2006
148. Sun Fire X2250 (2xIntel Xeon X5272, 4 cores, 2 cores/chip, OpenSolaris 2008.05): 4 thread World Record of
SPECompM2001 13,934
As of 08/05/2008:
Sun Fire X4600 M2 (8 chips, 32 cores) 683,542 SPECjbb2005 bops, 85,443 SPECjbb2005 bops/JVM.
As of 09/15/2008:
Sun Fire X4450 (24 cores, 4 chips)- 260.08 SPECjvm2008 Base ops/m – 283.79
Sun Fire X4450 (4 x Intel Xeon X7460 processors, 24 cores, Sun Java Platform, Standard Edition v.1.6.0_06p, Solaris 10)
531,669 SPECjbb2005 bops, 132,917 SPECjbb2005 bops/JVM
SUN MICROSYSTEMS
Q109 QUARTERLY
RESULTS RELEASE
Investor Relations
http://www.sun.com/investors

                               24

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Sun Microsystems Q109 Quaterly Results Release

  • 1. SUN MICROSYSTEMS Q109 QUARTERLY RESULTS RELEASE Investor Relations http://www.sun.com/investors 1
  • 2. Speakers • Ron Pasek – VP, Corporate Treasurer • Jonathan Schwartz – CEO & President • Mike Lehman – CFO & Executive VP, Corporate Resources 2
  • 3. Top Level P&L Q108 Q408 Q109 Q-Q Y-Y Actuals Actuals Actuals Change Change Revenue 3,219 3,780 2,990 (790) (229) Gross Margin 1,561 1,673 1,201 (472) (360) Gross Margin % 48.5% 44.3% 40.2% (4.1) Pts (8.3) Pts Operating Expenses * 1,498 1,610 2,851 1,241 1,353 Operating Income 63 63 (1,650) (1,713) (1,713) Net Income 89 88 (1,677) (1,765) (1,766) Operating Margin % 2.0% 1.7% (55.2%) (56.9) Pts (57.2) Pts EPS GAAP $0.10 $0.11 ($2.24) ($2.35) ($2.34) Non-GAAP Net Income ** 285 275 (65) (340) (350) EPS Non-GAAP ** $0.32 $0.35 ($0.09) ($0.44) ($0.41) * Total Operating Expenses includes SG&A, R&D, Purchase IPRD, Restructuring, and Intangible Impairment charges. ** See Slide 15 for a reconciliation of GAAP Net Income and EPS GAAP to Non-GAAP Net Income and EPS Non-GAAP, respectively. 3
  • 4. Revenue Products Revenue down (11)% Y/Y ● Services Revenue down (1)% Y/Y ● PRODUCTS/SERVICES Ye a r/ Ye a r C h a n g e 0% (1)% $4,000 1% 7% 3% (1)% 17% 1% (7)% 35% 37% 38% $3,000 37% Revenue (millions) 39% 37% 38% 39% 41% $2,000 61% 63% 63% 65% 62% 62% 61% 63% 59% $1,000 $0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter Services Revenue (% of Total) Products Revenue (% of Total) 4
  • 5. Revenue PR OD UC TS/SERV IC ES Ye a r / Ye a r C h a n g e 50% Products Revenue Services Revenue 40% Revenue Y/Y Change % 31% 30% 25% 23% 21% 20% 20% 15% 15% 10% 7% 7% 7% 7% 6% 6% 6% 4% 5% 5% 5% 4% 3% 3% 3% 3% 2% 1% 1% 0% 0% -1% -1% -1% 0% -2% -3% -3% -4% -5% -7% -10% -11% -10% -13% -20% Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter 5
  • 6. Billings Disclosure by Category* ($Millions ) Q107 Q207 Q307 Q407 FY07 Q108 Q208 Q308 Q408 FY08 Q109 Systems Billings Solaris SPARC Enterpris e Servers 642 908 762 1,076 3,388 793 978 702 939 3,413 576 Change % Y/Y 2 16 -9 1 2 23 8 -8 -13 1 -27 Solaris SPARC CMT Servers 109 138 142 220 608 185 282 299 353 1,119 338 Change % Y/Y 743 218 84 237 70 105 110 61 84 83 X64 Servers 153 176 162 192 684 169 157 186 195 707 176 Change % Y/Y 79 47 36 28 44 10 -11 14 1 3 4 Other Sys tems Products 421 466 388 462 1,737 356 367 282 286 1,292 156 Change % Y/Y -17 -14 -21 -23 -19 -15 -21 -27 -38 -26 -56 Subtotal*** 1,326 1,687 1,455 1,950 6,418 1,503 1,785 1,469 1,774 6,530 1,246 Change % Y/Y 8 15 -3 1 5 13 6 1 -9 2 -17 Software Billings Java 24 41 60 94 219 29 45 57 88 220 34 Change % Y/Y 41 3 5 17 13 21 10 -4 -6 1 18 MySQL / Infras tructure 30 45 50 74 198 25 52 40 91 208 52 Change % Y/Y 100 9 79 35 43 -17 16 -20 24 5 111 Solaris , Management and Virtualization 50 65 52 55 221 44 59 49 64 216 38 Change % Y/Y -1 3 2 12 -12 -10 -4 16 -2 -14 Subtotal*** 104 151 162 223 639 97 156 147 244 644 124 Change % Y/Y 73 3 20 18 20 -6 3 -9 9 1 27 Computer Systems Reserves and Adjustments ** 39 -204 -117 -320 -602 -126 -347 -142 -295 -910 -114 Total Computer Systems Revenue*** 1,468 1,634 1,500 1,853 6,455 1,475 1,594 1,473 1,722 6,264 1,257 Storage Billings Dis ks & Storage Arrays 294 386 345 387 1,412 302 407 350 468 1,528 311 Change % Y/Y 6 7 -2 -7 1 3 6 1 21 8 3 Open Storage 17 9 24 50 9 26 23 33 91 25 Change % Y/Y 55 155 37 83 162 Tape 204 277 242 266 990 196 282 195 279 953 188 Change % Y/Y 1 -25 14 -8 -8 -4 2 -19 5 -4 -4 Other Storage 8 12 -4 22 37 14 17 16 12 58 11 Change % Y/Y -5 20 -128 153 -12 69 41 458 -44 55 -16 Storage Reserves and Adjustments ** -15 -65 -32 -60 -172 -17 -77 -54 -128 -276 -28 Total Storage Revenue*** 491 626 560 639 2,316 505 655 530 664 2,354 507 Total Products Revenue 1,959 2,260 2,060 2,492 8,771 1,980 2,249 2,003 2,386 8,618 1,764 Services Revenue Hardware, Software Support (Including Solaris & Other Software) 987 1,001 950 1,024 3,962 979 1,041 961 1,042 4,023 963 Change % Y/Y 18 5 5 4 8 -1 4 1 2 2 -2 Professional and Education Services 243 305 273 319 1,140 260 325 302 352 1,239 263 Change % Y/Y 30 11 15 0 12 7 7 11 10 9 1 Total Services Revenue 1,230 1,306 1,223 1,343 5,102 1,239 1,366 1,263 1,394 5,262 1,226 Total Sun Revenue 3,189 3,566 3,283 3,835 13,873 3,219 3,615 3,266 3,780 13,880 2,990 Notes: 8 20 26 43 96 55 44 69 73 241 61 Blade Servers Billings (includes CMT, X64, and Netra) 0 0 0 0 0 638 122 162 71 151 11 Change % Y/Y ● Solaris SPARC Enterprise Servers includes the Datacenter & Midrange server systems ● Solaris SPARC CMT Servers includes all CMT Servers, including CMT Blades and CMT Netra products ● X64 Servers includes X64 Rack, X64 Blades and X64 Netra products and excludes products categorized under Open Storage ● Other Systems Products includes Workstations, Volume SPARC, Netra SPARC, Integrated Products and Networking products ● Open Storage includes the Sun Fire X4500, Sun Fire X4540, J4200, J4400 and J4500 products ● Other Storage includes the NAS products *Billings represent the amount invoiced to customers for products and are subject to cancellation. Billings is not a GAAP financial measurement, and therefore is not an audited number. Billings differs from revenue in that billings are not adjusted for any reserves and are not subject to any of the conditions under GAAP that must be met before revenue is recognized. Accordingly, amounts billed may not lead to revenue and billings should not be viewed as equivalent to, or a substitute for, GAAP revenue. Reserves and adjustments represent deferrals, reserves and other reductions of invoiced amounts required under GAAP before revenue is recognized. ** *** Excludes service revenue attributable to Systems, Software, and Storage including maintenance and support shown in the Hardware, Software Support line under Services Revenue 6
