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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JUNE 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-15086
SUN MICROSYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-2805249
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
2550 GARCIA AVENUE (415) 960-1300
MOUNTAIN VIEW, CA 94043-1100 (REGISTRANT'S TELEPHONE NUMBER,
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING AREA CODE)
INCLUDING ZIP CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK
COMMON SHARE PURCHASE RIGHTS
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, as of September 7, 1994, was approximately $2,082,000,000 based
upon the last sale price reported for such date on the NASDAQ National Market
System. For purposes of this disclosure, shares of Common Stock held by persons
who hold more than 5% of the outstanding shares of Common Stock and shares held
by officers and directors of the Registrant have been excluded because such
persons may be deemed to be affiliates. This determination is not necessarily
conclusive.
The number of shares of the Registrant's Common Stock outstanding as of
September 7, 1994 was 94,793,483.
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DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Annual Report to Stockholders for the fiscal year ended June
30, 1994 are incorporated by reference into Items 1, 5, 6, 7, 8 and 14 hereof.
Parts of the Proxy Statement for the 1994 Annual Meeting of Stockholders
are incorporated by reference into Items 10, 11, 12 and 13 hereof.
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PART I
ITEM 1. BUSINESS
GENERAL
Sun Microsystems, Inc. ("Sun" or the "Company") is a leading supplier of
enterprise computing products that feature networked workstations and servers
that store, process and distribute information. The Company's computer systems
are used for many demanding commercial and technical applications. Sun has
differentiated itself from its competitors by its commitment to the distributed
computing model and the UNIX operating system, its rapid innovation and its open
systems architecture. The Company's objective is to be a leading provider of
open technologies for general purpose distributed computing.
The Sun implementations of its hardware and software products conform with
the Scalable Processor Architecture ("SPARC") Compliance Definition ("SCD")
standard established by SPARC International, Inc. The SCD currently includes the
SPARC microprocessor (based on RISC technology originally developed by Sun but
now widely licensed); the UNIX operating system (originally developed by
American Telephone and Telegraph Company ("AT&T")) as implemented and extended
as the Solaris software environment including UNIX; OpenWindows (including
X11/NeWS, OpenFonts and the OPEN LOOK graphical user interface); and ONC/NFS,
Sun's open systems distributed computing environment and distributed computing
file system.
Sun, which operates in a single industry segment, conducts its business
through several operating entities and divisions organized around the Company's
principal areas of added value. The individual businesses generally operate
independently within their charter, but with the common strategic vision of
being a leading force in the open systems information technology marketplace.
Sun believes this organizational structure allows it to more efficiently focus
on its customers and the products, channels and markets necessary to serve them.
As of July 1, 1994, Sun's primary operating businesses are Sun Microsystems
Computer Company ("SMCC"), SunSoft, Inc. ("SunSoft"), SPARC Technology Business
("STB"), SunService and SunExpress, Inc. ("SunExpress"). SMCC, a division and
principal operating business of the Company, is responsible for designing,
manufacturing, selling and supporting the workstations and servers incorporating
SPARC microprocessor technology and other key technologies used in enterprise
computing. These workstations and servers are offered with the Solaris software
environment, licensed by SMCC from SunSoft. SunSoft develops, markets, supplies
and supports Solaris, the leading UNIX system software environment. SunSoft
offers the Solaris operating environment primarily through OEM resellers,
including SMCC. SunSoft also offers integrated solutions for network computing
environments, professional software developers, enterprise management and PC
desktop integration. Through its business units, SunSoft supplies to the
Company's installed base and to other vendors value-added hardware and software
based on the SCD and other UNIX interface standards. STB designs and develops
high performance SPARC microprocessors as well as enabling
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Sun, the Sun Logo, Sun Microsystems, SunExpress, SunSoft, SunService, Catalyst,
NFS, ONC, ONC+, OpenFonts, OpenWindows, Solaris, SunLink, SunOX, PC-NFS,
SolarNet, SunPC, SunSoft Workshop, Solstice, Wabi, DOS Windows, JumpStart and
X11/NeWS are trademarks, registered trademarks or service marks of Sun
Microsystems, Inc. All SPARC trademarks, including SuperSPARC and the SCD
Compliant logo, are trademarks or registered trademarks of SPARC International,
Inc. SPARCserver, SPARCclassic, SPARCstation, SPARCcenter, SPARCstorage and
microSPARC are licensed exclusively to Sun Microsystems, Inc. Products bearing
SPARC trademarks are based upon an architecture developed by Sun Microsystems,
Inc. UNIX is a registered trademark in the United States and other countries,
exclusively licensed through X/Open Company, Ltd. OPEN LOOK and NetWare are
registered trademarks of Novell, Inc. Interactive is a trademark of Interactive
Systems Corporation. Legato Networker is a registered trademark of Legato
Systems, Inc. PowerPC is a trademark of International Business Machines
Corporation. Macintosh is a registered trademark of Apple Computer, Inc. MS-DOS
is a registered trademark of Microsoft Corporation. All other product or service
names mentioned herein are trademarks of their respective owners.
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technologies such as chipsets and circuit boards for SMCC and third-party
customers. SunService is a leading service organization for Solaris and SPARC
platforms, providing worldwide post-sale service and support to end users of Sun
products. SunExpress offers easy ordering and quick delivery of accessories,
spare parts, options, software and third party products to end users of SPARC
systems and Solaris software. SunExpress' goal is to be a leading worldwide
supplier of aftermarket products for the SPARC and Solaris computing
environments by offering competitive prices and the highest quality services to
customers using innovative direct marketing technology.
The combination of Sun's hardware and software implementations have
attracted a large number of software vendors to port their applications to Sun
platforms, including an increasing number of vendors of commercial applications.
The availability of such third-party software contributes to the Company's
leadership position in enterprise computing as well as the increasing size of
Sun's installed base and the success of its developer assistance programs.
The Company actively works with or belongs to industry-wide standardization
organizations such as X/Open Company (Ltd.), SPARC International, Inc., the
Object Management Group, the Open Software Foundation, UniForum, American
National Standards Institute ("ANSI"), ASC X3 and the IEEE, the X Consortium,
ECMA and the International Organization for Standardization. The Company also
promotes cross industry standardization initiatives such as COSE and SPEC 1170.
PRODUCTS
Sun believes that customers are increasingly demanding computer systems
that do not limit them to any one vendor's proprietary technology. To respond to
customer needs, Sun has been a proponent of the open systems strategy based on
industry standards such as POSIX, X/OPEN and the SCD. The benefits to users and
software developers of systems, whose vendors adhere to these industry
standards, are that their products offer compatibility, interoperability,
portability, upgradeability and scaleability. Sun's open systems architecture
protects existing customer investments while providing customers with new,
innovative technology to allow them to be competitive in their own market.
Sun has developed and generally licenses to third parties the SPARC
microprocessor architecture, numerous ASIC components and the Solaris software
environment and certain of the components of that environment, including the ONC
networking products, NFS file system software (the standard for sharing files
across heterogeneous systems), SunOS (the Sun implementation of the UNIX
operating system) and its OpenWindows environment.
SYSTEMS
SMCC, as the business responsible for the development of Sun's integrated
computing systems, focuses on continuing to improve the features, functionality,
quality, competitiveness and price/performance of the Company's systems. Sun's
workstations span the range from low-cost X-terminals to high-performance color
graphics systems. Its multiprocessing servers can provide various resources,
including filesharing, system administration and database and network
management. As a filesharing resource, a server enables users to access data
distributed across multiple storage devices and networks.
