SUN MICROSYSTEMS, INC. - 8-K filing on 2004-01-15


		INVESTOR CONTACT:
		Jeff Boldt (650) 786-0333
		jeff.boldt@sun.com

		MEDIA CONTACT:
		May Goh Petry (650) 786-0034
		may.petry@sun.com

		INDUSTRY ANALYST CONTACT:
		Joanne Masters (650) 786-0847
		joanne.masters@sun.com

SUN MICROSYSTEMS REPORTS FISCAL SECOND QUARTER RESULTS

SANTA CLARA, Calif. — January 15, 2004 — Sun Microsystems, Inc. (NASDAQ: SUNW), a leader in systems and solutions that make the Net work, reported results today for its fiscal 2004 second quarter, which ended December 28, 2003.

Revenues for the second quarter of fiscal 2004 were $2.888 billion, a sequential increase of 13.9 percent and a year-over-year decline of 0.9 percent as compared with $2.915 billion for the second quarter of fiscal 2003. Total gross margin for the quarter as a percent of revenues was 41.8 percent, an increase of 1.7 percentage points sequentially and a decrease of 1.5 percentage points as compared with the second quarter of fiscal 2003. Net loss for the quarter was $125 million or $0.04 per share as compared with a net loss of $2.283 billion or a net loss of $0.72 per share for the second quarter of fiscal 2003.

“FY04Q2 was a quarter of progress for us,” said Scott McNealy, Chairman, President and Chief Executive Officer, Sun Microsystems, Inc. “We announced over 20 new products at our sold-out SunNetwork^SM conference in Berlin and a significant alliance with AMD that will continue our strategy of using industry economics to deliver extreme performance at compelling price points and puts Sun in a strong product position for calendar year 2004. We continue to be confident that these investments, along with our ongoing focus on operating efficiency and quality, will deliver increasing value to our customers and partners worldwide.”

Steve McGowan, Sun’s Chief Financial Officer and Executive Vice President, Corporate Resources, said “Our sequential revenue growth was the highest Q1 to Q2 revenue growth since fiscal year 1998. Despite competitive pressures, we improved gross margin sequentially due to an ongoing focus on cost management. We ended the quarter with a cash and marketable debt securities position of $5.161 billion after funding the growth of the business this quarter.”

Sun has scheduled a conference call today to discuss its earnings for the second quarter of fiscal year 2004 at 1:30 p.m. (PT), which is being broadcast live at www.sun.com/investors.

About Sun Microsystems, Inc.
Since its inception in 1982, a singular vision — “The Network Is The Computer^TM” — has propelled Sun Microsystems, Inc. (Nasdaq: SUNW) to its position as a leading provider of industrial-strength hardware, software and services that make the Net work. Sun can be found in more than 100 countries and on the World Wide Web at http://www.sun.com.

This news release contains forward-looking statements regarding the future results and performance of Sun Microsystems, Inc., including statements that the new products announced and the alliance with AMD will continue our strategy of using industry economics to deliver extreme performance at compelling price points and puts Sun in a strong product position for calendar year 2004 and that we continue to be confident that these investments, along with our ongoing focus on operating efficiency and quality, will deliver increasing value to our customers and partners worldwide. Such statements are just predictions and involve risks and uncertainties such that actual results and performance may differ materially. Factors that might cause such a difference include risks associated with increased competition, continued adverse macroeconomic conditions in the U.S. and internationally, including adverse business conditions in the specific markets for Sun’s products, lack of success in the timely development, production and acceptance of new products and services and in technical advancements, and the failure to manage costs and improve operating efficiencies. These and other risks are detailed from time to time in Sun’s periodic reports that are filed with the Securities and Exchange Commission, including Sun’s annual report on Form 10-K for the fiscal year ended June 30, 2003 and quarterly report on Form 10-Q for the fiscal quarter ended September 28, 2003.

Sun, Sun Microsystems, the Sun logo, and The Network Is The Computer are trademarks or registered trademarks of Sun Microsystems, Inc. in the United States and in other countries.

SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in millions, except per share amounts)


				Three Months Ended						Six Months Ended

				December 28, 2003			December 29, 2002			December 28, 2003			December 29, 2002

Net revenues:
	Products			$	1,944		$	2,013		$	3,578		$	3,893
	Services				944			902			1,846			1,769

		Total net revenues			2,888			2,915			5,424			5,662
Cost of sales:
	Cost of sales-products				1,107			1,118			2,072			2,211
	Cost of sales-services				573			534			1,128			1,056

		Total cost of sales			1,680			1,652			3,200			3,267

			Gross margin		1,208			1,263			2,224			2,395
Operating expenses:
	Research and development				471			451			938			888
	Selling, general and administrative				828			830			1,626			1,712
	Restructuring charges				(10	)		357			(9	)		381
	Purchased in-process research and development				—			4			1			4
	Impairment of goodwill and other intangible assets				—			2,125			—			2,125

		Total operating expenses			1,289			3,767			2,556			5,110

			Operating loss		(81	)		(2,504	)		(332	)		(2,715	)
Loss on equity investments, net					(36	)		(11	)		(61	)		(42	)
Interest income, net					20			38			41			77

	Loss before income taxes				(97	)		(2,477	)		(352	)		(2,680	)
Provision (benefit) for income taxes					28			(194	)		59			(286	)

Net loss				$	(125	)	$	(2,283	)	$	(411	)	$	(2,394	)

Net loss per common share-basic and diluted				$	(0.04	)	$	(0.72	)	$	(0.13	)	$	(0.75	)

Shares used in the calculation of net loss per common share — basic and diluted					3,262			3,181			3,248			3,175

Calculation of net income (loss) excluding special items:
	Net loss per above			$	(125	)	$	(2,283	)	$	(411	)	$	(2,394	)
	Restructuring charges				(10	)		357			(9	)		381
	Purchased in-process research and development				—			4			1			4
	Loss on equity investments, net				36			11			61			42
	Impairment of goodwill and other intangible assets				—			2,125			—			2,125
	Related tax effects				—			(204	)		—			(226	)

Net income (loss) excluding special items				$	(99	)	$	10		$	(358	)	$	(68	)

Net income (loss) excluding special items per common share — basic and diluted				$	(0.03	)	$	0.00		$	(0.11	)	$	(0.02	)

Shares used in the calculation of net income (loss) excluding special items per common share — basic					3,262			3,181			3,248			3,175

Shares used in the calculation of net income (loss) excluding special items per common share — diluted					3,262			3,205			3,248			3,175

SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)


				December 28, 2003		June 30, 2003*

				(unaudited)
ASSETS
Current assets:
		Cash and cash equivalents		$	1,428	$	2,015
		Short-term marketable debt securities			732		1,047
		Accounts receivable, net			2,214		2,381
		Inventories			480		416
		Deferred and prepaid tax assets			140		133
		Prepaid expenses and other current assets			826		787

			Total current assets		5,820		6,779
Property, plant and equipment, net					2,115		2,267
Long-term marketable debt securities					3,001		2,679
Goodwill					466		326
Other acquisition-related intangible assets, net					120		91
Other non-current assets, net					702		843

				$	12,224	$	12,985

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt and short-term borrowings			$	263	$	—
		Accounts payable			906		903
		Accrued payroll-related liabilities			469		479
		Accrued liabilities and other			859		1,027
		Deferred revenues			1,213		1,453
		Warranty reserve			255		267

			Total current liabilities		3,965		4,129
Long-term debt					1,214		1,531
Long-term deferred revenues					463		450
Other non-current obligations					343		384
Total stockholders’ equity					6,239		6,491

				$	12,224	$	12,985

Derived from audited financial statements

SUN MICROSYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)