  • 7. Billings Trends* Growth Categories Traditional Categories 2,250 1,125 2,000 1,000 1,750 875 Billings (millions) Billings (millions) Open Storage Other Storage 1,500 750 Solaris, Manage- Tape ment and Virtualiza- 1,250 Disks & Storage tion 625 Arrays MySQL / Infrastruc- 1,000 Other Systems ture 500 Products Java 750 Solaris SPARC X64 Servers 375 Enterprise Solaris SPARC 500 Servers CMT Servers 250 250 125 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0 07 07 07 07 08 08 08 08 09 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter Fiscal Quarter * Billings represent the amount invoiced to customers for products and are subject to cancellation. Billings is not a GAAP financial measurement, and therefore is not an audited number. Billings differs from revenue in that billings are not adjusted for any reserves and are not subject to any of the conditions under GAAP that must be met before revenue is recognized. Accordingly, amounts billed may not lead to revenue and billings should not be viewed as equivalent to, or a substitute for, GAAP revenue. 7
  • 8. Services Revenue Support Services down (2)% Y/Y ● Professional Services/Edu Services up 1% Y/Y ● TOTAL SERVIC ES REVENUE Ye a r/ Ye a r C h a n g e $1,500 4% 5% 3% 6% 3% 20% 1% 7% (1)% 25% 24% 23% 24% Revenue (millions) 21% 20% 24% 22% 21% $1,000 $500 79% 76% 76% 75% 79% 80% 77% 78% 76% $0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter Professional Services/Edu Services Support Services Revenue (% of Total Revenue (% of Total Services) Services) 8
  • 9. Products Margin down (12.8) pts Y/Y Gross Margin ● Services Margin down (1.9) pts Y/Y ● Total Margin down (8.3) pts Y/Y ● PRODUCTS/SERVICES 48.5% 48.5% 47.2% 44.9% 45.0% 44.3% 44.5% 43.5% $2,000 1,812 40.2% 1,753 1,673 1,604 1,561 Gross Margin (millions) 1,468 1,461 47.1% 1,388 48.7% $1,500 47.3% 43.8% 1,201 49.2% 45.2% 44.9% 44.9% 47.3% $1,000 48.0% 48.4% 44.8% 42.5% 35.2% 42.7% 45.7% 44.3% 47.4% $500 $0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter Gross Margin % Gross Margin %-Products Gross Margin %-Services 9
  • 10. Gross Margin % PRODUCTS/SERVICES 50.0% 49.2% 48.7% 48.5% 48.5% 49.0% 48.4% 48.0% 48.0% 47.4% 47.2% 47.3% 47.3% 47.1% 47.0% 45.7% 46.0% 45.2% 45.0% 44.9% 44.9% 44.9% 44.8% 45.0% 44.5% 44.3% 44.3% Gross Margin % 43.8% 43.5% 44.0% 42.7% 43.0% 42.5% 42.0% 41.0% 40.2% 40.0% 39.0% 38.0% Products Gross Margin 37.0% Services Gross Margin Total Gross Margin 36.0% 35.2% 35.0% Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter 10
  • 11. R&D / SG&A Expense* Ye a r/ Ye a r C h a n g e (3)% Y/Y decrease ● $1,800 (7)% (5)% (12)% 2% (2)% (2)% 13% (3)% $1,500 (3)% $1,200 (millions) $978 $957 $958 $989 $1,032 $995 $958 $939 $900 $920 $600 $300 $514 $514 $507 $473 $463 $468 $457 $446 $423 $0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter SG&A R&D * Total Operating Expenses differ from SG&A and R&D Expenses because Total Operating Expenses includes IPRD, Restructuring, & Intangible Impairment charges. 11
  • 12. Demand Metrics Book to Bill Ratio & Backlog Deferred Revenue at $2.8B Ye a r / Ye a r G r o w t h 8% 3,000 9% 24% 9% 6% 14% Q108 Q408 Q109 15% Balance (millions) 10% 2,500 9% Book to Bill Ratio* 0.98 1.00 0.99 2,000 1,500 Product & Services 1,000 Backlog ($M) ** $1,931 $1,919 $1,900 500 0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter * Book to Bill Ratio assumes Services ratio 1:1. ** Services Backlog based on three month backlog horizon 12
  • 13. Deferred Revenue Products Deferred Revenue up 49% Y/Y ● Services Deferred Revenue down (3)% Y/Y ● PRODUCTS/SERVICES Ye a r/ Ye a r C h a n g e 8% 9% 9% 24% $2,800 6% 14% 15% 10% 9% Revenue (millions) $2,100 78% 78% 78% 77% 72% 75% 71% 70% 70% $1,400 $700 22% 25% 23% 22% 29% 28% 30% 30% 22% $0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter Services Deferred Revenue Products Deferred Revenue (% of Total) (% of Total) 13