The current desktop workstation line includes the low-end SPARCclassic X,
the low-end color SPARCclassic, the entry level SPARCstation 5, the
high-performance SPARCstation 10 series, and the high performance SPARCstation
20 series of MP-ready uniprocessor and multiprocessor systems.
The SPARCclassic X computer is the only X-terminal to feature a low-cost,
plug-and-play upgrade to a SPARC workstation, so that users can continue to
maximize their current investment as their computing needs evolve.
The SPARCclassic is a low priced, fully configured color workstation. Based
on the 50 Mhz microSPARC processor, this compact desktop system is designed to
satisfy users who demand a low-cost color system that still offers high
performance and networking.
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The SPARCstation 5, introduced in March 1994, is the Company's entry level,
accelerated graphics workstation and is the industry's lowest priced 24-bit
color system. Based on the microSPARC II processor, it allows up to two internal
3.5 inch disks and an internal CD ROM.
The SPARCstation 10 series, with multiprocessing capabilities, is built
around the super-scalar SuperSPARC chip. Its modular design provides an easy,
cost-effective upgrade path to higher performance microprocessors. The
SPARCstation 10 series, providing up to 512 megabytes of main memory, is
designed for users who require fast application performance and the benefits of
multiprocessing.
The SPARCstation 20 series, introduced in March 1994, represents Sun's line
of highest performance workstations and offers a combination of high-end
workstation performance and functionality at a low price. Available in both
uniprocessor and multiprocessor versions, the SPARCstation 20 line achieves
higher performance from the use of 50 MHz (in entry level systems) and 60MHz (in
higher performance versions) SuperSPARC processors, as well as high performance
motherboards and ASICs. Designed for users needing more specialized graphics
power, the SPARCstation 20, available in six versions, features a broad
complement of graphics computing capabilities, such as 24-bit color and built-in
imaging acceleration.
The Company offers a wide range of servers from the SPARCclassic server, a
low-cost entry server for small workgroups, to the SPARCcenter 2000, a high-end,
enterprise-wide computing solution. Midrange servers include the SPARCserver 20
and the SPARCserver 1000. These servers are balanced, high-performance
multipurpose platforms that are designed for fast input-output and distributed
computing. They can also function as computational servers for technical
applications such as simulation and analysis for electrical and mechanical CAD.
These systems offer a range of main memory and hard disk storage configurations,
as well as ease of expandability. The SPARCserver 20, introduced in March 1994,
is a competitively priced RISC-based multiprocessing UNIX server with a modular
design that provides workgroup users with an easy upgrade path to future
processor technologies. The SPARCserver 1000 is a powerful, scalable, versatile,
upgradeable and affordable departmental UNIX server in an extremely compact
package. The SPARCcenter 2000 is Sun's high-end server for the data center and
the enterprise. Based on up to 20 60MHZ SPARC microprocessors, the SPARCcenter
2000 delivers competitive results in NFS file server performance, system
computational performance and multi-user throughput. In March 1994, Sun
introduced the SPARCstorage Array Model 100 Series, a new storage subsystem
utilizing RAID technology, Sun's affordable, high availability disk storage
subsystem.
SYSTEM SOFTWARE
The system software environment is a critical component of enterprise
computing. SunSoft continues to focus on developing Solaris (an open
client-server UNIX system software environment for SPARC, Intel and other volume
platforms) as the Company believes it derives competitive advantage from its
over ten years experience with operating system software. With the integration
in late fiscal 1994 of the businesses which formerly comprised SunTechnology
Enterprises, SunSoft became the single entity within Sun focused on delivering
software solutions for the enterprise, rightsizing and network computing. Its
independent business units and their associated products are as follows:
Solaris Products -- Solaris Products is responsible for the development and
marketing of all desktop, workgroup and enterprise server Solaris software
environment products for SPARC, x86, Pentium and PowerPC platforms. Solaris is
the industry's leading 32-bit UNIX software environment for enterprise-wide
distributed computing environments. The Solaris software environment offers
connectivity and interoperability among hardware platforms from other vendors,
ease of application development and availability of over 9,000 products from
third-party software and hardware developers. Solaris Products also includes the
newly formed INTERACTIVE group, overseeing development and marketing of
INTERACTIVE UNIX operating system products.
Networking Products -- Networking products are central to Sun's open
systems architecture. These products provide networking capabilities that make
distributed resources easily accessible by workstations, servers and other
computing devices on a network. This business provides products that integrate
heterogeneous corporate, department, local and remote network resources into
company-wide information systems. The
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business is committed to continued leadership in marketing and evolving open
industry networking standards and technologies including emerging areas such as
the Internet. Products include ONC+/NFS on all platforms including Solaris, DCE
for Solaris, the SunLink family of WAN and connectivity products and SolarNet,
PC-NFS and NetWare compatibility for integrating PCs into enterprise networks.
Developer Products -- Developer Products designs and markets productivity
tools for professional software developers and is a worldwide volume leader of
programming tools for UNIX. It provides a powerful, comprehensive software
development environment to enable the development of next-generation, network-
based, client/server applications. Products include SunSoft WorkShop for C, C++,
FORTRAN and Ada, integrated suites of tools for individuals and teams of
software developers that support the rapid development of single and
mutithreaded applications, and software developer kits for developers of Solaris
applications.
Enterprise Management Products -- Enterprise Management Products provides
solutions for managing Global 2000 enterprise network computing environments and
assists these organizations in reducing the total cost of administering their
Information Technology resources. The product line features SunNet Manager, the
industry's leading network management platform, Solstice, SunSoft's
next-generation enterprise management platform, and a complete line of system
administration and management tools, including JumpStart and Legato Networker.
PC Desktop Integration Products -- PC Desktop Integration Products is
dedicated to giving UNIX users the power to run productivity applications
written for non-UNIX environments, including MS-DOS, DOS Windows and Macintosh.
Products include Wabi, SunPC, the Macintosh Application Environment and Merge,
which enable UNIX users to leverage their investment in other platforms.
SALES, DISTRIBUTION AND MARKETING
Each of the Company's businesses has responsibility for sales, distribution
and marketing of its products. SMCC distributes its products through the
channels described below, as well as through SunExpress. SunSoft offers
off-the-shelf software products on an OEM basis to hardware manufacturers,
including SMCC. Sun also supplies follow-on and peripheral products to its end
user installed base through SMCC, independent distributors and resellers and
SunExpress. SunExpress, whose offerings support the strategies of Sun and its
constituent businesses, is chartered with providing an efficient telemarketing
channel for delivery of nonsystem products based on the SPARC architecture and
other UNIX products. STB provides high performance microprocessors to both SMCC
and third party customers.
SMCC sells to and supports its customers worldwide through a combination of
direct and indirect channels and maintains a presence in major commercial and
technical markets. Distribution channels include: a direct sales force selling
to named accounts and numerous indirect channels, including commercial systems
integrators (CSIs) who sell large commercial projects requiring substantial
analysis, design, development and implementation; master resellers (MRs) who
supply product and provide product marketing and technical support services to
SMCC's numerous smaller Value Added Resellers (VARs); OEMs who integrate the
Company's products with other hardware and software; VARs who provide added
value in the form of software packages, proprietary software development,
high-end networking integration, training, installation and support; and
independent distributors who primarily cover markets in which Sun does not have
a direct presence. Over time, the Company expects that systems revenues from
these indirect channels will continue to increase in proportion to direct
channel revenues. Sales to or through C. Itoh Technoscience Co. Ltd., Fujitsu,
Ltd. and Toshiba Corporation together represent a significant portion of Sun's
revenues in Japan. The growth and management of these reseller channels is
important to the future revenues and profitability of the Company.
