A Q2 Sun Burn: Fool by Numbers

On Jan. 24, Sun Microsystems (Nasdaq: SUNW  ) released Q2 2006 earnings for the period ended Dec. 25, 2005.

  • Sun's net loss included several special items, including $145 million for accounting adjustments and amortization from recent acquisitions, $10 million in restructuring charges, $14 million for a gain in equity investments, and a $3 million tax benefit. Together, these charges cost the company $0.04 per share. Stock-based compensation subtracted another $0.02. Combined, they brought Sun's adjusted net loss to $0.01, or in line with analyst projections.
  • Sales of $3.34 billion were well short of Street estimates, however. And it isn't the first time that's happened, either.
  • Executives say revenue suffered because Sun underestimated demand for its servers. Whoops. Management expects the backlog to be relieved by the end of Q3 or the beginning of Q4, according to The New York Times.

(Figures in millions, except per-share data)

Income Statement Highlights

Avg. Est.

Q2 2006

Q2 2005

% Change

Sales

$3,490

$3,337

$2,841

+17.5%

Net Profit

--

$(223)

$4

N/A

EPS

$(0.01)

$(0.07)

--

N/A



Get back to basics with a look at the income statement.

Margin Checkup

Q2 2006

Q2 2005

Change

Gross Margin

42.58%

42.17%

+0.41%

Op. Margin

-5.57%

0.04%

-5.61%

Net Margin

-6.68%

0.14%

-6.82%



Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q2 2006

Q2 2005

% Change

Cash + ST Invest.

$2,449

$3,639

-32.7%

Inventory

$550

$429

+28.2%

Accounts Rec.

$2,289

$1,842

+24.3%



Liabilities

Q2 2006

Q2 2005

% Change

Long-Term Debt

$593

$1,145

-48.2%

Accounts Pay.

$1,214

$963

+26.1%



Cash Flow Highlights*

Q2 2006

Q2 2005

% Change

Cash From Ops

$33

$176

-81.3%

Capital Expend.**

$3,281

$141

2,227%

Free Cash Flow

$(3,248)

$35

N/A

*Cash flow data for last six months of respective periods
**Capex for 2006 includes cash outlays associated with acquisitions

Find out why Fools always follow the money.

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Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so checkFool.comfor more of our in-depth discussion of what the numbers mean.

Dell is aMotley Fool Stock Advisorrecommendation. Microsoft is aMotley Fool Inside Valueselection. Try either newsletter risk-free for 30 days by following the links. Or subscribe now and we'll throw inStocks 2006, which features our analysts' best picks for the year ahead. All you have to lose is the prospect of a richer portfolio.

Fool contributorTim Beyersdidn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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