  • 14. Revenue - Geo North America down (12)% Y/Y ● Europe down (8)% Y/Y ● North America/ Europe/ Emerging Markets up 12% Y/Y ● Emerging Markets/ APAC* APAC down (4)% Y/Y ● 3,835 3,780 $4,000 3,615 3,566 3,283 3,266 Revenue – Geo (millions) 12% 3,219 12% 3,189 12% 2,990 12% $3,000 13% 13% 14% 12% 13% 12% 15% 13% 12% 13% 13% 14% 12% 15% 31% $2,000 33% 33% 34% 32% 31% 33% 32% 34% $1,000 45% 42% 41% 39% 39% 44% 43% 41% 41% $0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter Revenue-APAC Revenue-Emerging Revenue-North Revenue-Europe (% of Total) Markets (% of Total) America (% of Total) (% of Total) * Effective Q1FY09, we began utilizing revised geographic groupings. Percentage of total revenue figures have been adjusted to reflect the change in the compilation of the countries that make up each of our geographic regions. Geographic revenue reported for Q1FY07 and Q2FY07 has been adjusted to reflect a correction in intercompany revenue to properly report country of origin. 14
  • 15. Non-GAAP Calculation of Net Income Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Actuals Actuals Actuals Actuals Actuals Actuals Actuals Actuals Actuals GAAP net income (Loss) (56) 133 67 329 89 260 (34) 88 (1,677) Non-GAAP adjustments: Purchased IPRD 0 0 0 0 0 1 24 6 0 Amortization of acquisition related intangibles 81 80 78 74 74 74 76 86 80 Stock based compensation 58 58 50 48 48 52 57 57 49 Restructuring and related impairment of 21 26 35 15 113 32 14 104 63 long-lived assets Impairment of Goodwill 0 0 0 0 0 0 0 0 1,445 (Gain) loss on equity investments, net 0 0 (5) (1) (22) 0 0 (10) (8) Settlement Income 0 0 (54) 0 0 0 0 (45) 0 Tax effect of non-GAAP adjustments (10) (7) (10) (7) (17) (10) (5) (11) (17) Non-GAAP net income (loss) 94 290 161 458 285 409 132 275 (65) Diluted Non-GAAP net income (loss) per share $0.11 $0.32 $0.18 $0.50 $0.32 $0.50 $0.17 $0.35 ($0.09) Change vs. prior year (%) 266.7% 500.0% 357.1% 455.6% 190.9% 56.3% -5.6% -30.0% -128.1% Change vs. prior quarter (%) 22.2% 190.9% -43.8% 177.8% -36.0% 56.3% -66.0% 105.9% -125.7% 15
  • 16. Server Metrics Total Server Units Ye a r / Ye a r C h a n g e 120 (11)% 2% 100 1% Total Server Units 4% 6% 11% (5)% 2% (5)% (thousands) 80 60 40 20 0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter x64* Server Units Ye a r / Ye a r C h a n g e 28% 39% 26% 35 0% 13% x64* Server Units 30 22% 10% 7% (thousands) 25 55% 20 15 10 5 0 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Fiscal Quarter * x64 servers include x86 32-bit and x64 64-bit servers and blades 16
  • 17. Major News from Sun's Q1 FY09 • Focused on Long-term Growth & Profitability > According to the IDC Quarterly Disk Storage Systems Tracker for Q2CY08, Sun outpaced all major storage vendors to see a 29.2% year-over-year increase in factory revenue for the second quarter of 2008, outperforming the market by nearly three times. Released 20% growth adoption numbers for the Open Storage community, specifically > highlighting OurStage's use of OpenSolarisTM, Solaris ZFS and advanced open storage technologies. Announced that shipments of Sun RayTM Thin Clients nearly doubled quarter-over-quarter. Sun > Ray unit shipments were growing faster than the entire thin client industry, highlighting the appeal of thin client and desktop virtualization. Announced