Sun Microsystems Case

8/9/2019 Sun Microsystems Case

http://slidepdf.com/reader/full/sun-microsystems-case 1/30

Rev. Mar. 20, 2013

This spreadsheet was prepared by Elena Loutskina, Assistant ro!essor o! "usiness Ad#inistration. $opyri%ht & 2010 by the 'niversity o! (ir%inia )arderi%hts reserved. For customer service inquiries, send an e-mail tosales-dardenbusinesspublishin%.+o#. No part of this publication may be reproduced, stoor transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden chool F



SUN

T $o

#arket d

Stock Shares Market

Price Out CapTicker ($) (MM) ($MM)

Primarily ar!"are

Advan+ed Mi+ro )evi+es AM) 3.56 60/ 2,167

Apple AAL 123.82 77/ 10/,13

)ell )ELL 11.06 1,/88 21,505

EM$ EM$ 12.71 2,081 26,182

9ewlett:a+kard 9; 36.30 2,816 7,07

ntel <T$ 15.60 2,562 3/,/6

nternational "usiness Ma+hines "M 101.2 1,383 136,052

<etApp <TA 1.5/ 330 5,707*un Mi+rosyste#s =A(A 6.6/ 3/ 8,/81

Primarily So#t"are

Adobe *yste#s A)"E 28.0 528 12,/88

Mi+roso!t M*T 1/.20 7,7/6 10,/5

<ovell <>(L 3./8 383 1,353

>ra+le >R$L 1/.06 5,086 /6,170

Red 9at R9T 17.32 1/0 3,872

)ata sour+es? @ahoo inan+e, Moodys, "loo#ber%, and +o#pany !ilin%s.



Ehibit /

ICROSYSTEMS

panies inan+ial )ata

ata as o! April 1, 200/4

% Cash & 'TM 'TM 'TM

et 'e*ere! o+! I+*estme+ts Sales EIT EIT,($MM) eta Rati+- ($MM) ($MM) ($MM) ($MM)

8,/77 2.1/ " /33 5,707 1,/554 324

: 1.11 : 28,8/0 3,0/6 ,/78 7,3/

2,011 1.12 A2 /,586 61,101 3,1/0 3,/5/

3,808 1.3/ : 6,886 18,76 1,56/ 2,626

20,857 1.25 A2 10,180 117,6/ 10,358 18,15

1,/77 1.20 A1 7,780 3,576 7,/58 13,50

33,/25 0./3 A1 12,/0 103,630 16,15 22,165

1,265 1.70 : 2,608 3,868 116 2761,25 1.3 "a1 3,061 13,837 2,2314 1,54

350 1.32 : 2,017 3,86 /61 1,231

2,000 0.// Aaa 31,88 61,/71 22,127 28,875

122 1.50 "1 1,06 /80 10 55

11,237 1.2 A2 12,628 23,630 7,806 10,2/1

: 1.20 "" 663 627 70 11/



'TM

*ales MultipleEar+i+-s($MM) E"T Multiple

3,0/74 7.54 1.0 3.174

5,27 /.7 2.30 10.6

2,87 3.5 0.23 8.37

1,386 7.7 1.55 18.2

7,050 6./ 0.73 /.8

5,2/2 2.8 0.77 3.0

12,338 .1 1.52 /.80

101 15.6 1.2/ 37.3nBa 1.74 0.23 1.814

70/ /.2 3.28 11.8

1,232 5.7 2.27 6.3/

154 .8 0.83 81.08

5,3/ /.2 8.01 11.27

75 23. 8.8/ 35.08

,*era-e ./0 1/2 13/4

E"T)AM'LTLE



Ehibit 10

SUN MICROSYSTEMS

Relevant *e+urity @ields, April 200/

Corporate o+! Yiel!s

AAA 5.50CAA 5.C

AD 6.2C

A 6.35C

A: 6.50C

"""D .58C

""" .62C

""": 7.68C

""D 11.82C

"" 11.8/C

"": 11.0C"D 13.27C

" 18.0C

": 15.86C

U/S/ Treasury Yiel!s

170:)ay 0.38C

1:@ear 0.58C

3:@ear 1.22C

5:@ear 1.1C10:@ear 2.72C

30:@ear 3.66C

)ata sour+es? Mer%ent "ond Re+ord, '.*. Treasury, and bbotson Asso+iates.