SMCC's direct systems sales force serves business enterprises, educational
institutions, software vendors, governments, and other strategic accounts. The
Company has approximately 80 sales offices in the United States and
approximately 65 sales offices in 26 other countries. In addition, it uses
independent distributors in approximately 100 countries, sometimes in concert
with other resellers and direct sales operations.
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Revenues from outside the United States, including those from end users,
resellers and distributors, constituted approximately 51%, 49% and 50% of net
revenues in fiscal 1994, 1993 and 1992, respectively. Direct sales made in
countries outside of the United States are generally priced in local currencies
and are, therefore, subject to currency exchange fluctuations. The net impact of
currency fluctuations on net revenues and operating results cannot be precisely
measured as the Company's product mix and pricing change over time in various
markets, partially in response to currency movements. To minimize currency
exposure gains and losses, the Company borrows funds in local currencies,
utilizes forward exchange contracts and foreign currency options, and promotes
natural hedges by purchasing components in local currencies whenever feasible.
Sun's sales to overseas customers are made under export licenses that must be
obtained from the United States Department of Commerce. Protectionist trade
legislation in either the United States or other countries, such as a change in
the current tariff structures, export compliance laws or other trade policies,
could adversely affect Sun's ability to sell or to manufacture in international
markets. See Note 6 of Notes to Consolidated Financial Statements incorporated
by reference for additional information concerning sales to foreign customers
and industry segments.
The Company's marketing activities include advertising in technical
computer publications and the business press, periodic direct mailings to
customers and prospects and attendance at trade shows. Sun maintains a customer
resource program, Sunergy, that includes live interactive satellite broadcasts
and provides electronic access to newsletters and technical information. Sun
also sponsors a series of seminars to specific resellers, university customers,
end users and government customers and prospects designed to familiarize
attendees with the capabilities of the Sun product line.
The Company's Catalyst support program promotes the development and support
of third-party application software and hardware packages for the Solaris
software environment for systems based on SPARC and x86. Currently, more than
9,000 software and hardware products are available for the Solaris software
environment to address many of the requirements of engineering, scientific,
technical and commercial users. Sun has made significant strides in the past two
years in working with independent software vendors to aggressively transition
software applications from the original Solaris operating environment to the
Solaris 2 platform. Of the more than 9,000 products available, more than 3,000
are ported to the SPARC Solaris 2.X environment and more than 400 to the Solaris
x86 environment. Supported application areas include EDA, Mechanical Design,
AEC, CASE, earth resources, industrial automation, database and document image
management. Supported markets include electronics, computers, aerospace,
automotive, finance, telecommunications, government and education. In addition
to marketing through third-party suppliers, the Company lists Catalyst packages
in a reference catalog for its customers, demonstrates Catalyst packages at its
sales offices and at regional and national trade shows and distributes Catalyst
promotional literature through its sales offices. Sun believes a continued
increase in the number of integrated commercial and technical solutions will be
important in achieving significant sales of its systems to commercial users and
in maintaining its commitment to the technical sector.
Sun's order backlog at June 30, 1994 was approximately $338 million, as
compared with approximately $160 million at June 30, 1993. The backlog level at
June 30, 1994 reflects strong demand for the Company's most recently introduced
products, the SPARCstation 5 and the SPARCstation 20. The lower June 30, 1993
backlog level was impacted to some extent by generally weaker economies in
several of the Company's international markets. Backlog only includes orders for
which a delivery schedule within six months has been specified by the customer.
Because of the possibility of customer order delays, changes in delivery
schedules or cancellation of orders, Sun's backlog at any particular date may
not be indicative of actual net revenues for any succeeding period.
CUSTOMER SERVICE AND SUPPORT
The Company's service organization, SunService, is focused on providing
customers with a full range of post-sale support. The field support organization
includes software and hardware engineers who, along with third-party service
providers, deliver a full range of system support. The customer education
organization provides technical software, maintenance, system administration and
end-user courses.
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The Company offers a warranty for parts and labor on its systems, generally
for one year from date of sale. SunService maintains and services the products
on a contractual basis after the initial product warranty has expired. Warranty
and post-warranty services are provided from its 130 direct sales offices and 22
solutions centers in the United States and overseas. Investments in field
personnel and spare parts to meet the service requirements of the growing
installed base are being supplemented by partnerships with third-party service
providers. These organizations provide installation and support services under
contract with Sun, thereby facilitating an expansion of geographical coverage
while reducing the Company's investment in fixed resources. Generally, large
resellers and distributors will provide installation, customer training,
customer service and support for products they sell.
PRODUCT DEVELOPMENT
The Company's research and product development programs are intended to
sustain and enhance its competitive position by incorporating the latest
worldwide advances in hardware, software, microprocessor, graphics, networking
and data communications technologies. Sun's product development efforts,
conducted within each of its businesses, are currently focused on increasing the
price/performance of its systems, improving its system software platforms and
developing advanced workstation architectures, application-specific integrated
circuits and software for networking and distributed computing, including the
high-performance implementation of existing standards and the development of new
technology standards where none exist. Sun works closely with third parties and
also licenses from them development software that is ported to run on its
hardware products.
Sun conducts research and development worldwide through facilities in the
United States, Canada, France, Japan and Ireland. Research and development
expenses were approximately $455 million, $445 million and $382 million in
fiscal 1994, 1993 and 1992, respectively. In recent years, Sun's research and
development efforts have focused increasingly on Solaris software and SPARC
CPUs. Sun believes that in the future software will provide significant
competitive differentiation. Sun currently devotes substantial resources to the
development of workgroup software, networking and data communications, video,
graphics, object technology and the software development environment.
MANUFACTURING AND SUPPLY
The Company's manufacturing operations consist primarily of printed circuit
board assembly and final assembly, test and quality control of materials and
components. Sun has manufacturing facilities in California and Scotland and
distribution facilities in the Netherlands and Japan. The Company has continued
its efforts to simplify its manufacturing process by reducing the diversity of
its system configurations, increasing the standardization of components across
product types and establishing local sources of supply in major geographies.
Sun uses many standard parts and components in its products and believes
there are a number of competent vendors for most parts and components. However,
a number of important components are developed by and purchased from single
sources due to price, quality, technology or other considerations. In some
cases, those components are available only from single sources.
In particular, Sun is dependent on Sony Corporation for certain monitors
and on Fujitsu Limited (Fujitsu) and Texas Instruments Incorporated (TI) for
certain implementations of SPARC microprocessors. Certain custom silicon parts
are designed by and produced on a contractual basis for Sun. The process of
substituting a new producer of such parts could adversely affect Sun's operating
results. Certain other components, especially memory integrated circuits such as
DRAMs and VRAMs, have from time to time been subject to industrywide shortages.