a new version of Sun xVM VirtualBoxTM as well as xVM VirtualBox Software > Enterprise Subscription, offering 24/7 premium support for enterprise users. Achieved milestone of xVM VirtualBox surpassing 6.5 million downloads worldwide and 15,000 downloads a day. Announced that the JavaTM Platform Micro Edition is integrated in the new HP iPAQ 900 series > Business Messenger smartphone. Based on the Sun Java Wireless Client software - Sun's Java ME implementation for wireless handsets - and enhanced with custom features designed specifically for HP, the new HP 3G smartphone delivers a flexible wireless e-mail experience, including convenient voice control and hands-free operation. Launched Sun Open Suite for SWIFT, software and hardware integration for financial > institutions and corporate treasuries. 17
  • 18. Major News from Sun's Q1 FY09 • Delivered Ground-Breaking Innovations to the Market Released the Sun StorageTekTM T10000B, the industry's first one terabyte tape storage drive. > Introduced the Sun Storage J4000, a new line of economical storage arrays, and the Sun FireTM X4540, > a new highly efficient, high-performance addition to the popular Sun Fire X4500 quot;Thumperquot; family. > Announced the Sun Fire X4600 M2 server, equipped with eight Quad-Core AMD OpteronTM processors, set the World Record score of 683,542 SPECjbb2005 bops for fastest x86 JavaTM Server. Extended the family of Intel XeonTM-based Sun Fire servers with two new High Performance Computing > offerings, the Sun Fire X2250 and Sun Fire X4250 servers, representing the fastest Xeon-based 1U server for technical computing workloads and the most expandable Xeon-based 2U server for enterprise-class systems, respectively. Also introduced the Intel Xeon-based Sun Fire X4450 server and Sun Blade X6450 server, each with up to six processors. With Xilinx introduced a 64-bit open-source, multi-core, multi-threaded OpenSPARCTM evaluation > platform, continuing the expansion of the UltraSPARC® ecosystem. Expanded virtualization with Sun xVMTM Server software and Sun xVM Ops Center 2.0. > Announced the addition of VMware Virtual Desktop Manager and VMware Virtual Desktop Infrastructure > to Sun's line-up of virtualization solutions. Certified Sun Ray thin clients as VMware Ready for VMware VDI and allowed secure connection with VMware Virtual Desktop Manager. Introduced the following additions to Sun NetraTM carrier-grade server family, driving performance, > efficiency and scalability: Sun Netra X4250 server, Sun Netra X4450 server, Sun Netra T5540 server. Partnered with Fujitsu on a new enhanced line of SPARC Enterprise® servers that delivers a > virtualization and consolidation platform with up to 80 percent better performance on commercial applications and 2x better performance on HPC workloads and using 44 percent less energy per core. 18
  • 19. Q1 FY09 Sample Customer Momentum • Based on Sun's strong Services and storage hardware offering, The BMW Group selected Sun to provide managed storage on demand services and SAN infrastructure in Europe, the U.S., South Africa and Asia Pacific for the next five years. Sun was also chosen to provide disk and tape infrastructure for the mainframe environment in the Munich headquarters. • City Bank, one of Bangladesh’s top commercial banks, has purchased and deployed the Sun SPARC Enterprise M5000, Sun SPARC Enterprise T5220 server, Sun StorageTek 6540 modular array