Case 48 Sun Microsystems

This spreadsheet supports STUDENT analysis of the case “Sun Microsystems” (Case 48

This spreadsheet as prepared )y *ssistant +rofessor of ,usiness *dministration Elena -outs.ina# Copyri/ht 0 $&'& )y the Uni"ersity of 1ir/inia Darden School 2oundation% Charlottes"ille% 1*# *ll ri/hts reser"ed#  For customer service inquiries, send an e-mail tosales3darden)usinesspu)lishin/#com. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden chool Foundation. !e"# No"# $% $&'$

Ehi)it ' SUN MICROSYSTEMS MICROSYSTEMS 5lo)al Computer 6ardare Sales

Global Computer Hardware Sales: 20040!    )   s   (   o    '    l    l    '    b    &    %   s   e    l   a    S

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$ && 4

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5roth

Global Computer Hardware Sales b" #rodu$t: 200! Monitors =#<<;

>ther  4#'&;

+rinters ' <; +Cs 48#9:;

Ser"ers Ser"ers and Netor.in Netor.in/ / $<#'=;

Data source7 Datamonitor% “5lo)al Computer 6ardare7 ndustry +rofile%” Decem)er $&&8#

Ehi)it $ SUN MICROSYSTEMS 5lo)al Softare @ Ser"ices Sales

Global So,tware - Ser.'$es Sales: 2004 – 0!    )   s   (   o    '    l    l    '    b    &    %   s   e    l   a    S

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$&&=

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5roth

Global So,tware - Ser.'$es Sales b" #rodu$t: 200! T Ser"ices ''#8$;

nternet Softare and Ser"ices 99#'8;

Softare ::#&&;

Data source7 Datamonitor% “5lo)al Softare @ Ser"ices7 ndustry +rofile%” March $&&<#

Ehi)it 9 SUN MICROSYSTEMS 5lo)al Softare @ Ser"ices Sales

Global So,tware - Ser.'$es Sales b" S*are: 200!

MS2T EDS' >!C,M 9#?&; $#=&; '#'&; '#&&;

'

EDS as acAuired )y 6+ in $&&8#

>ther  <'#:<;

Data source7 Datamonitor% “5lo)al Softare @ Ser"ices7 ndustry +rofile%” March $&&<#

E SUN MIC T ndustr

#r'mar'l" Hardware /es$r'pt'o( *d"anced Micro De"elops and manufactures semiconductors and De"ices microprocessors

*pple

Desi/ns% manufactures and mar.ets personal computers% related softare and mo)ile communication and entertainment de"ices

Dell

>ffers a ide ran/e of computers and related  products

EMC

+ro"ides enterprise stora/e systems% softare% netor.s and ser"ices

6elettB+ac.ard

+ro"ides ima/in/ and printin/ systems% computin/ systems% and information technolo/y for )usiness and home

ntel

Desi/ns and manufactures computin/ communications components and platforms

and

nternational ,usiness >ffers computer solutions throu/h the use of Machines ad"anced information technolo/y  Net*pp Sun Microsystems

#r'mar'l" So,tware *do)e Systems

+ro"ides stora/e and data mana/ement solutions +ro"ides products% ser"ices and support for  )uildin/ and maintainin/ netor. computin/ en"ironments

De"elops% mar.ets and supports softare products and technolo/y

computer

Microsoft

De"elops% manufactures% licenses% supports softare products

 No"ell

+ro"ides netor. and nternet directory softare and ser"ices

>racle

Supplies softare for enterprise information mana/ement

!ed 6at

De"elops and pro"ides open source softare and ser"ices

Sources7 ndustry reports and ,loom)er/#

sells

and

 

 

i)it 4 OSYSTEMS Companies

e" #rodu$ts 8? microprocessors% microprocessors computers and ser"ers

Notable 1$u's't'o(s for *T Technolo/ies ($&&?

