Sun Microsystems Report

1949 Words8 Pages
Sun Microsystems is a leading supplier of computer related products, including servers, workstations, storage devices, and network switches. In the 2001 annual report, a letter to stockholders from the President and CEO Scott G. McNealy offered a remark saying that the fiscal year was ended with a significant revenue growth of 16% and that was a good indication of gaining market share. Also, that the employees were responsible for bringing the costs down and new products to the market. However, no earnings were cited and the information of income statement and additional analysis of other factors, consolidated balance sheet were available at the summaries.
This report from Sun Microsystems to the shareholders will present
…show more content…
Using the Du Pont System of Analysis, which is net income divided by the stockholders’ equity, the percentage of return on stockholders’ equity for 2000 is 67%, and for 2001 is 33%.
Analyzing the ratios, some of the results found are:
Profit Margin = Net Income/Sales 2000 = 11% 2001 = 5%,
Return on Assets (investment) = Net income/Total Assets 2000 = 13% 2001 = 5%,
Net income/Sales x Sales/Total Assets 2000 = 11% x 1.1% = 12.1% 2001 = 5% x 1% = 5%, Return on Equity = Return on Assets/ (1-Debt/Assets) 2000 = 0.13 / 1-0.483 = 26% 2001 = 0.50 / 1-0.417 = 11%
The DuPont system of analysis looks at the return on assets (investment) = Profit margin x Asset turnover.

Sun Microsystems return on stockholders’ equity shows a decrease from 26% in 2000 to 11% in 2001. Sales increased over the previous year, the company incurred more debt in line items, such as operating cost of sales, R&D, increasing total expenses on assets. Earnings at Sun Microsystems are down, and the company is carrying a higher debt and producing lower stockholder returns than the previous year. Leadership in the organization has delivered market share, at the expense of shareholders’ equity. In order to grow sales, additional debt and risk were incurred and
Get Access