and Sun StorageTek SL24 autoloader running on the Solaris 10 Operating System (OS) to support the bank’s ambitious plans for growth. • Stésud, a Belgium-based ERP provider with eGovernment clients that include the Belgian government, looked to Java when it identified that its existing software infrastructure needed refreshing. Stésud evaluated several solutions and selected Sun's GlassFishTM application server. As part of this multi-million dollar deal, Stésud also employed Sun's MySQL EnterpriseTM subscription, allowing the company to dependably migrate to a more scalable and reliable Web database architecture for the future. 19
  • 20. Industry Analyst Recognition • “Sun Microsystems' acquisition of MySQL further validated the open source database market's worthiness, and enterprises can now expect even more reliability and improved support in the coming years.” - “Market Update: Open Source Databases”, Forrester Research, Inc., July 2008 • “Sun continues to invest in its UltraSPARC T2 line, and it unveiled two new models with strong performance improvements over the existing line in April.” - Sun Microsystems Server Residual Value Analysis, August 2008, Susan Middleton, IDC, Doc #213754 • “With their recent announcement, Sun and Fujitsu put a new spark into SPARC-based platforms. They have increased performance, lowered energy consumption, lowering the total cost of ownership (TCO) in SPARC, and preserved the investment that legacy data centers have made in Sun products.” - in The Clipper Group Navigator, quot;Sun and Fujitsu Ignite Enterprise Systems with a New SPARCquot;, August 11, 2008 • “The Sun J4000 products, with their leading scalability and density among current SAS subsystems, can serve as ideal hardware components for open storage solutions. J4000 systems attach to servers via the LSI-made SAS HBAs.” - IDEAS International Inc., Aug. 14, 2008, J. Zhou, IDEAS Insight Blog: The Real Story Behind Sun’s Breakthrough Economics with Sun Storage J4000 (Part 2) • “This new announcement [OpenSSO] is a very good step forward for Sun’s customers. Customers have the best of both worlds – a very innovative product with a large and active engineering base, together with professional support.” - Kuppinger Cole, July 24, 2008, Felix Gaehtgens, Sun unveils new models for OpenSSO
  • 21. Praise for Sun's Continued Innovation Strong Sun Q1 FY09 Product Reviews Installing Sun OpenSolaris Sun Server Delivers Heavyweight Performance By Tory Skyers By Jeff Ballard ZFS takes quite a bit of worry out of my day. I don't have to worry about Sun crams a lot of gear into this 1U device. To put it in perspective, a purchasing expensive RAID controllers. I can use the SATA ports on my standard rack can hold as many as 40 of these servers. Thus, a rack full motherboard and get great redundancy and fault tolerance. I can take Sun's virtualization activity of the units as we tested would give you a whopping 320 processor ● snapshots, and revert from snapshots via a browser interface. I can cores, 320 hot-swappable hard drives, 640 DIMM slots, 120 PCI-E slots, received strong feedback from create ZFS volumes and manipulate those volumes via the same and 160 Gigabit Ethernet connections. browser-based interface. Couple all that with the ability to segregate my InformationWeek, InfoWeek, PC server into logical partitions like IBM's LPARS, and you have some Worries about Sun's support of operating