Macintosh computers% i+hones% i+ods% music related products Des.top and laptop computers% softare and EAual-o/ic ($&&8  peripherals% ser"ers nformation stora/e% 1Mare Consultin/ ser"ices% enterprise stora/e and CompaA ($&&$ ser"ers% personal computers% di/ital cameras% EDS ($&&8  printers and in.  Microprocessors%  platforms Consultin/ laptops

chipsets%

ser"ices%

mother)oards%

middleare%

ser"ers%

2ilers Enterprise systems and ser"ices% stora/e and MyS- ($&&8 softare platforms a"a% Solaris and MyS-

Creati"e solutions% *cro)at Findos% )usiness and ser"er /amin/ and handheld de"ices

softare%

Enterprise netor.in/ softare !elational data)ases% middleare softare% +eopleSoft ($&&: applications% related ser"ices Sie)el Systems ($&&? 6yperion Solutions ($&&= ,E* Systems ($&&8 -inu

Ehi)it : SUN MICROSYSTEMS !elati"e Sales 5roth% $&&& –&8

#r'mar'l" Hardware Compa('es

4&&#&;

*pple

9&&#&;

 Net*pp

$&&#&; 6+

'&&#&;

&#&; &#&; $&&&

'?#'; $&&'

B$&#:; B$=#9; B$8#<; B$<#?; B'?#<; B''#8; $&&$ $&&9 $&&4 $&&: $&&? $&&=

Dell EMC *MD ,M B''#=; ntel Sun $&&8

B'&&#&; #r'mar'l" So,tware Compa('es

?&&#&; !ed 6at

4:&#&;

9&&#&;

*do)e Microsoft

':&#&;

>racle

&#&; $&&&

B':&#&;

$&&'

$&&$

$&&9

$&&4

$&&:

$&&?

$&&=

 No"ell $&&8

Data source7 Compustat#

Ehi)it ? SUN MICROSYSTEMS Selected *cAuisitions Completed )y >racle%

Tar3et +eopleSoft

!ete. nc# 5B-o/

Complet'o( /ate anuary $&&:

/eal S'e %&MM) '&%9&&#&

#rodu$t Cat3or" *pplications

*pril $&&:

?9&#&

ndustry Solutions

Septem)er $&&:

NG*

ndustry Solutions

Sie)el Systems nc#

anuary $&&?

:%<4?#:

9?&Commerce

anuary $&&?

NG*

ndustry Solutions

*pril $&&?

$99#=

ndustry Solutions

Mantas nc#

>cto)er $&&?

'$$#?

ndustry Solutions

Stellent nc#

No"em)er $&&?

9<8#=

Middleare

MetaSol" nc#

>cto)er $&&?

$'=#=

ndustry Solutions

6yperion Solutions Corp#

March $&&=

+ortal Softare nc#

*/ile Softare Corp# ,E* Systems nc#

May $&&= anuary $&&8

*pplications

9%$<$#'

*pplications

48&#'

*pplications

8%&:?#&

Middleare

S.yire Softare --C

une $&&8

NG*

ndustry Solutions

+rima"era Softare nc#

>cto)er $&&8

NG*

*pplications

Source7 SDC +latinum#

 

$&&: –&8

Core #rodu$ts 6uman resource mana/ement systems relationship mana/ement softare

and

customer

Mana/ement softare for the retail industry -o/istics and transportation mana/ement softare Customer relationship mana/ement% )usiness intelli/ence and data inte/ration softare >penBstore and multilBchannel solutions softare ,illin/ and re"enue mana/ement communications and media industry

solutions

for

2raud and compliance softare for financial institutions Content mana/ement softare solutions Customer relationship softare for the communications industry +erformance mana/ement softare +roduct life cycle softare for the industrial products% electronics and hi/hBtech% and life science industries Enterprise infrastructure softare Fe)B)ased insurance% financial and enterprise mana/ement softare +roHect% pro/ram and portfolio mana/ement softare

Ehi)it = SUN MICROSYSTEMS !elati"e Stoc. +erformance% anuary 9% $&&?% to *pril '?% $&&<

9G'4G&87 2ed )ails out ,ear Stearns

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B=:#&;

B'&&#&;

$&&?