During the fourth quarter of fiscal 1994, the Company experienced supply
constraints on certain memory devices and expects such constraints to continue
into fiscal 1995. In addition, suppliers of certain components, including color
monitors and custom silicon parts, require long lead times. Accordingly, it can
be difficult to plan inventory levels of components to consistently meet Sun's
manufacturing requirements. The Company is increasingly dependent on the ability
of its suppliers to develop and deliver advanced components required for the
timely introduction of new products. The production of
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sufficient quantities of advanced components on a timely basis entails both
design risk and manufacturing risk. The Company has experienced some component
shortages in the past that have adversely affected operating results and have
caused delays in new product introductions and shipments. Accordingly, the
inability to secure enough components to build products, including new products,
in the quantities and configurations required, or to produce, test and deliver
sufficient products to meet demand in a timely manner, would adversely affect
the Company's operating results.
The computer systems offered by Sun generally are the result of both
hardware and software development, so that delays in software development can
delay the Company's ability to ship new hardware products. In addition, adoption
of a new release of an operating system, such as the Solaris 2 software
environment, typically requires effort on the part of the customer as well as
software porting by software vendors providing applications. As a result, the
timing of conversion to a new release is inherently unpredictable. Moreover,
delays in adoption of a new release of an operating system by customers can
limit the acceptability of hardware products tied to that release. In either
situation, the future operating results of the Company could be adversely
affected.
COMPETITION
The market for the Company's products is intensely competitive and subject
to continuous, rapid technological change, short product life cycles and
frequent product performance improvements and price reductions. Due to the
breadth of Sun's product line and the scalability of client/server computing,
the Company competes in many areas of the computer market across a broad
spectrum of customers. The requirements of those customers and the basis of
competition varies widely depending on the market area and types of users.
Sun's traditional customer base is in the technical and scientific markets
where it competes primarily with Hewlett-Packard Company (HP), Digital Equipment
Corporation (DEC) and Silicon Graphics, Inc. (SGI). Competition in this segment
is based primarily on system performance, price/performance, availability of
application software, robustness of the software development environment, system
expandability and upgradability, adherence to standards, graphics features and
performance and product quality and reliability.
Since 1992, Sun has been making significant inroads into commercial markets
both with large enterprises who are downsizing and distributing their computer
resources, as well as with smaller companies who are upsizing their networks. In
downsizing opportunities, Sun's competition tends to come from International
Business Machines (IBM) and HP, as well as other mini and mainframe computer
suppliers such as Unisys and Data General. In these situations, competition is
based on price/performance, capabilities and stability of the systems software,
product quality and reliability, ease of system operation and administration,
service and support, applications and middleware availability, database
performance, global marketing and distribution capabilities, and corporate
reputation and name recognition.
In upsizing opportunities and sales for the commercial desktop, competition
tends to come from personal computer manufacturers such as Apple Computer, Inc.
and Compaq Computer Corporation. The competition for these opportunities is
heavily biased toward price, availability of application software, ease of use,
software development tools, networking capabilities and product delivery. Sun
has also encouraged the proliferation of its SPARC technology as a standard in
the computer marketplace by licensing much of the technology and promoting open
interfaces to the Solaris operating environment, as well as by offering
microprocessors and enabling technologies to third party customers. As a result,
several licensees also offer SPARC/Solaris based products that compete directly
with Sun's products primarily in this area.
The Company expects that the markets for its products and technology, as
well as its competitors within such markets, will continue to change as the
rightsizing trend shifts customer buying patterns to distributed systems
employing multiple platform networks. Raw microprocessor performance is a highly
visible element of the competitive landscape and Sun expects to see continued
performance improvements in microprocessor technology and products introduced by
Intel Corporation and Motorola, Inc. Such products, coupled with enhanced
operating systems software from Microsoft Corporation and other competitors, are
expected to continue to provide competitive pressure throughout the Company's
product range. While many factors affect
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a customer's buying decision, Sun's future operating results will depend, in
part, on its ability to compete in these technologies.
PATENTS AND LICENSES
Sun currently holds a number of U.S. and foreign patents relating to
various aspects of its products and technology. While the Company believes that
patent protection is important, it also believes that patents are of less
competitive significance than such factors as innovative skills and
technological expertise.
As is common in the computer industry, the Company has from time to time
been notified that it may be infringing certain patents and other intellectual
property rights of others, although no material litigation has arisen out of any
of these claims. Several pending claims are in various stages of evaluation. The
Company is evaluating the desirability of entering into licensing agreements in
certain of these cases. Based on industry practice, the Company believes that in
most cases any necessary licenses or other rights could be obtained on
commercially reasonable terms. However, no assurance can be given that licenses
can be obtained on acceptable terms or that litigation will not occur. The
failure to obtain necessary licenses or other rights, or litigation arising out
of such claims, could have a material adverse effect on the Company's
operations.
Sun has entered into separate patent exchange agreements with IBM, Cray
Research, Inc. (Cray) and Fujitsu. Under each agreement, the parties grant to
each other non-exclusive, worldwide rights to patents in their respective patent
portfolios. These agreements cover patents issued or applied for during certain
limited periods as specified in the agreements. The agreements with Cray and
Fujitsu are royalty free. The agreement with IBM requires Sun to make annual
payments through July 1995. These payments have not been and are not expected to
be material to Sun's financial position.
In March 1990, Texas Instruments Incorporated (TI) alleged that a
substantial number of the Company's products infringe certain of TI's patents.
Based on its discussions with TI, the Company believes that it will be able to
negotiate a license agreement with TI, if necessary, and that the outcome of
this matter will not have a material adverse effect on Sun's financial position.
EMPLOYEES
As of June 30, 1994, Sun employed approximately 13,300 people. The
Company's future operating results will depend on its ability to continue to
broaden and develop senior management and to attract and retain skilled
employees, and on the ability of its management and key employees to manage
growth successfully through the enhancement of management information systems
and financial controls. None of Sun's employees are represented by a labor union
in the United States.
ITEM 2. PROPERTIES
Sun conducts its worldwide operations using a combination of leased and
owned facilities. The Company believes that, while it currently has sufficient
facilities to conduct its operations during fiscal 1995, it will continue to
lease and acquire owned facilities throughout the world as its business
requires. Properties owned by the Company consist of an approximately 260,000
square foot facility on approximately 10 acres in Palo Alto, California; an
approximately 227,000 square foot facility on approximately 30 acres in
Linlithgow, Scotland; an approximately 30,000 square foot facility on
approximately 2.5 acres in Bagshot, England; and approximately 90 acres in
Newark, California. In addition, Sun is committed to purchase in the first half
of fiscal 1995 an approximately 439,000 square foot facility on approximately 27
acres in Menlo Park, California, which is currently leased by the Company. The
facility will be occupied beginning in the first quarter of fiscal 1995. Sun
leases approximately 165 sales and service offices throughout the world
aggregating about 2.1 million square feet. Sun also leases approximately 3
million square feet for its research and development and manufacturing
facilities, primarily in Milpitas, Sunnyvale and Mountain View, California and
Chelmsford, Massachusetts. In addition, Sun leases approximately 28 acres in
Menlo Park, California with
8
10
approximately 596,000 square feet under construction with an estimated
completion date of the second quarter of fiscal 1997.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
9
11
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information regarding the executive
officers of the Company as of September 7, 1994:
NAME AGE POSITION
---- --- --------
Scott G. McNealy 39 Chairman of the Board of Directors,
President and Chief Executive Officer, Sun
Microsystems, Inc.
Kenneth M. Alvares 50 Vice President, Human Resources, Sun
Microsystems, Inc.