systems other than Solaris are serious potential. Once this thing is set up, I don't foresee much care and World, Macworld and CRN. unfounded. The X4150 provides more bang for your server buck than feeding outside of critical security patches. comparable offerings from Dell, Hewlett-Packard, and IBM. Computerworld said that the Sun ● Fire X4150 was “very powerful for what is a singe U high pizza Hands On With JavaFX - First Impressions box” and is “decidedly capable”. By Andrew Trice TM InfoWorld gave NetBeans 6.1 Performance-wise, I was very happy with the smoothness of the ● A First Look at OpenOffice.org 3.0 animations inside the runtime (although i didn't put it through rigorous a 9/10 rating, saying “NetBeans By Jason Fitzpatrick tests). After all, it is Java, and Java has very mature graphics APIs. may well be the overall pick of Mac OS X users will be pleased with 3.0, because support for OS X is Overall, I think this is a great step for RIAs in general. Sun/Java has the this review group”. potential to become a major player in the RIA game. Flex/AIR is still even more robust. OpenOffice.org 3.0 works right out of the box with undoubtedly my quot;weapon of choicequot;, but I'll be keeping a close eye on minimal fuss. Another bonus for OS X users: features that were dropped JavaFX. from the Mac version of Microsoft Office such as the spreadsheet Solver TechTarget advised readers to ● and VBA support are included in the Mac version of OpenOffice.org. “keep a close eye on the Like other great open source projects such as Firefox, OpenOffice has development of”OpenSolaris. support for extensions to allow you to tweak the software as you see fit. The OpenOffice Extension Repository is filled with everything from Get Started With Virtual Machines The O'Reillly Network reviewed dictionaries to templates to file import wizards to code formatting tools. ● By Scott Spanbauer the JavaFX preview SDK, saying “Sun/Java has the potential to Sun Microsystems should rename its free, open-source virtualization utility VersatileBox. Not only does it run on Windows, Linux, Mac, and become a major player in the Sun's OpenSolaris, but it also supports an even wider array of guest OSs, including just about any version of Windows. RIA game”. OpenOffice.org 3.0 launch ● Sun Microsystems Sun Fire X4450 server received major praise from By Michael Palamountain Lab test: Climb aboard Ruby on Rails mainstream, IT and online news By Martin Heller sources, including ZDNet For raw power this is the gutsiest server we have seen. The benchmark results are the best we have seen in high end servers — particularly the Australia's Editors' Choice NetBeans may well be the overall pick of this review group, at least SunGard score — although we cannot claim to have tested such a based on the numbers. Whether it should be your own pick, however, machine with specs quite like this before. award. depends on your personal preferences. Sun compares this machine against an IBM x3850 and a Dell R900 in its If you already use NetBeans for Java and/or C/C++ development, then it features description. These are both 4 RU machines (the Sun Fire is just should probably be your top choice as a Rails IDE as well. Delivering strong editing and navigation along with good debugging and profiling, 2 RU in size), yet Sun manages to pack just as much inside the case. it's a very capable and highly integrated Rails IDE. And it's free.