				Six Months Ended

				December 28, 2003			December 29, 2002

Cash flows from operating activities:
	Net loss			$	(411	)	$	(2,394	)
		Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization			361			483
		Amortization of other intangible assets and unearned equity compensation			46			64
		Impairment of goodwill and other intangible assets			—			2,125
		Tax benefits from employee stock plans			—			4
		Deferred taxes			—			(286	)
		Loss on equity investments, net			61			42
		Purchased in-process research and development			1			4
		Changes in operating assets and liabilities:
			Accounts receivable, net		178			454
			Inventories		(63	)		109
			Prepaid and other assets		(59	)		140
			Accounts payable		4			(236	)
			Other liabilities		(449	)		(186	)

Net cash provided by (used in) operating activities					(331	)		323

Cash flows from investing activities:
		Purchases of marketable debt securities			(5,065	)		(2,851	)
		Proceeds from sales of marketable debt securities			5,029			2,675
		Proceeds from maturities of marketable debt securities			—			311
		Purchases of equity investments			—			(4	)
		Proceeds from sales of equity investments			10			2
		Acquisition of property, plant and equipment, net			(127	)		(181	)
		Acquisition of spare parts and other assets			(26	)		(89	)
		Payments for acquisitions, net of cash acquired			(190	)		(30	)

Net cash used in investing activities					(369	)		(167	)

Cash flows from financing activities:
		Acquisition of common stock			—			(499	)
		Proceeds from issuance of common stock, net			113			77
		Principal payments on borrowings and other obligations			—			(201	)

Net cash provided by (used in) financing activities					113			(623	)

Net decrease in cash and cash equivalents					(587	)		(467	)
Cash and cash equivalents, beginning of period					2,015			2,024

Cash and cash equivalents, end of period				$	1,428		$	1,557

SUN MICROSYSTEMS, INC.
OPERATIONS ANALYSIS — CONSOLIDATED (UNAUDITED)


STATEMENTS OF OPERATIONS			FY 2004									FY 2003															FY 2002

(in millions except per share amounts)			Q1			Q2			FY04 YTD			Q1			Q2			Q3			Q4			FY03			Q2			Q3			Q4			FY02

