STOCKREPORTS		 Sun Microsystems, Inc. Nasdaq Symbol SUNW
In S&P 500
19-JUL-97 Industry:
Computers (Hardware)		 Summary: Sun makes high-performance workstations for engineering, scientific and technical markets, and also sells servers and operating system software.

Recent Price 46.31
52 Wk Range 46.31 - 26.56		 Yield Nil
12-Mo. P/E 23.6

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
5
Fair Value
48.90
Risk
MEDIUM
Earn/Div Rank
B
Technical Evaluation:
BEARISH since 06/97
Rel. Strength Rank (1 Lowest - 99 Highest)
97
Insider Activity
Neutral

Overview 28-APR-97

Revenues are forecast to grow 20% in FY 97 (Jun.), benefiting from a new and more powerful product line-up, growing contributions from Internet-related products, and Sun's continued success in penetrating new commercial markets with client-server solutions. Sun has been benefiting from demand for its new workstation and high-end server products based on its UltraSPARC processor technology, and production of its new Starfire high-end server is expected to ramp up sharply in the fourth quarter. Gross margins have been in a strong uptrend, aided by strong sales of more richly configured servers, but are likely to remain flat as SUNW takes aggressive pricing actions in certain key markets. Expense growth should remain brisk, reflecting continued efforts to build up the commercial enterprise infrastructure, enhanced R&D initiatives, and investments to increase Sun's visibility. EPS comparisons should remain favorable, helped by additional share buybacks. Sun's goal is to achieve compound earnings growth of 15% over any three-year period.

Valuation 28-APR-97

The shares remain attractive. Sun is well positioned to capitalize on strong growth opportunities in commercial client-server and Internet/intranet markets. It has aggressively launched new products that target these markets, as exhibited by the recent introduction of the Ultra Enterprise servers and JAVA line of microprocessors. These efforts should prove to be additive to both revenues and gross margins, and should fuel EPS growth of 15% to 20% over the next several years. In light of this favorable situation, and based on their current valuation, the shares, which were split two for one in December 1996, should be accumulated for their above-average appreciation potential.

Key Stock Statistics

S&P EPS Est. 1998 2.20
P/E on S&P Est. 1998 21.1
Dividend Rate/Share Nil
Shs. outstg. (M) 368.9
Avg. daily vol. (M) 4.559
Tang. Bk. Value/Share 6.06
Beta 0.88
Shareholders 3,800
Market cap. (B) $ 17.1
Inst. holdings 53%
Value of $10,000 invested 5 years ago:$ 65,285

Fiscal Year Ending Jun. 30

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 1,859 1,485 1,273 960.5 856.0 755.0
Q2 2,082 1,751 1,475 1,131 1,051 909.0
Q3 2,115 1,840 1,505 1,196 1,141 952.0
Q4 2,543 2,018 1,648 1,403 1,261 973.0
Year 8,598 7,095 5,902 4,690 4,309 3,589

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.32 0.21 0.10 0.04 0.01 0.07
Q2 0.46 0.32 0.21 0.11 0.06 0.12
Q3 0.58 0.36 0.27 0.15 0.12 0.15
Q4 0.61 0.31 0.32 0.21 0.18 0.09
Year 1.96 1.21 0.90 0.51 0.37 0.43

Dividend Data
Amount ($) Date Decl. Ex-Div. Date Stock of Record Payment Date
2-for-1 Aug. 08 Dec. 11 Nov. 18 Dec. 10 '96

Business Summary 28-APR-97

Sun Microsystems is a leading supplier of networked computing products including workstations, servers, software, microprocessors and a full range of services and support. Computer systems are used mainly for commercial and technical applications. Net revenues by geographic area in recent fiscal years (Jun.):

FY 96 FY 95 FY 94
U.S. 49% 49% 49%
Europe 27% 26% 26%
Rest of World 24% 25% 25%

The UNIX operating system is the foundation for Sun's open systems approach, which utilizes and licenses its own SPARC (Scalable Processor ARChitecture) microprocessor. In late 1995 and early 1996, Sun unveiled a line of workstations and servers based on its new UltraSPARC processor technology.

Sun's workstations range from low cost X-terminals to high performance color graphics systems. Current desktops include the low-end SPARCstation 4 and SPARCstation 5, the high-performance SPARCstation 20 series and the new family of Ultra workstations. The company's servers can be used for file sharing, enabling users to access data distributed across multiple storage devices and networks, or as compute resources, to distribute compute-intensive applications across multiple processors. Servers include the low end SPARCstation 5 for small workgroups and a line of Ultra Enterprise Servers for mid-range and high-end. The company's Netra servers provide preconfigured solutions for Internet and Intranet publishing.