Ehibit 11

SUN MICROSYSTEMS

*un Mi+rosyste#s 9istori+al and roe+ted "alan+e *heet

in #illions o! '.*. dollars4

5is

888,ssets

$urrent Assets

3,620

Marketable )ebt *e+urities 2,322

<et Re+eivables 2,/68

nventory 528

200

>ther $urrent Assets 1,057

Total $urrent Assets 10,677

roperty, lant, F EGuip#ent, <et 1,508

Hoodwill 2,518

ntan%ible Assets 633>ther <on+urrent Assets 8//

Total ,ssets 129:4:

'iailities & E;uity

$urrent Liabilities

A++ounts ayable n+ludin% A++rued ayroll 2,222

*hortB$urrent Lon%:Ter# )ebt 1

2,08

>ther $urrent Liabilities n+ludin% Iarranty Reserve 1,172

Total $urrent Liabilities 5,851

Lon%:Ter# )ebt 1,26865/

1,275

Total Liabilities 7,65/

*to+kholders EGuity

$o##on *to+k 6,/7

Treasury *to+k 3114

Retained Earnin%s 17/

>ther *to+kholders EGuity 318

Total *to+kholders EGuity ,1/

Total 'iailities & E;uity 129:4:

)ata sour+es? $o#pany !ilin%s and +ase writer esti#ates.

24 )e!erred taes and related a++ounts are not epe+ted to vary with sales or +ontinue to a++u#ulate as a +o#pan

$ash14

)e!erred repaid Taes24

)e!erred Taes24

)e!erred Lon%:Ter# $har%es24

>ther <on+urrent Liabilities34

14 *un Mi+rosyste#s4 lon%:ter# strate%y is to #aintain a #ini#u# a#ount o! +ash and +ash eGuivalents in subsinvest the re#ainin% a#ount o! our +ash in interest:bearin% and hi%hly liGuid +ash eGuivalents and #arketable debt



34 n+ludes de!erred settle#ent in+o#e !ro# Mi+roso!t as o! =une 30, 200/, 2007, 200, and 2006, lon%:ter# ta l200, and 2006 and lon%:ter# restru+turin% liabilities.



cal Year6E+! 7u+e 40

888 300<E

2,22 1,76

1,037 1,175

3,01/ 2,257

670 566

216 177

1,217 //5

7,883 ,067

1,611 1,616

3,215 1,83

565 26/506 536

1=94=0 119343

2,121 1,600

: 558

2,236 2,381

1,311 1,126

5,667 5,621

1,265 6/5673 635

1,136 /6

7,52 ,/2

,3/1 ,572

2,264 2,56/4

830 2,0554

8/3 38

5,577 3,305

1=94=0 119343

%rowth.

idiaries !or operational purposes and tose+urities.



iabilities as o! =une 30, 200/, 2007,



Ehibit 12

SUN MICROSYSTEMS

>ra+le 9istori+al and roe+ted "alan+e *heet


5iscal Year6E+! May 41300. 300: 300<E

,ssets

$urrent Assets

$ash F $ash EGuivalents ,020 11,083 12,628

<et Re+eivables 8,57/ 5,// 8,830

nventory : : :

>ther $urrent Assets 1,28 1,261 1,52

Total $urrent Assets 12,773 17,103 17,571

roperty, lant, F EGuip#ent, <et 1,603 1,677 1,/22

Hoodwill 13,8/ 1,//1 17,782

ntan%ible Assets 5,/68 7,3/5 ,26/>ther <on+urrent Assets 683 1,0/1 702

Total ,ssets 4=92.3 =.93>: =.9=1>

'iailities & E;uity

$urrent Liabilities

A++ounts ayable 315 373 21

*hortB$urrent Lon%:Ter# )ebt 1,357 1,001 1,001

>ther $urrent Liabilities ,18 7,685 ,7

Total $urrent Liabilities /,37 10,02/ /,18/

Lon%:Ter# )ebt 6,235 10,235 /,23

)e!erred Lon%:Ter# $har%es 1,121 1,217 870

>ther <on+urrent Liabilities /10 2,61 3,860

Total Liabilities 1,653 28,283 22,326

*to+kholders EGuity

$o##on *to+k 10,2/3 12,886 12,/70

Treasury *to+k : : :