NET REVENUES
Products				1,634			1,944			3,578			1,880			2,013			1,897			2,003			7,793			2,260			2,269			2,507			9,093
Services				902			944			1,846			867			902			893			979			3,641			848			838			913			3,403
TOTAL				2,536			2,888			5,424			2,747			2,915			2,790			2,982			11,434			3,108			3,107			3,420			12,496
		Growth vs. prior year (%)		-7.7	%		-0.9	%		-4.2	%		-4.0	%		-6.2	%		-10.2	%		-12.8	%		-8.5	%		-39.2	%		-24.1	%		-14.4	%		-31.5	%
		Growth vs. prior quarter (%)		-15.0	%		13.9	%					-19.7	%		6.1	%		-4.3	%		6.9	%					8.6	%		0.0	%		10.1	%
COST OF SALES
Products				965			1,107			2,072			1,093			1,118			1,021			1,110			4,342			1,437			1,306			1,476			5,506
Services				555			573			1,128			522			534			526			568			2,150			532			494			530			2,074
TOTAL				1,520			1,680			3,200			1,615			1,652			1,547			1,678			6,492			1,969			1,800			2,006			7,580
		% of revenue		59.9	%		58.17	%		59.0	%		58.8	%		56.7	%		55.4	%		56.3	%		56.8	%		63.4	%		57.9	%		58.7	%		60.7	%
GROSS MARGIN ($)
Products				669			837			1,506			787			895			876			893			3,451			823			963			1,031			3,587
		% of product revenue		40.9	%		43.1	%		42.1	%		41.9	%		44.5	%		46.2	%		44.6	%		44.3	%		36.4	%		42.4	%		41.1	%		39.4	%
Services				347			371			718			345			368			367			411			1,491			316			344			383			1,329
		% of service revenue		38.5	%		39.3	%		38.9	%		39.8	%		40.8	%		41.1	%		42.0	%		41.0	%		37.3	%		41.1	%		41.9	%		39.1	%
TOTAL				1,016			1,208			2,224			1,132			1,263			1,243			1,304			4,942			1,139			1,307			1,414			4,916
		% of revenue		40.1	%		41.8	%		41.0	%		41.2	%		43.3	%		44.6	%		43.7	%		43.2	%		36.6	%		42.1	%		41.3	%		39.3	%
R&D				467			471			938			437			451			467			482			1,837			428			468			463			1,832
		% of revenue		18.4	%		16.3	%		17.3	%		15.9	%		15.5	%		16.7	%		16.2	%		16.1	%		13.8	%		15.1	%		13.5	%		14.7	%
PURCHASED IN PROCESS R&D				1			0			1			0			4			0			0			4			0			0			0			3
		% of revenue		0.0	%		0.0	%		0.0	%		0.0	%		0.1	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%
SG&A				798			828			1,626			882			830			791			826			3,329			966			985			894			3,806
		% of revenue		31.5	%		28.7	%		30.0	%		32.1	%		28.5	%		28.4	%		27.7	%		29.1	%		31.1	%		31.7	%		26.1	%		30.5	%
RESTRUCTURING CHARGES				1			(10	)		(9	)		24			357			(4	)		(6	)		371			511			(4	)		(4	)		517
		% of revenue		0.0	%		-0.3	%		-0.2	%		0.9	%		12.2	%		-0.1	%		-0.2	%		3.2	%		16.4	%		-0.1	%		-0.1	%		4.1	%
IMPAIRMENT EXPENSE				0			0			0			0			2,125			0			0			2,125			0			6			0			6
		% of revenue		0.0	%		0.0	%		0.0	%		0.0	%		72.9	%		0.0	%		0.0	%		18.6	%		0.0	%		0.2	%		0.0	%		0.0	%
TOTAL OPERATING EXPENSES				1,267			1,289			2,556			1,343			3,767			1,254			1,302			7,666			1,905			1,455			1,353			6,164
		% of revenue		50.0	%		44.6	%		47.1	%		48.9	%		129.2	%		44.9	%		43.7	%		67.0	%		61.3	%		46.8	%		39.6	%		49.3	%
OPERATING INCOME (LOSS)				(251	)		(81	)		(332	)		(211	)		(2,504	)		(11	)		2			(2,724	)		(766	)		(148	)		61			(1,248	)
		Operating margin		-9.9	%		-2.8	%		-6.1	%		-7.7	%		-85.9	%		-0.4	%		0.1	%		-23.8	%		-24.6	%		-4.8	%		1.8	%		-10.0	%