Richard B. Barker 44 Vice President and Corporate Treasurer, Sun
Microsystems, Inc.
Patrick J. Deagman 46 Vice President, Finance, Information
Resources and Operations, SunSoft, Inc.
Lawrence W. Hambly 48 President, SunService
Masood A. Jabbar 44 Vice President, Chief Financial Officer Sun
Microsystems Computer Company
William N. Joy 39 Vice President, Research and Development;
Sun Microsystems, Inc.
Michael E. Lehman 44 Vice President, Chief Financial Officer Sun
Microsystems, Inc.
William G. Marr 47 Vice President, North American and
Australian Field Operations, Sun
Microsystems Computer Company
Michael H. Morris 46 Vice President, General Counsel and
Corporate Secretary, Sun Microsystems,
Inc.
Rajesh H. Parekh 41 Vice President, Engineering, Sun
Microsystems Computer Company
William J. Raduchel 48 Vice President, Corporate Planning and
Development and Chief Information Officer,
Sun Microsystems, Inc.
George Reyes 40 Vice President, Corporate Controller, Sun
Microsystems, Inc.
Joseph P. Roebuck 58 Vice President, Worldwide Field Operations,
Sun Microsystems Computer Company
J. Phillip Samper 60 President, Sun Microsystems Computer Company
Eric E. Schmidt 39 Vice President, Chief Technology Officer,
Sun Microsystems, Inc.
John C. Shoemaker 51 Vice President, Worldwide Operations, Sun
Microsystems Computer Company
Chester J. Silvestri 45 President, SPARC Technology Business
Dorothy A. Terrell 49 President, SunExpress, Inc.
Kevin J.F. Walsh 52 Vice President, Finance and Planning,
Worldwide Operations, Sun Microsystems
Computer Company
Edward J. Zander 47 President, SunSoft, Inc.
Mr. McNealy is a founder of the Company and has served as Chairman of the
Board of Directors, President and Chief Executive Officer since December 1984,
as President and Chief Operating Officer from February 1984 to December 1984 and
as Vice President of Operations from February 1982 to February 1984. Mr. McNealy
has served as a director of the Company since the incorporation of Sun in
February 1982.
Mr. Alvares has served as Vice President, Human Resources of the Company
since June 1992. From 1990 to June 1992, he served as Vice President, Human
Resources, Nichols Institute. He held various positions at Frito-Lay, Inc. from
1984 to 1990, including Vice President of Personnel from 1987 to 1990.
10
12
Mr. Barker has served as Vice President and Corporate Treasurer since
October 1992. From July 1992 to October 1992, he served as Vice President,
European Corporate Functions of the Company. From January 1990 to June 1992, he
served as Vice President, European Finance and from January 1986 to December
1989, he served as Director, European Finance for the Company.
Mr. Deagman has served as Vice President, Finance, Information Resources
and Operations of SunSoft, Inc. since July 1993. From July 1991 to June 1993, he
served as Director, Finance, Information Resources and Operations of SunSoft,
Inc. From October 1990 to June 1991, he served as Director, Worldwide
Operations, Finance and Business Planning. Prior to joining Sun, from November
1988 to September 1990, Mr. Deagman served as Vice President and Chief Financial
Officer of Xerox Imaging Systems, a subsidiary of Xerox Corporation.
Mr. Hambly has served as President, SunService, a division of the Company,
since July 1993. From July 1991 to July 1993, he served as Vice President,
Marketing of Sun Microsystems Computer Company (formerly Sun Microsystems
Computer Corporation). From July 1988 to July 1991, he served as President of
Sun Microsystems Federal, Inc. From April 1983 to July 1988, he served in
various sales management capacities at the Company, most recently as Vice
President, Western Area Sales.
Mr. Jabbar has served as Vice President, Finance and Chief Financial
Officer of Sun Microsystems Computer Company since June 1994. From July 1992
until June 1994, Mr. Jabbar served as Vice President, Finance and Planning,
Worldwide Field Operations of Sun Microsystems Computer Company. From June 1991
to June 1992, he served as Vice President, Finance and Administration, United
States Field Operations for Sun Microsystems Computer Company and from October
1990 to June 1991, he served as Director, Finance and Administration, United
States Field Operations for the Company. From October 1989 to October 1990, he
served as Director of United States Field Marketing for the Company. From April
1988 to October 1989, he served as United States Sales and Service Controller
for the Company. From December 1986 to April 1988 he served as United States and
Intercontinental Sales Controller for the Company.
Mr. Joy has served as Vice President, Research and Development of the
Company since August 1983.
Mr. Lehman has served as Vice President and Chief Financial Officer since
February 1994. From June 1990 until February 1994, Mr. Lehman served as Vice
President and Corporate Controller of the Company. From September 1989 to June
1990, he served as Director of Finance and Administration of Sun Microsystems of
California, Ltd., one of the Company's Hong Kong subsidiaries. He served as
Assistant Corporate Controller of the Company from September 1988 to August 1989
and as External Reporting Manager from August 1987 to August 1988.
Mr. Marr has served as Vice President, North American and Australian Field
and Operations of Sun Microsystems Computer Company since April 1992. From July
1991 to April 1992, he served as Vice President and General Manager of SunPics,
currently a business of Sun Microsystems Computer Company. From July 1990 to
June 1991 he served as Vice President of Purchasing for the Company and from
December 1987 to June 1990, he served as Central Area Sales Vice President for
the Company.
Mr. Morris has served as Vice President, General Counsel and Corporate
Secretary of the Company since October 1987. From July 1986 to October 1987, he
was General Counsel and Secretary of U.S. Telecenters Corporation.
Mr. Parekh has served as Vice President, Engineering for Sun Microsystems
Computer Company since July 1993. From September 1992 to July 1993, he served as
Vice President, Advanced Workstations and Graphics for Sun Microsystems Computer
Company. Prior to joining the Company, from September 1982 to May 1992, he
served in various positions, including Vice President and General Manager,
Personal Systems and Corporate Vice President Advanced Technology for Silicon
Graphics, Inc. ("SGI"). From May 1992 to September 1992, he was employed by SGI
as an independent consultant.
Mr. Raduchel has served as Vice President, Corporate Planning and
Development and as Chief Information Officer of the Company since July 1991. In
addition, from July 1991 to June 1992, he served as Vice President, Human
Resources (acting). From June 1989 to July 1991, he served as Vice President and
11
13
Chief Financial Officer of the Company; he was also acting Chief Information
Officer of the Company from November 1990 to July 1991. From October 1988 to
June 1989, he served as Vice President, Corporate Planning and Development. From
1985 to 1988, he served as Vice President of Document Systems in the Strategic
Business Office of Xerox Corporation.
Mr. Reyes has served as Corporate Controller of the Company since April
1994. From April 1992 to March 1994, Mr. Reyes served as Audit Director for the
Company. From April 1991 to April 1992, he was Director of Finance for the
Company's ICON operations. From June 1989 to April 1991, he served as Assistant
Controller. From July 1988 to June 1989, Mr. Reyes was the Controller of the
Company's General Systems Group. From March 1988 to June 1988, Mr. Reyes served
as the Company's Marketing Controller.
Mr. Roebuck has served as Vice President, Worldwide Field Operations of Sun
Microsystems Computer Company since April 1992. From November 1988 to April
1992, he served as Vice President, United States Field Operations, Sun
Microsystems Computer Company and from January 1986 to November 1988, he served
as Vice President of Sales for the Company.