$&&= Sun

>racle

Data sources7 IahooJ 2inance and Fharton !esearch Data)ase Ser"ice#

$&&8 S@+ :&&

$&&<

Ehi)it 8 SUN MICROSYSTEMS Comparin/ >racle and Sun Microsystems (in )illions of U#S# dollars

OR1C5E

Employees 2I&8 !e"enue

SUN MICROSY

8?%:&& K$$#49 )illion

9&%&&& K'9#88 )illion

4#? ?#$

$#4 '=#'4;

?#9 4:#&&;

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2I&8 +rofit

K:#:$ )illion

K4&9 million

Ley +roducts

Data)ases% )usiness softare from Sie)el% +eopleSoft

Ser"er computers% stora/e de Solaris technolo/y

Data source7 Don Clar. and ,en Forthen% “>racle Snatches Sun% 2oilin/ ,M%” !all treet "ournal, *pril $'% $&&<#

TEMS

:#9

ices% a"a% and

Ehi)it < SUN MICROSYSTE T Companies 2inancial

T'$6er

Sto$6 #r'$e %&)

S*ares Out %MM)

Mar6et Cap %&MM)

78 /ebt %&MM)

#r'mar'l" Hardware *d"anced Micro De"ices *pple Dell EMC 6elettB+ac.ard ntel nternational ,usiness Machines  Net*pp Sun Microsystems

*MD **+DE-EMC 6+ NTC ,M NT*+ *1*

9#:? OOO ''#&? '$#8' 9?#9& ':#?& OOO '=#:< ?#?<

?&< 88< '%<44 $%&4' $%4'? $%:?$ '%949 99& =9<

$%'?8 '&<%='9 $'%:&: $?%'4$ 8=%=&8 9<%
4%<88 B $%&'' 9%4&4 $&%4:8 '%<88 99%<$: '%$?: '%$:=

#r'mar'l" So,tware *do)e Systems Microsoft  No"ell >racle !ed 6at

*D,E MS2T N>1>!C!6T

$4#=& '<#$& 9#<4 '<#&? '8#9$

:$4 8%8
'$%<44 '=&%=<: '%9:9
9:& $%&&& '$$ ''%$98 B

Mar.et data as of *pril '=% $&&< Data sources7 IahooJ 2inance% Moodys% ,loom)er/% and company filin/s#

 

S Data

Cas* 5e.ered 7o(d I(.estme(ts 7eta Rat'(3 %&MM)

OOO

, '#'' '#'$ '#9< '#$: '#$& &#<9 '#8& '#=9

OOO &#<< OOO OOO OOO

B *$ B *$ *' *' B ,a'

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B *aa ,' *$ ,,

$%&'8 9'%44= '%&?= '$%?$4 ??9

5TM Sales %&MM)

5TM 5TM 5TM E7IT E7IT/1 Ear('(3s %&MM) %&MM) %&MM)

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9%4=? OOO <4& OOO ?$8


(=9$ 8%=9< 9%<:< $%?$? '4%'=: '9%:=& $$%'?: $8? ('%=:=

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'%$9' $4%48: :: '&%$<' ''<

8&< '=%$9$ (': :%=9< 8:

Ehi)it '& SUN MICROSYSTEMS !ele"ant Security Iields% *pril $&&<

Corporate 7o(d Y'elds *** ** *P * *B ,,,P ,,, ,,,B ,,P ,, ,,B ,P , ,B

U9S9 Treasur" Y'elds '8&BDay 'BIear 9BIear :BIear '&BIear 9&BIear

:#:&; :#==; ?#$=; ?#9:; ?#:&; =#:4; =#?$; 8#?4; ''#4$; ''#4<; ''#=&; '9#$8; '4#=&; ':#4?;

^ &#:4; '#$$; '#='; $#8$; 9#??;

Data sources7 ,loom)er/% U#S# Treasury% and ))otson *ssociates#

Ehi)it '' SUN MICROSYSTEMS Sun Microsystems 6istorical and +roHected ,alance Sheet (in millions of U#S# dollars 's$al Year;E(d >

>>

200?E

9%?$& $%9$$ $%
$%$=$ '%&98 9%&'< ?8&

'%8=? '%'8: $%$:8 :??