  • 22. New Record-breaking Results for Q1FY09 350+ World Records and counting Model Benchmark Sun SPARC Best ever OpenMP result on SPECompL2001 benchmark HPC Enterprise M9000 with Solaris 10 OS and Sun Studio 12 compiler software Sun SPARC Best result ever recorded on SAP SD 2-tier benchmark ERP Enterprise M9000 with Solaris 10 OS and Oracle Database Server 10g Sun SPARC The highest floating point result in the world with Solaris 10 HPC Enterprise M8000 OS and Sun Studio 12 compiler on SPECfp2006 benchmark Sun Fire X2250 Best 2 socket x86 results -SPECompM2001, SPECcpu2006 HPC with OpenSolaris OS and Sun Studio Express compilers Sun Fire X4600 The fastest x86 Java server in the industry with Solaris 10 Java and latest Java Platform, Standard Edition (J2SE) software Sun Fire X4450 4-socket champion on Enterprise Java benchmark Java Sun Fire X4450 Best result on brand new SPECjvm2008 benchmark Results were posted during Q1FY09 (July-Sept. 2008). See Benchmark Disclosure slide for additional information.
  • 23. Benchmark Disclosure SPEC and the benchmark names SPECweb, SPEComp, SPECfp, SPECint, SPECjAppServer and SPECjbb are registered trademarks of the Standard Performance Evaluation Corporation. Competitive data obtained from http://www.spec.org as of the date located above the paragraph. See respective websites for the latest results. For comparison purposes, the terms CPU, chip and processor are used interchangeably. Each socket can accommodate one chip. SAP, R/3, mySAP reg TM of SAP AG in Germany and other countries. For the latest results and additional information visit www.sap.com/benchmark. As of 7/14/2008: Two-tier SAP Sales and Distribution (SD) standard SAP ERP 2005 application benchmark: SPARC Enterprise M9000, 64 proc. / 256 cores / 512 threads, UltraSPARC64 VII 2.52 GHz running Solaris 10, Oracle 10g and the SAP ERP application Release 6.0 (2005) – 39,100 SAP SD Benchmark users, 196,564 SAPS. Certification Number 2008042. Sun SPARC Enterprise M9000 (256 cores, 64 chips, 192/256 OMP threads, 2.52GHz) 1456653 SPECompL2001, 1250890 SPECompLbase2001 Sun SPARC Enterprise M8000 Server(SPARC64 VII 2.5GHz) 28.8 SPECfp2006, As of 8/19/2008: Sun Fire X2250 (2xIntel Xeon X5272, 4 cores, 2 cores/chip, OpenSolaris 2008.05): World Record x86 result of SPECfp2006 26. Sun Fire X2250 (2xIntel Xeon X5272, 4 cores, 2 cores/chip, SLES 10): World Record result of SPECint2006 28.5. Sun Fire X2250 (2xIntel Xeon X5472, 8 cores, 4 cores/chip, SLES 10) World Record for all 2-chip x86 systems of SPECint_rate2006 148. Sun Fire X2250 (2xIntel Xeon X5272, 4 cores, 2 cores/chip, OpenSolaris 2008.05): 4 thread World Record of SPECompM2001 13,934 As of 08/05/2008: Sun Fire X4600 M2 (8 chips, 32 cores) 683,542 SPECjbb2005 bops, 85,443 SPECjbb2005 bops/JVM. As of 09/15/2008: Sun Fire X4450 (24 cores, 4 chips)- 260.08 SPECjvm2008 Base ops/m – 283.79 Sun Fire X4450 (4 x Intel Xeon X7460 processors, 24 cores, Sun Java Platform, Standard Edition v.1.6.0_06p, Solaris 10) 531,669 SPECjbb2005 bops, 132,917 SPECjbb2005 bops/JVM
  • 24. SUN MICROSYSTEMS Q109 QUARTERLY RESULTS RELEASE Investor Relations http://www.sun.com/investors 24