Mr. Samper joined Sun in February 1994 as President, Sun Microsystems
Computer Company. Prior to that time, from August 1992 to February 1994, Mr.
Samper served as a General Partner of Sterling Partners, L.P. From February 1991
to August 1992, he was a private investor and consultant. From June 1990 to
February 1991, Mr. Samper served as President and Chief Executive Officer of
Kinder-Care Learning Centers, Inc., a child care center operating company. Prior
to that, he served Eastman Kodak for 28 years, most recently as Vice Chairman
and Executive Officer from 1986 to 1989. From October 1991 to February 1994, Mr.
Samper also served as a director on the Company's Board of Directors.
Mr. Schmidt has served as Chief Technology Officer of the Company since
February 1994. From July 1991 to February 1994, Mr. Schmidt served as President
of Sun Technology Enterprises, Inc., formerly a subsidiary of the Company. From
July 1988 to July 1991, he served as Vice President of the Company's General
Systems Group. From May 1985 to July 1988, he served as Vice President and
General Manager, Software Products Division for the Company.
Mr. Shoemaker has served as Vice President, Worldwide Operations of Sun
Microsystems Computer Company since July 1993. From June 1992 to July 1993 he
served as Vice President, U.S. Operations of Sun Microsystems Computer Company.
From May 1990 to February 1993, he also served as Vice President, Finance and
Planning, Worldwide Operations (on an acting basis since July 1992). He served
as Vice President (Acting), Materials, Worldwide Operations from October 1991 to
June 1992. From March 1989 to March 1990, he served as Senior Vice President,
Electronic Printing Worldwide Marketing, Xerox Corporation. From December 1986
to March 1989, he served as Vice President and General Manager, Document Systems
Business, Xerox Corporation.
Mr. Silvestri has served as President, SPARC Technology Business since
February 1994. From August 1992 to February 1994, Mr. Silvestri served as Vice
President, SPARC Sales. Prior to joining Sun, from December 1986 to August 1992,
he served as Vice President and General Manager, Technology Products for MIPS
Computer Systems, Inc., later acquired by SGI.
Ms. Terrell has served as President of SunExpress, Inc. since August 1991.
She held various positions at Digital Equipment Corporation from 1976 to 1991,
including Group Manager, Application Specific Interconnect and Packaging in
1991, Manufacturing Manager from 1988 to 1991 and Resource Development Manager,
Corporate Manufacturing from 1987 to 1988.
Mr. Walsh has served as Vice President, Finance and Planning, Worldwide
Operations for Sun Microsystems Computer Company since February 1993. From
February 1993 to February 1994, Mr. Walsh also served as Corporate Controller
for Sun Microsystems Computer Company. Prior to joining the Company, from June
1990 to January 1993, he served as Chief Operating Officer of Spatial Technology
Inc. From 1985 to May 1990, he served as Vice President, Finance for
Schlumberger Technologies, Inc.
Mr. Zander has served as President of SunSoft, Inc. since July 1991. From
October 1987 to July 1991, he served as Vice President of Corporate Marketing of
the Company.
12
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is incorporated by reference to page
28 and the inside back cover of Sun's 1994 Annual Report to Stockholders. At
September 7, 1994 there were 4,738 stockholders of record.
The following is a summary of all sales of the Company's Common Stock by
the Company's executive officers who are subject to Section 16 of the Securities
Exchange Act of 1934, as amended, during the fiscal quarter ended June 30, 1994:
NUMBER OF
OFFICER DATE PRICE SHARES SOLD
------- ------- -------- -----------
Melia, Kevin...................... 4/26/94 $22.50 814
Reyes, George..................... 5/31/94 $20.8125 1,600
Wozniak, Curt..................... 5/27/94 $21.065 20,000
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to the
information included under the caption "Historical Financial Review" on page 10
of Sun's 1994 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference to pages
11 through 14 of Sun's 1994 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
15 through 27 of Sun's 1994 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
13
15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company is incorporated by reference
from "Election of Directors" in Sun's 1994 Proxy Statement for the Company's
1994 Annual Meeting of Stockholders. Current executive officers of the
Registrant found under the caption "Executive Officers of the Registrant" in
Part I hereof is also incorporated by reference into this Item 10.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
section entitled "Executive Compensation" in Sun's 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference from the
section entitled "Information Concerning Solicitation and Voting -- Record Date
and Share Ownership" and "Security Ownership of Management" in Sun's 1994 Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from the
sections entitled "Executive Compensation -- Summary Compensation Table",
"Certain Transactions With Management" and "Employment Contracts and
Change-In-Control Arrangements" in Sun's 1994 Proxy Statement.
14
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial statements that are incorporated herein by reference to
the following in Sun's 1994 Annual Report to Stockholders:
Consolidated Statements of Income for each of the three years in
the period ended June 30, 1994 (page 15).
Consolidated Balance Sheets at June 30, 1994 and 1993 (page 16).
Consolidated Statements of Cash Flows for each of the three years
in the period ended June 30, 1994 (page 17).
Consolidated Statement of Stockholders' Equity for each of the
three years in the period ended June 30, 1994 (page 18).
Notes to Consolidated Financial Statements (pages 19 through 26).
Report of Ernst & Young LLP, Independent Auditors (page 27).
The Company's 1994 Annual Report to Stockholders is not deemed filed as
part of this report except for those parts specifically incorporated
herein by reference.
2. Financial statement schedules:
PAGE SCHEDULE TITLE
---- --------- -----
S-1 I Marketable Securities -- Other Investments
S-2 II Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties
S-5 VIII Valuation and Qualifying Accounts
S-6 IX Short-Term Borrowings
All other schedules have been omitted since the required information is
not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements, including the notes
thereto.
3. EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
--------- -----------
3.1(2) Amended and Restated Certificate of Incorporation of Registrant.
3.2(10) Bylaws of Registrant, as amended.
3.3(9) Certificate of Amendment of the Restated Certificate of
Incorporation of Registrant.
4.1(6) Indenture between Registrant and Harris Trust and Savings Bank,
Trustee, covering $135,000,000 of 6 3/8% Debentures (including form
of Debenture) due October 15, 1999.
4.3(10) First Amended and Restated Common Shares Rights Agreement dated
December 14, 1990, between Registrant and The First National Bank
of Boston.
4.4(12) Amendment dated as of October 28, 1991 to the First Amended and
Restated Common Shares Rights Agreement dated December 14, 1990.
4.5(13) Second Amendment dated as of August 5, 1992 to the First Amended
and Restated Common Shares Rights Agreement dated December 14,
1990.
15
17
EXHIBIT
NUMBER DESCRIPTION
--------- -----------
10.1(1) Technology Transfer Agreement dated February 27, 1982, for the
purchase by the Registrant of certain technology for cash, and
related Assumption Agreement dated February 27, 1982.
10.3(1) Form of Founders' Restricted Stock Purchase Agreement.
10.8(1) Registration Rights Agreement dated as of November 26, 1984.
10.8A(1) Amendment to Registration Rights Agreement.
10.9(3) Registrant's 1982 Stock Option Plan, as amended, and representative
forms of Stock Option Agreement.
10.10(3) Registrant's Restricted Stock Plan, as amended, and representative
form of Stock Purchase Agreement.