Retained Earnin%s 6,223 /,/61 11,7/8

>ther *to+kholders EGuity 803 617 216

Total *to+kholders EGuity 16,/1/ 23,025 25,0/0

Total 'iailities & E;uity 4=92.3 =.93>: =.9=1>




Ehibit 13

SUN MICROSYSTEMS

>ra+le 9istori+al and roe+ted n+o#e *tate#ent


5iscal Year6E+! May 41300. 300: 300<E

*o!tware Revenues 18,211 1,783 17,7

*ervi+es Revenues 3,75 8,57 8,35

<et Revenue 1,//6 22,830 23,252

*ellin%, Heneral, F Ad#inistrative 7,/0 10,867 10,21

Resear+h F )evelop#ent 2,1/5 2,81 2,6

A#ortiJation o! ntan%ible Assets 77 1,212 1,13

>ther >peratin% Epense 15/ 165 238

Total >peratin% Epense 12,022 18,576 18,/31

>peratin% n+o#e 5,/8 ,788 7,321

n+o#e Ta on >perations 1,0/ 2,316 2,370

<et >peratin% ro!it A!ter Ta 8,265 5,527 5,/81

E!!e+tive $orporate Ta Rate 27.6C 2/.5C 27.6C




SUN

*un Mi+rosyste#s 9ist

in #i

300. 888

<et Revenue 13,73 13,770

$ost o! *ales ,607 ,825

Hross Mar%in 6,265 6,855

*ellin%, Heneral, F Ad#inistrative 3,751 3,/55

Resear+h F )evelop#ent 2,007 1,738

#pair#ent o! Hoodwill : KKK

>ther >peratin% Epense / 2/8

Total >peratin% Epense 5,/56 6,073

>peratin% n+o#e 30/ 32

)epre+iation F A#ortiJation 51 86

as ! of "rior #ear ""$% 38.8C 2/.5C

<et FE 1,611 1,616

as C o! *ales 11.6C 11.6C




Ehibit 18

MICROSYSTEMS

ori+al and roe+ted n+o#e *tate#ent

lions o! '.*. dollars4

5iscal Year6E+! 7u+e 40300<E 3010E 3011E 3013E 3014E

11,88/ 12,665 13,08 13,526 13,775

6,17 ,675 ,573 ,35 ,77/

8,31 8,/70 5,868 5,/1 5,//6

3,861

1,687

1,860

3/7

6,/6 8,73/ 8,//2 5,121 5,28/

2,2364 181 82 60 8

88 536 856 80 87

2/.3C 30.0C 30.0C 30.0C 30.0C

1,77 1,520 1,566 1,623 1,666

15.6C 12.0C 12.0C 12.0C 12.0C



301=E

18,283

7,05

6,167

5,32

/6

500

30.0C

1,0/

12.0C



SUN

in #i

300. 888

<et Revenue 13,73 13,770$ost o! *ales ,607 ,825







Operati+- I+come 40< 4.3

EIT?(16T) 301 3=3

E 1,611 1,616Net PPE 2

<I$ 1,182 1,875

as ! of ales

Net N@C 4=4

epreciatio+ & ,mortiAatio+ 21. =.>

as ! of "rior #ear ""$% 38.8C 2/.5C

<et FE 1,611 1,616

as C o! *ales 11.6C 11.6C

@ithout Sy+er-y

5C5Termi+al %alue

E+terprise %alue

nterest

TaE"T:nterest4

E;uity Cash 5lo"

E;uity %alue o# 5irm

@ith Sy+er-y

<et Revenue 13,73 13,770

$ost o! *ales ,607 ,825









$usto#er Attrition

nte%ration $har%es

n+rease in >peratin% n+o#e

Operati+- I+come

EIT?(16T)

5C5Termi+al %alue

E+terprise *alue

nterest

TaE"T:nterest4

E;uity Cash 5lo"

E;uity %alue o# 5irm

Sy+er-y E##ect

Usi+- Multiple

ndustry E"T #ultiple 12/31

ndustry E"T)A #ultiple 817

ndustry *ales Multiple 1/222

'sin% E"T Multiples !ro# ntel 37/5

'sin% E"T Multiples !ro# "M /7/

The +o#panies%ood idea to sti



Ehibit 18

MICROSYSTEMS

lions o! '.*. dollars4

5iscal Year6E+! 7u+e 40

300<E 3010E 3011E 3013E 3014E

11,88/ 12,665 13,08 13,526 13,7756,17 ,675 ,573 ,35 ,77/

8,31 8,/70 5,868 5,/1 5,//6

3,861

1,687

1,860

3/7

6,/6 8,73/ 8,//2 5,121 5,28/

(3934>) 1=1 =.3 >.0 .=.

