Case Sun Microsystem
SUN MICROSYSTEM CASE: Chapter 3 - Comprehensive Problem 2
Sun Microsystems is a leading supplier of computer related products, including servers, workstations, storage devices, and network switches. In the letter to stockholders as part of the 2001 annual report, President and CEO Scott G. McNealy offered the following remarks: “Fiscal 2001 was clearly a mixed bag for Sun, the industry, and the economy as a whole. Still, we finished with revenue growth of 16 percent—and that’s significant. We believe it’s a good indication that Sun continued to pull away from the pack and gain market share. For that, we owe a debt of gratitude to our employees worldwide, who aggressively brought costs down—even as they continued to bring exciting new products to market.” The statement would not appear to be telling you enough. For example, McNealy says the year was a mixed bag with revenue growth of 16 percent. But what about earnings? You can research further by examining the income statement in Exhibit 1. Also, for additional analysis of other factors, consolidated balance sheet(s) are presented in Exhibit 2. 1. Referring to Exhibit 1., compute the annual percentage change in net income per common share-diluted (second numerical line from the bottom) for 1998-1999, 1999-2000, and 2000-2001. 2. Also in Exhibit 1., compute net income/net revenue (sales) for each of the four years. Begin with 1998. What is the major reason for the change in the net income/net revenue (sales) between 2000 and 2001? To answer this question for each of the two years, take in consideration the ratio of the major income statement accounts to net revenues (sales). Cost of sales, Research and development, Selling, general and administrative expense, Provision for income tax Exhibit 1
Note: Take in consideration that 90% of Revenues are Credit Sales
3. Compute for the last two (2) years (that is 2000 and 2001) all the ratios studied in Chapter 31 (Put your answers in a worksheet, if possible Excel.
Sun Microsystems is a leading supplier of computer related products, including servers, workstations, storage devices, and network switches. In the letter to stockholders as part of the 2001 annual report, President and CEO Scott G. McNealy offered the following remarks: “Fiscal 2001 was clearly a mixed bag for Sun, the industry, and the economy as a whole. Still, we finished with revenue growth of 16 percent—and that’s significant. We believe it’s a good indication that Sun continued to pull away from the pack and gain market share. For that, we owe a debt of gratitude to our employees worldwide, who aggressively brought costs down—even as they continued to bring exciting new products to market.” The statement would not appear to be telling you enough. For example, McNealy says the year was a mixed bag with revenue growth of 16 percent. But what about earnings? You can research further by examining the income statement in Exhibit 1. Also, for additional analysis of other factors, consolidated balance sheet(s) are presented in Exhibit 2. 1. Referring to Exhibit 1., compute the annual percentage change in net income per common share-diluted (second numerical line from the bottom) for 1998-1999, 1999-2000, and 2000-2001. 2. Also in Exhibit 1., compute net income/net revenue (sales) for each of the four years. Begin with 1998. What is the major reason for the change in the net income/net revenue (sales) between 2000 and 2001? To answer this question for each of the two years, take in consideration the ratio of the major income statement accounts to net revenues (sales). Cost of sales, Research and development, Selling, general and administrative expense, Provision for income tax Exhibit 1
Note: Take in consideration that 90% of Revenues are Credit Sales
3. Compute for the last two (2) years (that is 2000 and 2001) all the ratios studied in Chapter 31 (Put your answers in a worksheet, if possible Excel.