Software offerings include Solaris, an open client-server UNIX system software environment offered on SPARC and Intel platforms and Solstice, a software suite that manages large heterogenous networks.

In FY 96, Sun formed JavaSoft to develop, market and support Java, an object-oriented programming language. The Java programming language has attracted tremendous interest in the software development industry because of its portability; software created in Java can run on any type of system, including PCs, workstations and World Wide Web browsers. It is especially attractive as a tool for designing software for distribution over the Internet, because any one can access and use it.

R&D expenses amounted to 10% of revenues in FY 96, versus 9.5% in FY 95.

In July 1996, Sun acquired Lighthouse Design, Ltd., a leading provider of object-based developer and productivity tools. It also purchased the SPARC/Solaris related assets of Cray Research from Silicon Graphics, including Cray's high-end server business, for an undisclosed amount. In April 1996, the company purchased Integrated Micro Products (IMP), a U.K.-based supplier of fault tolerant computing products for the telecommunications industry, for $96.1 million.

Capitalization

Long Term Liabilities: $107,266,000 (03/97).

Per Share Data ($)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Tangible Bk. Val. NA 6.06 5.39 4.34 4.02 3.71 3.15 2.50 1.97 1.28
Cash Flow NA 1.93 1.52 1.15 0.93 0.96 1.00 0.78 0.48 0.38
Earnings 1.96 1.21 0.90 0.51 0.37 0.43 0.46 0.30 0.19 0.22
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Prices - High 45 1/8 35 1/8 20 9 3/8 10 1/4 9 9 5/8 9 3/8 5 3/4 5 1/8
- Low 25 7/8 18 7 1/2 4 5/8 5 1/4 5 5/8 5 1/4 3 3/4 3 3/8 3 1/4
P/E Ratio - High 23 29 22 19 28 21 21 31 30 23
- Low 13 15 8 9 14 13 11 12 18 15

Income Statement Analysis (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Revs. NA 7,095 5,902 4,690 4,309 3,589 3,221 2,466 1,765 1,052
Oper. Inc. NA 1,017 741 526 473 477 516 361 191 162
Depr. NA 284 241 248 232 215 221 184 103 51.0
Int. Exp. NA 9.1 17.8 21.8 34.9 45.2 49.4 37.4 14.3 12.4
Pretax Inc. NA 709 523 283 224 255 284 154 78.0 111
Eff. Tax Rate NA 33% 32% 31% 30% 32% 33% 28% 22% 40%
Net Inc. NA 476 356 196 157 173 190 111 61.0 66.0

Balance Sheet & Other Fin. Data (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Cash NA 990 1,228 883 1,139 1,220 834 394 54.0 128
Curr. Assets NA 3,034 2,934 2,305 2,272 2,148 1,801 1,297 880 532
Total Assets NA 3,801 3,545 2,898 2,768 2,672 2,326 1,779 1,269 757
Curr. Liab. NA 1,489 1,331 1,148 947 839 713 493 463 260
LT Debt NA 60.2 91.0 116 154 313 351 359 143 125
Common Eqty. NA 2,251 2,123 1,628 1,643 1,485 1,213 927 662 370
Total Cap. NA 2,312 2,214 1,745 1,797 1,798 1,564 1,286 805 495
Cap. Exp. NA 296 242 213 196 186 192 213 205 117
Cash Flow NA 760 596 444 389 389 411 295 164 117

Curr. Ratio NA 2.0 2.2 2.0 2.4 2.6 2.5 2.6 1.9 2.1
% LT Debt of Cap. NA 2.6 4.1 6.7 8.6 17.4 22.5 27.9 17.7 25.2
% Net Inc.of Revs. NA 6.7 6.0 4.2 3.6 4.8 5.9 4.5 3.4 6.3
% Ret. on Assets NA 13.0 11.0 7.2 5.7 6.8 9.1 7.3 5.7 10.1
% Ret. on Equity NA 21.8 18.9 12.5 9.9 12.6 17.5 13.4 11.2 21.1

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--2550 Garcia Ave., Mountain View, CA 94043-1100. Tel--(415) 960-1300. Chrmn & CEO--S. G. McNealy. VP & CFO--M. Lehman. VP & Secy--M. H. Morris. Investor Contact--M. Paisley. Dirs--L. J. Doerr, J. Estrin, R. J. Fisher, W. R. Hearst III, R. L. Long, S. G. McNealy, M. K. Oshman, A. M. Spence. Transfer Agent & Registrar--Bank of Boston. Incorporated--in California in 1982. Empl-- 20,739. S&P Analyst: Megan Graham Hackett


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