Interest income, net				21			20			41			39			38			33			45			155			68			77			47			299
Loss on equity investments, net				(25	)		(36	)		(61	)		(31	)		(11	)		(16	)		(26	)		(84	)		(39	)		(23	)		(18	)		(99	)
PRETAX INCOME (LOSS)				(255	)		(97	)		(352	)		(203	)		(2,477	)		6			21			(2,653	)		(737	)		(94	)		90			(1,048	)
		Pretax income (loss) margin		-10.1	%		-3.4	%		-6.5	%		-7.4	%		-85.0	%		0.2	%		0.7	%		-23.2	%		-23.7	%		-3.0	%		2.6	%		-8.4	%
INCOME TAX PROVISION (BENEFIT)				31			28			59			(92	)		(194	)		2			1,060			776			(306	)		(57	)		29			(461	)
TAX RATE (%)				N/A			N/A			N/A			45.5	%		7.8	%		44.0	%		N/A			N/A			41.5	%		60.8	%		11.3	%		44.0	%
NET INCOME (LOSS) (Reported)				(286	)		(125	)		(411	)		(111	)		(2,283	)		4			(1,039	)		(3,429	)		(431	)		(37	)		61			(587	)
		Growth vs. prior year (%)		-157.7	%		94.5	%		82.8	%		38.3	%		-429.7	%		110.8	%		-1803.3	%		-484.2	%		-201.9	%		-127.2	%		169.3	%		-163.3	%
		Growth vs. prior quarter (%)		72.5	%		56.3	%					-282.0	%		-1956.8	%		100.2	%		-26075.0	%					-139.4	%		91.4	%		264.9	%
		Net income (loss) margin		-11.3	%		-4.3	%		-7.6	%		-4.0	%		-78.3	%		0.1	%		-34.8	%		-30.0	%		-13.9	%		-1.2	%		1.8	%		-4.7	%
EPS (Diluted) (Reported)				(0.09	)		(0.04	)		(0.13	)		(0.04	)		(0.72	)		0.00			(0.32	)		(1.07	)		(0.13	)		(0.01	)		0.02			(0.18	)
		Growth vs. prior year (%)		-125.0	%		94.4	%		82.7	%		33.3	%		-453.8	%		100.0	%		-1700.0	%		-494.4	%		-208.3	%		-125.0	%		166.7	%		-166.7	%
		Growth vs. prior quarter (%)		71.9	%		55.6	%					-300.0	%		-1700.0	%		100.0	%		N/A						-116.7	%		92.3	%		300.0	%
SHARES (CSE)(Diluted)				3,235			3,262			3,248			3,168			3,181			3,218			3,219			3,190			3,239			3,245			3,309			3,242
OUTSTANDING SHARES				3,240			3,280			3,280			3,116			3,194			3,200			3,236			3,236			3,250			3,245			3,234			3,234
GAAP net income (loss)				(286	)		(125	)		(411	)		(111	)		(2,283	)		4			(1,039	)		(3,429	)		(431	)		(37	)		61			(587	)
	In-process research and development			1			0			1			0			4			0			0			4			0			0			0			3
	Restructuring charges			1			(10	)		(9	)		24			357			(4	)		(6	)		371			511			(4	)		(4	)		517
	Loss on equity investments, net			25			36			61			31			11			16			26			84			39			23			18			99
	Impairment expense			0			0			0			0			2,125			0			0			2,125			0			6			0			6
	Valuation allowance on deferred tax assets			0			0			0			0			0			0			1,051			1,051			0			0			0			0
	Related tax effects			0			0			0			(22	)		(204	)		(5	)		(8	)		(239	)		(218	)		(8	)		(6	)		(246	)
Net income (loss) excluding special items				(259	)		(99	)		(358	)		(78	)		10			11			24			(33	)		(99	)		(20	)		69			(208	)
		Growth vs. prior year (%)		-232.1	%		-1090.0	%		-426.5	%		50.6	%		110.1	%		155.0	%		-65.2	%		84.1	%		-120.0	%		-113.8	%		527.3	%		-118.8	%
EPS (Diluted) excluding special items *				(0.08	)		(0.03	)		(0.11	)		(0.02	)		0.00			0.00			0.01			(0.01	)		(0.03	)		(0.01	)		0.02			(0.06	)
		Growth vs. prior year (%)		-300.0	%		N/A			450.0	%		60.0	%		100.0	%		100.0	%		-50.0	%		83.3	%		-121.4	%		-125.0	%		N/A			-118.8	%

