Sun Sets on McNealy Era: Fool by Numbers

On April 24 2006, Sun Microsystems (Nasdaq: SUNW  ) released Q3 2006 earnings for the period ended March 26, 2006.

  • Sales earnings came up short of Street expectations, but the company delivered on per-stub earnings expectations, according to Capital IQ, a division of Standard & Poor's.
  • It may not get better soon. In Q2, management said it had underestimated demand for its servers and, as a result, inventory spiked by 28% year over year. The plan was to see the backlog relieved by the end of Q3 or Q4, but Sun's inventory build on a percentage basis has accelerated over the past three months, up another 48% year over year. Ouch.
  • Scott McNealy, a Sun founder and CEO for 22 years, has stepped down, but will remain as chairman of the board. Company president Jonathan Schwartz will assume the top job.

(Figures in millions, except per-share data)
Income Statement Highlights

Avg. Est.

Q3 2006

Q3 2005

% Change

Sales

$3,199

$3,177

$2,627

20.9

Net Profit

--

($217)

($28)

N/A

EPS

($0.07)

($0.06)

($0.01)

N/A



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

Margin Checkup

Q3 2006

Q3 2005

% Change

Gross Margin

43.03%

41.38%

1.65

Op. Margin

(6.67%)

(5.41%)

(1.27)

Net Margin

(6.83%)

(1.07%)

(5.76)



Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q3 2006

Q3 2005

% Change

Cash+ ST Invest.

$2,872

$3,135

(8.4)

Inventory

$574

$388

47.9

Accounts Rec.

$2,301

$2,020

13.9



Liabilities

Q3 2006

Q3 2005

% Change

Total Debt

$1,090

$1,116

(2.3)

Accounts Pay.

$1,315

$1,071

22.8



Learn the ways of the balance sheet.

Cash Flow Checkup*

Q3 2006

Q3 2005

% Change

Cash From Ops

$230

$174

32.2

Capital Expend.

$246

$267

(7.9)

Free Cash Flow

($16)

($93)

N/A

*Cash flow numbers calculated on a trailing nine-month basis.

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 check Fool.com for more of our in-depth discussion of what the numbers mean.

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Fool contributor Tim Beyers didn'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 Fool profile. The Motley Fool has an ironclad disclosure policy.


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