(19=24) <3 40. =4> =:>

1,77 1,520 1,566 1,623 1,6661.3 (3>:) => 2. =4

1,0/3 1,20/ 1,286 1,2/1 1,326

10.6C 3.0C 3.C 2.C

(4<3) 11> 4> => 4=

=.= 24> =2> =.0 =:.

2/.3C 30.0C 30.0C 30.0C 30.0C

1,77 1,520 1,566 1,623 1,666

15.6C 12.0C 12.0C 12.0C 12.0C

(.2<) .:0 >:0 :03 :<2119><4

<93>< Share Price 12.54

182.68 /.3 /.3 /.3 /.3

:732.52 21.5 13.82 206.2 233.6

(:23) 1.= >3< .20 :==

.9442

11,88/ 12,665 13,08 13,526 13,775

6,17 ,675 ,573 ,35 ,77/

8,31 8,/70 5,868 5,/1 5,//6

3,861 2,287 2,31/ 2,3/ 2,837

1,687 1,585 1,5/8 1,635 1,66

1,860

3/7 183 187 152 155

6,/6 3,/36 8,061 8,166 8,20



85

50 350

/00 /00

(3934>) 3=< 19024 19>32 19.3>

(19=24) 1>3 >:2 1902> 19133

(.2<) :20 1902: 19=34 192431<.<=

129... Share Price 21.35

188.86 188.86 182.68 /.3 /.3

:733.16 36.8 317.6/ 581.06 56.3

(:24) 303 <>2 194.1 19=:0

14930<

>920:

iven in ehibit / are bi%%er than *un Mi+rosyste# and hen+e we #ay end up over valuin%k to industry avera%es.



TaB Rate 35C

301=E Sta## EBpe+se S&, R&

18,283 25C 32C : 7,05 22C 2C :

6,167 60C 8C 32C

Su+ MicroSystem 300<

)ebt "(4 125 Id 20C

*hares 3/

5,32 *hare ri+e 6.6/

.<> EGuityM(4 8/88 Ie 70C

21. "eta Levered4 1.3 Hiven Ehibit /

1,0/ R! 3.66C 30 year bond Ehibit 10 =4 kd 11.82C Ratin% : "a1 Ehibit 10

1,360 Rp 5C

2.6C ke 12.31C

4= IA$$ 11.32C

200

30.0C

1,0/ Oracle D301=

12.0C )ebt "(4 11237 Id 10C

*hares 5086

<=0 *hare ri+e 1/.06EGuityM(4 /61 Ie /0C

"eta Levered4 1.2 Hiven Ehibit /

/.3 R! 3.66C 30 year bond Ehibit 10

250.72 kd 6.35C Ratin% : A2 Ehibit 10

::< Rp 5C

ke 11.65C

'nlevered "eta 1.87

<ew "eta Levered 1.60

IA$$ 10.76C

18,283 Hrowth Rate 2.72C

7,05

6,167

2,8/5

1,15

15/

8,30



/00

19.<:

191><

192<1

/.3

601.55

192=0

he !ir#. 9en+e it #i%ht be a



30116301=

)ebt 03 Id 12C

EGuity 8/88 Ie 77C

'nlevered "eta 1.87

<ew "eta 1.62 <ew ke 11.C





Ehibit 1

SUN MICROS

in #illions o! '.

888 888 300<E

<et Revenue 13,73 13,770 11,88/$ost o! *ales ,607 ,825 6,17

Hross Mar%in 6,265 6,855 8,31

*ellin%, Heneral, F Ad#inistrative 3,751 3,/55 3,861

Resear+h F )evelop#ent 2,007 1,738 1,687

#pair#ent o! Hoodwill : : 1,860

>ther >peratin% Epense / 2/8 3/7

Total >peratin% Epense 5,/56 6,073 6,/6

Operati+- I+come 40< 4.3 (3934>)

EIT?(16T) 301 3=3 (19=24)

E 1,611 1,616 1,77Net PPE 2 1.3

<I$ 1,182 1,875 1,0/3

as ! of ales

Net N@C 4=4 (4<3)

epreciatio+ & ,mortiAatio+ 21. =.> =.=

as ! of "rior #ear ""$% 38.8C 2/.5C 2/.3C

<et FE 1,611 1,616 1,77

as C o! *ales 11.6C 11.6C 15.6C

@ithout Sy+er-y

5C5 (19344)Termi+al %alue

E+terprise %alue 4934<

nterest 182.68

TaE"T:nterest4 :732.52

E;uity Cash 5lo" (1943>)