*		For the quarters ended June 30, 2003 and December 29, 2002, Sun used 3,251 shares and 3,205 shares, respectively, to calculate the “Net income (loss) excluding special items.”

		For all other periods, the number of shares used to calculate “EPS (Diluted) (Reported)” and “EPS (Diluted) excluding special items” were the same.


				FY 2004									FY 2003															FY 2002

(in millions)				Q1			Q2			FY04 YTD			Q1			Q2			Q3			Q4			FY03			Q2			Q3			Q4			FY02

REVENUE BY GEOGRAPHY
		UNITED STATES ($M)			1,162			1,214			2,376			1,242			1,267			1,212			1,328			5,049			1,436			1,439			1,714			5,936
			Growth vs. prior year (%)		-6.4	%		-4.2	%		-5.3	%		-7.8	%		-11.8	%		-15.8	%		-22.5	%		-14.9	%		-42.2	%		-13.9	%		-9.9	%		-32.4	%
			Growth vs. prior quarter (%)		-12.5	%		4.5	%					-27.5	%		2.0	%		-4.3	%		9.6	%					6.6	%		0.2	%		19.1	%
		EUROPE ($M)			780			928			1,708			806			932			886			954			3,578			900			924			973			3,606
			Growth vs. prior year (%)		-3.2	%		-0.4	%		-1.7	%		-0.4	%		3.6	%		-4.1	%		-2.0	%		-0.8	%		-39.8	%		-30.9	%		-13.2	%		-31.6	%
			Growth vs. prior quarter (%)		-18.2	%		19.0	%					-17.2	%		15.6	%		-4.9	%		7.7	%					11.2	%		2.7	%		5.3	%
		JAPAN ($M)			185			192			377			250			243			243			200			936			292			278			203			1,060
			Growth vs. prior year (%)		-26.0	%		-21.0	%		-23.5	%		-12.9	%		-16.8	%		-12.6	%		-1.5	%		-11.7	%		-32.7	%		-43.6	%		-43.8	%		-38.0	%
			Growth vs. prior quarter (%)		-7.5	%		3.8	%					23.2	%		-2.8	%		0.0	%		-17.7	%					1.7	%		-4.8	%		-27.0	%
		REST OF WORLD ($M)			409			554			963			449			473			449			500			1,871			480			466			530			1,894
			Growth vs. prior year (%)		-8.9	%		17.1	%		4.4	%		7.4	%		-1.5	%		-3.6	%		-5.7	%		-1.2	%		-31.6	%		-21.4	%		-13.3	%		-24.0	%
			Growth vs. prior quarter (%)		-18.2	%		35.5	%					-15.3	%		5.3	%		-5.1	%		11.4	%					14.8	%		-2.9	%		13.7	%
	% of Total Revenue
		UNITED STATES (%)			45.8	%		42.1	%		43.8	%		45.2	%		43.5	%		43.4	%		44.5	%		44.2	%		46.2	%		46.3	%		50.1	%		47.5	%
		EUROPE (%)			30.8	%		32.1	%		31.5	%		29.3	%		32.0	%		31.8	%		32.0	%		31.3	%		29.0	%		29.7	%		28.5	%		28.9	%
		JAPAN (%)			7.3	%		6.6	%		6.9	%		9.1	%		8.3	%		8.7	%		6.7	%		8.2	%		9.4	%		8.9	%		5.9	%		8.5	%
		REST OF WORLD (%)			16.1	%		19.2	%		17.8	%		16.3	%		16.2	%		16.1	%		16.8	%		16.4	%		15.4	%		15.0	%		15.5	%		15.2	%
PRODUCTS AND SERVICES REVENUE
COMPUTER SYSTEMS PRODUCTS ($M)					1,282			1,568			2,850			1,512			1,621			1,530			1,580			6,243			1,838			1,864			2,002			7,396
			Growth vs. prior year (%)		-15.2	%		-3.3	%		-9.0	%		-10.6	%		-11.8	%		-17.9	%		-21.1	%		-15.6	%		-48.8	%		-31.3	%		-21.4	%		-40.3	%
			Growth vs. prior quarter (%)		-18.9	%		22.3	%					-24.5	%		7.2	%		-5.6	%		3.3	%					8.6	%		1.4	%		7.4	%
NETWORK STORAGE PRODUCTS ($M)					352			376			728			368			392			367			423			1,550			422			405			505			1,697
			Growth vs. prior year (%)		-4.3	%		-4.1	%		-4.2	%		0.8	%		-7.1	%		-9.4	%		-16.2	%		-8.7	%		-42.2	%		-26.1	%		-7.5	%		-35.4	%
			Growth vs. prior quarter (%)		-16.8	%		6.8	%					-27.1	%		6.5	%		-6.4	%		15.3	%					15.6	%		-4.0	%		24.7	%
SUPPORT SERVICES ($M)					731			745			1,476			683			702			704			755			2,844			625			636			692			2,538
			Growth vs. prior year (%)		7.0	%		6.1	%		6.6	%		16.8	%		12.3	%		10.7	%		9.1	%		12.1	%		16.2	%		15.8	%		12.5	%		16.0	%
			Growth vs. prior quarter (%)		-3.2	%		1.9	%					-1.3	%		2.8	%		0.3	%		7.2	%					6.8	%		1.8	%		8.8	%
PROFESSIONAL AND EDUCATION SERVICES ($M)					171			199			370			184			200			189			224			797			223			202			221			865
			Growth vs. prior year (%)		-7.1	%		-0.5	%		-3.6	%		-16.0	%		-10.3	%		-6.4	%		1.4	%		-7.9	%		-14.2	%		-28.9	%		-23.0	%		-17.4	%
			Growth vs. prior quarter (%)		-23.7	%		16.4	%					-16.7	%		8.7	%		-5.5	%		18.5	%					1.8	%		-9.4	%		9.4	%
NET BOOKINGS ($M)					2,538			2,980			5,518			2,601			2,989			2,688			3,020			11,298			3,193			3,088			3,486			12,484
		Growth vs. prior year (%)			-2.4	%		-0.3	%		-1.3	%		-4.3	%		-6.4	%		-13.0	%		-13.4	%		-9.5	%		-35.5	%		-14.5	%		-4.5	%		-27.7	%
		Growth vs. prior quarter (%)			-16.0	%		17.4	%					-25.4	%		14.9	%		-10.1	%		12.4	%					17.5	%		-3.3	%		12.9	%
BACKLOG ($M)					707			799			799			695			769			667			705			705			794			775			841			841