$&& '%&:8 '&%?88 '%:&4 $%:'4 ?99 4<< @AB!=!

$'? '%$'8 8%449 '%?'' 9%$': :?: :&? @4B=40

'88 <<: =%&?8 '%?'? '%=49 $?< :9? @@B2=2

$%$$$ '

$%'$' B

'%?&& ::4

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$%$9?

$%94'

'%'8$ :%4:' '%$?4

'%9'' :%??8 '%$?:

'%'$? :%?$' ?<:

?:<

?89

?9:

Total -ia)ilities

'%$8: 8%?:<

'%'9? 8%=:$

<=? =%<$=

Stoc.holders EAuity Common Stoc. Treasury Stoc. !etained Earnin/s >ther Stoc.holders EAuity Total Stoc.holders EAuity

?%<8= (9'' '8< 9'4 =%'=<

=%9<' ($%=$? 49& 4<9 :%:88

=%:8$ ($%:?< ($%&:: 94= 9%9&:

@4B=40

@@B2=2

1ssets

Current *ssets Cash(' Mar.eta)le De)t Securities  Net !ecei"a)les n"entory Deferred +repaid Taes($ >ther Current *ssets Total Current *ssets +roperty% +lant% @ EAuipment% Net 5oodill ntan/i)le *ssets >ther Noncurrent *ssets Total 1ssets 5'ab'l't'es - Eu't"

Current -ia)ilities *ccounts +aya)le ncludin/ *ccrued +ayroll ShortGCurrent -on/BTerm De)t Deferred Taes($ >ther Current -ia)ilities ncludin/ Farranty !eser"e Total Current -ia)ilities -on/BTerm De)t Deferred -on/BTerm Char/es ($ >ther Noncurrent -ia)ilities

(9

Total 5'ab'l't'es - Eu't" Data sources7 Company filin/s and case riter estimates#

@AB!=!

('

(Sun MicrosystemsQ lon/Bterm strate/y is to maintain a minimum amount of cash and cash eAui"alents in su)sidiaries for operational purposes and to in"est the remainin/ amount of our cash in interestB)earin/ and hi/hly liAuid cash eAui"alents and mar.eta)le de)t securities# ($

 Deferred taes and related accounts are not epected to "ary ith sales or continue t o accumulate as a company /roth# (9

 ncludes deferred settlement income from Microsoft as of une 9&% $&&<% $&&8% $&&=% and $&&?% lon/Bterm ta lia)ilities as of une 9&% $&&<% $&&8% $&&=% and $&&?% and lon/Bterm restructurin/ lia)ilities#

Ehi)it '$ SUN MICROSYSTEMS >racle 6istorical and +roHected ,alance Sheet (in millions of U#S# dollars

's$al Year;E(d Ma" =@ 200

200!

200?E

1ssets Current *ssets

Cash @ Cash EAui"alents  Net !ecei"a)les n"entory >ther Current *ssets Total Current *ssets +roperty% +lant% @ EAuipment% Net 5oodill ntan/i)le *ssets >ther Noncurrent *ssets Total 1ssets

=%&$& 4%:8< B '%$=4 OOO '%?&9 OOO :%>>

''%&49 :%=<< B '%$?' '8%'&9 '%?88 '=%<<' 8%9<: '%&<' 4B2D!

'$%?$4 4%49& B '%:$= '8%:8' '%<$$ '8%84$ =%$?< 8&$ 4B4@D

Total Current -ia)ilities -on/BTerm De)t Deferred -on/BTerm Char/es >ther Noncurrent -ia)ilities Total -ia)ilities

9': '%9:8 =%='4 <%98= ?%$9: '%'$' <'& OOO

989 '%&&' 8%?4: '&%&$< '&%$9: '%$'8 $%=?' $4%$49

$=' '%&&' =%8== <%'4< <%$9= 48& 9%4?& $$%9$?