10.11(11) Registrant's 1984 Employee Stock Purchase Plan, as amended.
10.21(1) License Agreement dated July 26, 1983, by and between Registrant
and The Regents of the University of California.
10.22(1) Software Agreement effective as of April 1, 1982 by and between
Registrant and American Telephone and Telegraph Company, and
Supplemental Agreement dated effective as of May 28, 1983.
10.48(3) Registrant's 1987 Stock Option Plan and representative form of
Stock Option Agreement.
10.50(5) Amended and Restated Term Loan Agreement dated June 7, 1989 between
the Registrant, The First National Bank of Boston, Security Pacific
National Bank and The First National Bank of Boston, as agent for
the banks.
10.51(5) First Amendment to Amended and Restated Term Loan Agreement dated
September 22, 1989.
10.56(5) Building Loan Agreement dated May 11, 1989, between Sun
Microsystems Properties, Inc. and the Toyo Trust and Banking
Company, Limited, New York Branch and the related Promissory Note;
First Deed of Trust, Assignment of Leases, Rents and Other Income
and Security Agreement; Guaranty of Payment; Guaranty of Completion
(Sun Microsystems Properties, Inc.); Guaranty of Completion (Sun
Microsystems, Inc.); Shortfall Agreement and Indemnity.
10.57(5) Note and Warrant Purchase Agreement dated September 26, 1989,
between the Registrant, The Ohio National Life Insurance Company,
Principal Mutual Life Insurance Company, Pruco Life Insurance
Company, The Prudential Life Insurance Company of America,
Prudential Property and Casualty Insurance Company and Teachers
Insurance and Annuity Association of America and related Common
Stock Purchase Warrant.
10.59(6) Second Amendment to Amended and Restated Term Loan Agreement dated
as of October 26, 1989.
10.60(7) Note and Warrant Purchase Agreement dated December 15, 1989,
between the Registrant and Metropolitan Life Insurance Company and
related Common Stock Purchase Warrant.
10.61(7) Note and Warrant Purchase Agreement dated December 15, 1989,
between the Registrant and Allstate Life Insurance Company, Modern
Woodmen of America, The Ohio National Life Insurance Company, The
Western and Southern Life Insurance Company, Western-Southern Life
Insurance Company and Keystone Provident Life Insurance Company and
related Common Stock Purchase Warrant.
16
18
EXHIBIT
NUMBER DESCRIPTION
--------- -----------
10.62(8) Credit Agreement dated as of April 4, 1990, between the Registrant;
Citibank N.A.; Bank of America National Trust and Savings
Association; The First National Bank of Boston; Barclays Bank PLC;
Security Pacific National Bank; Morgan Guaranty Trust Company of
New York; Morgan Bank (Delaware); Algemene Bank Nederland N.V.; The
Fuji Bank, Limited; Mitsui Taiyo Kobe Bank, Limited; and the Bank
of California, N.A.
10.63(8) Third Amendment to Amended and Restated Term Loan Agreement dated
as of April 3, 1990.
10.64(9) Registrant's 1988 Directors' Stock Option Plan and representative
form of Stock Option Agreement.
10.65(11) Registrant's 1990 Employee Stock Purchase Plan.
10.66(11) Registrant's 1990 Long-Term Equity Incentive Plan and
representative form of agreement.
10.68(11) First Amendment to Credit Agreement dated as of June 25, 1991.
10.69(11) Fourth Amendment to Amended and Restated Term Loan Agreement dated
June 27, 1991.
10.73(11) Representative form of letter dated June 25, 1991 between the
Registrant and the insurance companies who are parties to the Note
and Warrant Purchase Agreements dated September 26, 1986 and
December 15, 1989.
10.74(11) Software Distribution Agreement dated January 28, 1991 by and
between the Registrant and UNIX System Laboratories, Inc.
10.75(14) Promissory Notes from Kenneth Alvares to the Registrant dated June
10, 1992 and July 13, 1992.
10.77(16) Lease Agreement between BNP Leasing Corporation and Registrant,
effective as of September 25, 1992.
10.79(16) Amendments to Note and Warrant Purchase Agreement dated May 26,
1993.
10.80 Promissory note from Chester Silvestri to the Registrant dated
December 30, 1992.
10.81 Notice of Exercise and Irrevocable Subscription Agreement dated
July 26, 1994 between Lawrence W. Hambly and the Registrant.
10.82 Revolving Credit Agreement dated June 1, 1994, between the
Registrant; Citicorp USA, Inc.; Bank of America National Trust and
Savings Association; ABN AMRO Bank N.V; The First National Bank of
Boston; Barclays Bank PLC; Morgan Guaranty Trust Company of New
York; The Fuji Bank Limited, San Francisco Agency; The Bank of
California, N.A.; The Sakura Bank, Limited, San Francisco Agency;
Banque Nationale de Paris; Bayerische Vereinsbank AG, Los Angeles
Agency; The Industrial Bank of Japan, Limited, San Francisco
Agency; Swiss Bank Corporation.
10.83 Receivables Purchase Agreement dated as of August 5, 1994 among the
Registrant, SunExpress, Inc., Sun Microsystems Federal, Inc.,
SunSoft, Inc., J.P. Morgan Delaware and Morgan Guaranty Trust
Company of New York.
11.0 Statement of computation of earnings per share.
13.0 1994 Annual Report to Stockholders (to be deemed filed only to the
extent required by the instructions to exhibits for reports on Form
10-K).
22.0 Subsidiaries of Registrant.
23.1 Consent of Independent Auditors.
24.0 Power of Attorney (see page 20).
27.0 Financial Data Schedule.
17
19
- - - ---------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (No. 33-2897), which became effective March 4, 1986.
(2) Incorporated by reference to identically numbered exhibits filed as
exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1987.
(3) Incorporated by reference to Exhibits 19.1, 19.3 or 19.4, filed as Exhibits
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 25, 1987.
(4) Incorporated by reference to an exhibit filed as an exhibit to the
Registrant's Report on Form 8-K filed on January 11, 1988.
(5) Incorporated by reference to identically numbered exhibits filed as
exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989.
(6) Incorporated by reference to Exhibits 19.0 and 19.3 filed as exhibits to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 29, 1989.
(7) Incorporated by reference to Exhibits 19.0 and 19.1 filed as exhibits to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 29, 1989.
(8) Incorporated by reference to Exhibits 19.0 and 19.1 filed as exhibits to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended March
30, 1990.
(9) Incorporated by reference to identically numbered exhibits filed as
exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1990.
(10) Incorporated by reference to Exhibits 3.1 and 4.1 filed as exhibits to the
Registrant's Report on Form 8-K filed on December 28, 1990.
(11) Incorporated by reference to identically numbered exhibits filed as
exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991.
(12) Incorporated by reference to Exhibit 4.0 filed as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
27, 1991.
(13) Incorporated by reference to Exhibit 3 filed as an exhibit to the
Registrant's Form 8 Amendment No. 3 to Registration Statement on Form 8-A
filed on September 16, 1992.
(14) Incorporated by reference to identically numbered exhibits filed as
exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1992.
(15) Incorporated by reference to Exhibit 19.0 filed as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended September
25, 1992.
(16) Incorporated by reference to identically numbered exhibits filed as
exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993.
18
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SUN MICROSYSTEMS, INC.