BALANCE SHEETS		FY 2004									FY 2003															FY 2002

(in millions)		Q1			Q2						Q1			Q2			Q3			Q4						Q2			Q3			Q4

CASH & ST INVESTMENTS			2,520			2,160						2,632			2,606			2,636			3,062						1,853			2,384			2,885
ACCOUNTS RECEIVABLE, NET			1,905			2,214						2,133			2,291			2,296			2,381						2,274			2,407			2,745
	RAW MATERIALS		133			120						136			119			101			114						305			206			168
	WORK IN PROCESS		73			107						123			130			82			75						104			118			125
	FINISHED GOODS		220			253						250			235			214			227						215			230			298

TOTAL INVENTORIES			426			480						509			484			397			416						624			554			591
OTHER CURRENT ASSETS			890			966						1,629			1,447			1,302			920						2,512			2,348			1,556

TOTAL CURRENT ASSETS			5,741			5,820						6,903			6,828			6,631			6,779						7,263			7,693			7,777
PP&E, NET			2,152			2,115						2,408			2,321			2,265			2,267						2,596			2,512			2,453
GOODWILL			389			466						2,182			326			326			326						2,180			2,182			2,182
LT MARKETABLE DEBT SECURITIES			3,006			3,001						2,612			2,671			2,902			2,679						4,117			3,564			2,979
OTHER NON-CURRENT ASSETS, NET			825			822						1,271			1,323			1,421			934						997			923			1,131

TOTAL ASSETS			12,113			12,224						15,376			13,469			13,545			12,985						17,153			16,874			16,522

SHORT TERM BORROWINGS			263			263						0			0			0			0						217			207			205
ACCOUNTS PAYABLE			780			906						798			809			870			903						871			935			1,044
ACCRUED LIABILITIES & OTHER			1,652			1,583						1,873			1,900			1,792			1,773						2,147			2,135			2,023
DEFERRED REVENUES			1,214			1,213						1,109			1,079			1,162			1,453						1,040			1,055			1,321

