---------------------------------------------------------------------------- SUN REPORTS THIRD QUARTER REVENUE AND NET INCOME SPARC/UNIX/OPEN LOOK CONTINUE TO LEAD INDUSTRY SunFLASH Vol 16 #19 April 1990 ---------------------------------------------------------------------------- MOUNTAIN VIEW, Calif. --April 26, 1990-- Sun Microsystems, Inc. (SUNW), today reported results for its third quarter and first nine months ended March 30,1990. Revenues for the quarter were $632.2 million, a 27% increase over revenues of $497.4 million in the same quarter a year ago. Net income for the third quarter was $36.7 million, or $0.40 per share, compared with net income of $31.0 million, or $0.38 per share, in the same period a year earlier. For the first nine months of fiscal 1990, Sun reported revenues of $1.766 billion, up 32% over $1.334 billion reported in the first nine months of fiscal 1989. Net income for the period was $62.1 million, or $0.70 per share, compared with $81.1 million, or $1.00 per share, in the first nine months of fiscal 1989. Scott McNealy, president and CEO, said, "Our initiative in providing customers with a single, powerful, binary-compatible architecture is paying off, as these results demonstrate. Achieving these results despite a major change in the Yen exchange rate very late in the quarter is especially gratifying. "During a time when the industry has never been more competitive, we reported the highest gross profit margin in 18 months," McNealy said. "Thanks to the acceptance of our new products--those introduced during the past 4 quarters--our manufacturing efficiency has improved dramatically. In the third quarter, for example, almost 95% of our hardware revenues were derived from these new products, clearly enhancing our profitability. In addition, improved inventory management and tighter financial controls instituted in recent quarters have also contributed to the profit margin improvement in the third quarter. These changes, combined with declining component costs in recent quarters, have improved our financial flexibility ," McNealy said. "In contrast to our other sales geographies, but consistent with recent reports from other computer companies, Sun too is experiencing a somewhat less robust U.S. market. Although U.S.-based revenues in the third quarter declined slightly from the prior quarter due largely to product transition issues, U.S.-based bookings still increased over the second quarter and ran well above year-ago levels," McNealy said. "Looking ahead we anticipate modest growth, at best, in the U.S. market in the fourth quarter. Meanwhile, a record 53% of our third quarter revenues were derived from markets outside the U.S. Europe, in particular, was a bright spot for us, accounting for a record 31% of total revenues, with third quarter bookings running well ahead of the prior quarter. We expect to begin shipments from our new manufacturing plant in Scotland in the current fourth quarter, which should increase our ability to serve customers throughout the European community." In the third quarter, Sun shipped 28,600 units worldwide. "We are particularly pleased with the acceptance of Sun's SPARC-based products and the OPEN LOOK graphical user interface," McNealy said. "To date, we've shipped more than 50,000 units of the SPARCstation 1 alone, making this by far the industry's most popular workstation. We have also shipped approximately 8,000 OPEN LOOK developer's kits and we expect about 300 OPEN LOOK applications to be porting by mid-year. One year ago, SPARC-based products accounted for just 25% of Sun's hardware revenues. Today, SPARC-based products account for about 85% of our hardware revenues. Mc Nealy said, "As part of our continuing efforts to provide customers with even better price/performance levels, yesterday we announced major performance enhancements to the SPARCstation 1. The SPARCstation 1+ offers 20-25% more power and graphics speed at no additional cost in a system that's fully compatible with all other SPARC-based computers." Effective with yesterday's announcement, Sun also reduced prices of many mass storage and memory options by 30-50%. "Shifting the focus from customers to employees, Sun workers around the world have rallied over the past few quarters to return the company to the levels of service, quality and profitability we can be proud of," McNealy said. "One reflection of this is the fact that Sun's revenues per employee for the 12 months ended March 30, 1990 topped the $200,000 mark for the first time." This compares with a computer industry average, according to this week's Fortune, of $143,000. Shortly after the close of the quarter, in early April, Sun replaced its $100 million Revolving Credit Agreement with a new $200 million line placed with Citibank, as agent, First National Bank of Boston, Security Pacific, Barclays, Bank of America, Morgan Guaranty, ABN, Fuji Bank, Mitsui Bank and Bank of California. Sun also called for redemption of $100 million of 5 1/4% convertible subordinated debentures through Goldman, Sachs & Co. and Salomon Brothers. This redemption will lead to a 20% decrease in long-term debt and an offsetting increase in equity. Sun Microsystems, Inc., headquartered in Mountain View, Calif., is a leading multibillion dollar worldwide supplier of network-based distributed computing systems, including professional workstations, servers and UNIX(R) operating system and productivity software. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Sunflash is an electronic mail news service from Sun Microsystems, Ft. Lauderdale, FL. Please address comments to John McLaughlin (sun!sunvice!johnj or johnj@sunvice.East.Sun.COM). (305) 776-7770.