Registrant
September 27, 1994
By: /s/ MICHAEL E. LEHMAN
------------------------------------
Michael E. Lehman
Vice President and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Scott G. McNealy and Michael E. Lehman jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on Form
10-K, and file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, which include the Chief
Executive Officer, the Chief Financial Officer and Corporate Controller and a
majority of the Board of Directors, on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ SCOTT G. McNEALY Chairman of the Board of September 27, 1994
- - - ------------------------------------------------ Directors, President and
(Scott G. McNealy) Chief Executive Officer
(Principal Executive
Officer)
/s/ MICHAEL E. LEHMAN Vice President and Chief September 27, 1994
- - - ------------------------------------------------ Financial Officer
(Michael E. Lehman) (Principal Financial
Officer)
/s/ GEORGE REYES Vice President and September 27, 1994
- - - ------------------------------------------------ Corporate Controller
(George Reyes) (Principal Accounting
Officer)
/s/ L. JOHN DOERR Director September 27, 1994
- - - ------------------------------------------------
(L. John Doerr)
/s/ WILLIAM RANDOLPH HEARST III Director September 27, 1994
- - - ------------------------------------------------
(William Randolph Hearst III)
19
21
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT L. LONG Director September 27, 1994
- - - ------------------------------------------------
(Robert L. Long)
/s/ M. KENNETH OSHMAN Director September 27, 1994
- - - ------------------------------------------------
(M. Kenneth Oshman)
/s/ A. MICHAEL SPENCE Director September 27, 1994
- - - ------------------------------------------------
(A. Michael Spence)
20
22
SCHEDULE I
SUN MICROSYSTEMS, INC.
MARKETABLE SECURITIES -- OTHER INVESTMENTS
YEAR ENDED JUNE 30, 1994
(IN THOUSANDS, EXCEPT SHARE AMOUNT)
NAME OF ISSUER/ NUMBER OF
TITLE OF EACH ISSUE SHARES AMOUNT(1)
------------------- --------- ---------
Auction Market Preferred Stock.................................. 55,959 $271,543
Municipal Obligations........................................... 162,318
Commercial Paper................................................ 11,427
Tax-exempt Commercial Paper..................................... 3,591
--------
$448,879
========
- - - ---------------
(1) Stated at cost, which approximates market. No individual security or group
of securities of an issuer exceeds 2% of total assets of the Company.
S-1
23
SCHEDULE II
SUN MICROSYSTEMS, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(IN THOUSANDS)
BALANCE AT BALANCE AT
BEGINNING AMOUNTS END OF
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED PERIOD
-------------- ---------- --------- --------- ----------
Year Ended June 30, 1994:
Kenneth Alvares:
Interest-free note receivable secured by
stock due in 1997......................... $300 $ -- $ -- $300
Interest-free note receivable secured by
real property due in 1997................. $375 $ -- $ -- $375
---- ----- ----- ----
$675 $ -- $ -- $675
==== ===== ===== ====
Mel Friedman:
8.57% notes receivable secured by real
property due in 1994...................... $150 $ -- $ -- $150
==== ===== ===== ====
Chester Silvestri:
Interest-free unsecured note receivable due
in 1995................................... $120 $ -- $ -- $120
==== ===== ===== ====
S-2
24
SCHEDULE II
(CONTINUED)
SUN MICROSYSTEMS, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(IN THOUSANDS)
BALANCE AT BALANCE AT
BEGINNING AMOUNTS END OF
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED PERIOD
-------------- ---------- --------- --------- ----------
Year Ended June 30, 1993:
Kenneth Alvares:
Interest-free note receivable secured by
stock due in 1997......................... $300 $ -- $ -- $300
Interest-free note receivable secured by
real property due in 1997................. $ -- $375 $ -- $375
---- ---- ---- ----
$300 $375 $ -- $675
==== ==== ==== ====
Mel Friedman:
8.57% notes receivable secured by real
property due in 1994...................... $300 $ -- $150 $150
==== ==== ==== ====
Jessie Mobley:
9.38% notes receivable secured by real
property due in 1994...................... $200 $ -- $200 $ --
==== ==== ==== ====
Dennis M. Ohryn:
8.25% notes receivable secured by real
property due in 1992...................... $200 $ -- $200 $ --
8.38% note receivable secured by real
property due in 1992...................... 30 -- 30 --
8.99% note receivable secured by real
property due in 1993...................... 70 -- 70 --
---- ---- ---- ----
$300 $ -- $300 $ --
==== ==== ==== ====
S-3
25
SCHEDULE II
(CONTINUED)
SUN MICROSYSTEMS, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(IN THOUSANDS)
BALANCE AT BALANCE AT
BEGINNING AMOUNTS END OF
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED PERIOD
-------------- ---------- ---------- ---------- ----------
Year Ended June 30, 1992:
Kenneth Alvares:
Interest-free note receivable secured by stock
due in 1997................................ $ -- $300 $ -- $300
==== ==== ==== ====
Mel Friedman:
8.57% notes receivable secured by real
property due in 1994....................... $300 $ -- $ -- $300
==== ==== ==== ====
Leonard B. Hughes:
8.25% notes receivable secured by real
property due in 1992....................... $176 $ -- $176 $ --
==== ==== ==== ====
Jessie Mobley:
9.38% notes receivable secured by real
property due in 1994....................... $200 $ -- $ -- $200
==== ==== ==== ====
Dennis M. Ohryn:
8.25% notes receivable secured by real
property due in 1992....................... $200 $ -- $ -- $200
8.38% note receivable secured by real property
due in 1992................................ 30 -- -- 30
8.99% note receivable secured by real property
due in 1993................................ 70 -- -- 70
---- ---- ---- ----
$300 $ -- $ -- $300
==== ==== ==== ====
Edward J. Zander:
8.62% note receivable secured by real property
due in 1993................................ $174 $ -- $174 $ --
==== ==== ==== ====
S-4
26
SCHEDULE VIII
SUN MICROSYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTION/ END OF
DESCRIPTION OF PERIOD EXPENSES WRITEOFF PERIOD
----------- ---------- ---------- ----------- ----------
Year ended June 30, 1992:
Accounts receivable allowances............. $58,985 $ 71,380 $ 81,668 $48,697
======= ======== ========= =======
Year ended June 30, 1993:
Accounts receivable allowances............. $48,697 $ 89,027 $ 86,262 $51,462
======= ======== ========= =======
Year ended June 30, 1994:
Accounts receivable allowances............. $51,462 $167,281 $138,898 $79,845
======= ======== ========= =======
S-5
27
SCHEDULE IX
SUN MICROSYSTEMS, INC.
SHORT-TERM BORROWINGS
(IN THOUSANDS)
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AVERAGE
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWING PERIOD RATE PERIOD PERIOD(A) PERIOD(B)
--------------------- ---------- --------- ------------ ------------ -------------
Year ended June 30, 1992:
Payable to others for borrowings...... $91,284 7.6% $ 91,284 $48,007 8.0%
======= === ======== ======= ===
Year ended June 30, 1993:
Payable to others for borrowings...... $90,890 5.4% $140,451 $94,595 6.5%
======= === ======== ======= ===
Year ended June 30, 1994:
Payable to others for borrowings...... $78,687 3.0% $ 90,890 $55,415 7.6%
======= === ======== ======= ===
- - - ---------------
(A) Calculated on average monthly borrowings
(B) Calculated by dividing interest on short-term borrowings during the year by
average short-term borrowings
S-6