TOTAL CURRENT LIABILITIES			3,909			3,965						3,780			3,788			3,824			4,129						4,275			4,332			4,593
LT DEBT			1,215			1,214						1,500			1,519			1,495			1,531						1,408			1,384			1,449
LT DEFERRED REVENUES			462			463						547			520			512			450						613			570			477
OTHER NON-CURRENT OBLIGATIONS			364			343						240			369			354			384						958			857			202
STOCKHOLDERS’ EQUITY			6,163			6,239						9,309			7,273			7,360			6,491						9,899			9,731			9,801

TOTAL LIABILITIES & SE			12,113			12,224						15,376			13,469			13,545			12,985						17,153			16,874			16,522

CASH FLOW			Q1			Q2		FY04 YTD				Q1			Q2			Q3			Q4		FY03				Q2			Q3			Q4		FY02

OPERATING ACTIVITIES			(49	)		(282	)		(331	)		182			141			379			335			1,037			82			288			177			880
INVESTING ACTIVITIES			(492	)		123			(369	)		126			(293	)		(108	)		(253	)		(528	)		17			269			287			39
FINANCING ACTIVITIES			7			106			113			(696	)		73			10			95			(518	)		85			(90	)		(112	)		(367	)

KEY METRICS			Q1			Q2						Q1			Q2			Q3			Q4						Q2			Q3			Q4

INVENTORY TURNS (hist.)			13.7			13.3						10.9			12.8			14.3			12.9						11.7			10.6			9.2
INVENTORY TURNS- PRODUCT ONLY (hist.)			9.0			8.7						7.8			9.0			9.9			8.6						8.7			7.8			6.7
DAYS SALES OUTSTANDING			68			69						70			71			74			72						66			70			72
DAYS PAYABLES OUTSTANDING			(46	)		(49	)					(44	)		(44	)		(51	)		(48	)					(40	)		(47	)		(47	)
DAYS OF SUPPLY ON HAND			25			26						28			26			23			22						29			28			27
L-T DEBT/EQUITY (%)			19.7	%		19.5	%					16.1	%		20.9	%		20.3	%		23.6	%					14.2	%		14.2	%		14.8	%
ROE (12 mo. avg.)(%)			-52.8	%		-22.0	%					-5.3	%		-26.3	%		-27.6	%		-45.1	%					-5.5	%		-7.3	%		-5.9	%
BOOK VALUE PER SHARE ($)			1.90			1.90						2.99			2.28			2.30			2.01						3.05			3.00			3.03
PRICE PER SHARE @ CLOSE			3.84			4.38						2.67			3.25			3.43			4.65						12.59			9.52			5.01
P/E RATIO (previous 4 qtrs)			N/A			N/A						N/A			N/A			N/A			N/A						N/A			N/A			N/A
ROA (12 mo. avg.)(%)			-27.7	%		-11.4	%					-3.1	%		-15.2	%		-15.8	%		-24.8	%					-3.2	%		-4.2	%		-3.5	%
DEPREC. & AMORT. ($M)			218			189						272			275			216			265						260			273			286
CAPITAL EXPENDITURES ($M)			55			72						83			98			57			135						122			126			98
NUMBER OF EMPLOYEES			36,014			35,798						39,001			36,460			35,745			36,068						40,093			39,473			39,433
REV. PER EMP. (12 mo.)($K)			311.6			312.8						317.5			334.3			332.1			317.0						350.7			331.1			316.9
GM PER EMP. (12 mo.)($K)			134.0			133.3						128.0			140.3			141.3			137.0						138.0			130.4			124.7
OP EXP AS % OF REV (12 mo.)			67.6	%		45.7	%					48.9	%		65.0	%		65.0	%		67.0	%					47.8	%		50.8	%		49.3	%
NET INCOME (LOSS) PER EMP. (12 mo.)($K)			(100.1	)		(40.4	)					(13.3	)		(65.0	)		(65.2	)		(95.1	)					(14.0	)		(18.6	)		(14.9	)