Stoc.holders EAuity Common Stoc. Treasury Stoc. !etained Earnin/s >ther Stoc.holders EAuity Total Stoc.holders EAuity

OOO B ?%$$9 4&9 OOO

'$%44? B <%
'$%<8& B ''%8<4 $'? $:%&<&

>>>

4B2D!

4B4@D

5'ab'l't'es - Eu't"

Current -ia)ilities *ccounts +aya)le ShortGCurrent -on/BTerm De)t >ther Current -ia)ilities

Total 5'ab'l't'es - Eu't"

Data sources7 Company filin/s and case riter estimates#

Ehi)it '9 SUN MICROSYSTEMS >racle 6istorical and +roHected ncome Statement (in millions of U#S# dollars

Softare !e"enues

's$al Year;E(d Ma" =@ 200 200! 200?E OOO '=%849 '8%8==

Ser"ices !e"enues 9%=8:  Net !e"enue OOO Sellin/% 5eneral% @ *dministrati 8%=<& !esearch @ De"elopment $%'<: *mortiRation of ntan/i)le *sset 8=8

4%:8= $$%49& '&%4?8 $%=4' '%$'$

4%9=: $9%$:$ '&%$'= $%=?= '%='9

>ther >peratin/ Epense Total >peratin/ Epense >peratin/ ncome

':< OOO :%<=4

'?: '4%:8? =%844

$94 '4%<9' 8%9$'

ncome Ta on >perations  Net >peratin/ +rofit *fter Ta

'%=&< 4%$?:

$%9'? :%:$8

$%98& :%<4'

Effecti"e Corporate Ta !ate

$8#?;

$<#:;

$8#?;

Data sources7 Company filin/s and case riter estimates#

Ehi)it '4 SUN MICROSYSTEMS Sun Microsystems 6istorical and +roHected ncome Statement (in millions of U#S# dollars

 Net !e"enue Cost of Sales 5ross Mar/in Sellin/% 5eneral% @ *dministrati" !esearch @ De"elopment mpairment of 5oodill >ther >peratin/ Epense Total >peratin/ Epense >peratin/ ncome Depreciation @ *mortiRation as # of $rior %ear $$&'   Net ++@E as ; of Sales

>>> '9%8=9 =%?&8 ?%$?: 9%8:' $%&&8 B <= :%<:? 9&<

>>> '9%88& =%4$: ?%4:: 9%<:: '%894 B $<4 ?%&89 9=$

:'= 94#4; '%?'' ''#?;

4=? $<#:; '%?'? ''#?;

's$al Year;E(d
4=4 $<#9; '%=88 ':#?;

:9? 9&#&; '%:$& '$#&;

4:? 9&#&; '%:?? '$#&;

Data sources7 Company filin/s and case riter estimates#

Exhibit 1: DCF Model

200

NOPLAT - Net PPE !C!! Te$%&na' a'e

101

337

392

(196)

(62)

(172)

268

(6)

(2,01"#6)

172#2

229#"

-

-

-

Ente$*$&+e a'e

1,676

et a'e

1,2"7

E.&t/ a'e

19

 of ha$e+ (P$e)  of ha$e+ (Po+t) P$&eha$e+ 4e%a$5+ 2 A**'/&ng $o:th (g)

201

(2,236)

- Change of NOWC

1A**'/&ng Ta 4ate

201

28#6 3

Exhibit

2: WACC Calculaon

;a$5et a'e of et1

20

1,2"7

;a$5et a'e of E.&t/

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Leeta

1#73

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2#82

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6#00

Co+t of E.&t/

13#2

?nte$e+t ?nte$e+t A@e$-Ta WACC

4e%a$5+ 1A**'/&ng oo5
11#2 8#1" 12.20%

 

20@ '9%:$? =%=9: :%=<'

20@ '9%88: =%88< :%<
20@4E '4%$49 8%&=: ?%'?8

:%'$' ?=&

:%$4< =4=

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4=& 9&#&; '%?$9 '$#&;

48= 9&#&; '%??? '$#&;

:&& 9&#&; '%=&< '$#&;

201

2013

201E

78

"33

"68

(77)

("8)

("8)

("7)

(3)

(3)

33#62

32#3

67#61

-

-

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