E;uity %alue o# 5irm 19.=1

@ith Sy+er-y

<et Revenue 13,73 13,770 11,88/

$ost o! *ales ,607 ,825 6,17

Hross Mar%in 6,265 6,855 8,31

*ellin%, Heneral, F Ad#inistrative 3,751 3,/55 3,861

Resear+h F )evelop#ent 2,007 1,738 1,687

#pair#ent o! Hoodwill : : 1,860

>ther >peratin% Epense / 2/8 3/7

Total >peratin% Epense 5,/56 6,073 6,/6



$usto#er Attrition

nte%ration $har%es

n+rease in >peratin% n+o#e

Operati+- I+come (3934>)

EIT?(16T) (19=24)

5C5 (19344)Termi+al %alue

E+terprise *alue <9.=.

nterest 188.86

TaE"T:nterest4 :733.16

E;uity Cash 5lo" (1943.)

E;uity %alue o# 5irm .9>12

Sy+er-y E##ect >920:

Usi+- Multiple

ndustry E"T #ultiple 12/31

ndustry E"T)A #ultiple 817

ndustry *ales Multiple 1/222

'sin% E"T Multiples !ro# ntel 37/5

'sin% E"T Multiples !ro# "M /7/

The +o#panies %iven in ehibit / be a %ood idea to sti+k to industry



8

STEMS

. dollars4

5iscal Year6E+! 7u+e 40

3010E 3011E 3013E 3014E 301=E

12,665 13,08 13,526 13,775 18,283,675 ,573 ,35 ,77/ 7,05

8,/70 5,868 5,/1 5,//6 6,167

8,73/ 8,//2 5,121 5,28/ 5,32

1=1 =.3 >.0 .=. .<>

<3 40. =4> =:> 21.

1,520 1,566 1,623 1,666 1,0/(3>:) => 2. =4 =4

1,20/ 1,286 1,2/1 1,326 1,360

10.6C 3.0C 3.C 2.C 2.6C

11> 4> => 4= 4=

24> =2> =.0 =:. 200

30.0C 30.0C 30.0C 30.0C 30.0C

1,520 1,566 1,623 1,666 1,0/

12.0C 12.0C 12.0C 12.0C 12.0C

3=4 33= 443 =0: ==029=.>

Share Price 4.38

/.3 /.3 /.3 /.3 /.3

21.5 13.82 206.2 233.6 250.72

(4>3) 1.4 3:1 42. 4:<

12,665 13,08 13,526 13,775 18,283

,675 ,573 ,35 ,77/ 7,05

8,/70 5,868 5,/1 5,//6 6,167

2,287 2,31/ 2,3/ 2,837 2,8/5

1,585 1,5/8 1,635 1,66 1,15

183 187 152 155 15/

3,/36 8,061 8,166 8,20 8,30



85

50 350

/00 /00 /00

3=< 19024 19>32 19.3> 19.<:

1>3 >:2 1902> 19133 191><

414 >03 <24 190=2 190<3142..

Share Price 13.19

188.86 182.68 /.3 /.3 /.3

36.8 317.6/ 581.06 56.3 601.55

(442) 210 <03 <<4 190=0

re bi%%er than *un Mi+rosyste# and hen+e we #ay end up over valuin% the !ir#. 9en+e it #i%htavera%es.



Ta Rate 35C

Sta## EBpe+se S&, R&

25C 32C :22C 2C :

60C 8C 32C

Su+ MicroSystem 300< 30116301=

)ebt "(4 125 Id 20C )ebt 03 Id

*hares 3/

*hare ri+e 6.6/

EGuityM(4 8/88 Ie 70C EGuity 8/88 Ie

"eta Levered4 1.3 Hiven Ehibit / 'nlevered "eta

R! 3.66C 30 year bond Ehibit 10 <ew "etakd 11.82C Ratin% : "a1 Ehibit 10 <ew ke

Rp 5C

ke 12.31C

IA$$ 11.32C

Oracle D301=

)ebt "(4 11237 Id 10C

*hares 5086

*hare ri+e 1/.06EGuityM(4 /61 Ie /0C

"eta Levered4 1.2 Hiven Ehibit /

R! 3.66C 30 year bond Ehibit 10

kd 6.35C Ratin% : A2 Ehibit 10

Rp 5C

ke 11.65C

'nlevered "eta 1.87

<ew "eta Levered 1.60

IA$$ 10.76C

Hrowth Rate 2.72C





12C

77C

1.87

1.6211.C



Sun Microsystems Case

Documents