This spreadsheet was prepared by Elena Loutskina, Assistant Professor of Business Administration.

Copyright 2010 by the University of Virginia Darden School Foundation, Charlottesville, VA. All
rights reserved. For customer service inquiries, send an e-mail tosales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet,
or transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School Foundation.
Rev. Mar. 20, 2013

Exhibit 9
SUN MICROSYST
IT Companies Financi
(market data as of April

Ticker

Stock
Price
($)

Shares
Out
(MM)

Market
Cap
($MM)

Primarily Hardware
Advanced Micro Devices
Apple
Dell
EMC
Hewlett-Packard
Intel
International Business Machines
NetApp
Sun Microsystems

AMD
AAPL
DELL
EMC
HPQ
INTC
IBM
NTAP
JAVA

3.56
123.42
11.06
12.81
36.30
15.60
101.27
17.59
6.69

609
889
1,944
2,041
2,416
2,562
1,343
330
739

2,168
109,713
21,505
26,142
87,708
39,967
136,052
5,808
4,941

Primarily Software
Adobe Systems
Microsoft
Novell
Oracle
Red Hat

ADBE
MSFT
NOVL
ORCL
RHT

24.70
19.20
3.94
19.06
18.32

524
8,896
343
5,046
190

12,944
170,795
1,353
96,180
3,482

Data sources: Yahoo! Finance, Moodys, Bloomberg, and company filings.

Exhibit 9
SUN MICROSYSTEMS
IT Companies Financial Data
(market data as of April 17, 2009)
BV
Debt
($MM)

Levered
Beta

4,988
2,011
3,404
20,458
1,988
33,925
1,265
1,257

2.19
1.11
1.12
1.39
1.25
1.20
0.93
1.80
1.73

350
2,000
122
11,238
-

1.32
0.99
1.50
1.27
1.20

Bond
Rating
B
A2
A2
A1
A1
Ba1

Aaa
B1
A2
BB

Cash &
Investments
($MM)

LTM
Sales
($MM)

LTM
EBIT
($MM)

LTM
EBITDA
($MM)

933
24,490
9,546
6,446
10,140
8,840
12,907
2,604
3,061

5,808
37,096
61,101
14,876
118,697
37,586
103,630
3,464
13,438

(1,955)
7,984
3,190
1,569
10,354
8,954
16,715
116
(2,231)

(732)
8,739
3,959
2,626
14,175
13,570
22,165
286
(1,757)

2,018
31,447
1,067
12,624
663

3,476

961
22,128
10
8,406
80

1,231
24,485
55
10,291
119

61,981
940
23,630
628

LTM
Earnings
($MM)

EBITDA
MULTIPLE

Sales Multiple EBIT Multiple

(3,098)
5,728
2,478
1,346
8,050
5,292
12,334
101
n/a

(8.5)
9.8
3.5
8.8
6.9
2.4
7.1
15.6
(1.8)

1.07
2.30
0.23
1.55
0.83
0.88
1.52
1.29
0.23

(3.18)
10.67
4.38
14.72
9.47
3.70
9.40
38.37
(1.41)

809
17,232
(15)
5,739
85

9.2
5.8
7.4
9.2
23.7

3.24
2.28
0.43
4.01
4.49

11.74
6.39
41.04
11.28
35.04

7.0

1.5

12.3

Average

Exhibit 10
SUN MICROSYSTEMS
Relevant Security Yields, April 2009

Corporate Bond Yields

AAA
AA
A+
A
ABBB+
BBB
BBBBB+
BB
BBB+
B
B-

U.S. Treasury Yields

180-Day
1-Year
3-Year
5-Year
10-Year
30-Year

5.50%
5.77%
6.27%
6.35%
6.50%
7.54%
7.62%
8.64%
11.42%
11.49%
11.70%
13.28%
14.70%
15.46%

0.34%
0.54%
1.22%
1.71%
2.82%
3.66%

Data sources: Mergent Bond Record, U.S. Treasury, and Ibbotson Associates.

Exhibit 11
SUN MICROSYSTEMS
Sun Microsystems Historical and Projected Balance Sheet
(in millions of U.S. dollars)
Fiscal Year-End June 30
###
Assets
Current Assets
Cash(1)
Marketable Debt Securities
Net Receivables
Inventory
Deferred Prepaid Taxes(2)
Other Current Assets
Total Current Assets
Property, Plant, & Equipment, Net
Goodwill
Intangible Assets
Other Noncurrent Assets
Total Assets

3,620
2,322
2,964
524
200
1,058
10,688
1,504
2,514
633
499
15,838

Liabilities & Equity

Current Liabilities
Accounts Payable Including Accrued Payroll
Short/Current Long-Term Debt
Deferred Taxes(2)
Other Current Liabilities Including Warranty Reserve
Total Current Liabilities
Long-Term Debt
Deferred Long-Term Charges(2)
Other Noncurrent Liabilities(3)
Total Liabilities

2,222
1
2,047
1,182
5,451
1,264
659
1,285
8,659

Stockholders Equity
Common Stock
Treasury Stock
Retained Earnings
Other Stockholders Equity
Total Stockholders Equity

6,987
(311)
189
314
7,179

Total Liabilities & Equity

15,838

Data sources: Company filings and case writer estimates.

(1) (Sun Microsystems) long-term strategy is to maintain a minimum amount of cash and cash equivalents in subsidiaries for operational pu
invest the remaining amount of our cash in interest-bearing and highly liquid cash equivalents and marketable debt securities.
(2) Deferred taxes and related accounts are not expected to vary with sales or continue to accumulate as a company growth.

(3) Includes deferred settlement income from Microsoft as of June 30, 2009, 2008, 2007, and 2006, long-term tax liabilities as of June 30, 20
2007, and 2006 and long-term restructuring liabilities.

nce Sheet

Fiscal Year-End June 30

###

2009E

2,272
1,038
3,019
680
216
1,218
8,443
1,611
3,215
565
506
14,340

1,876
1,185
2,258
566
188
995
7,068
1,616
1,743
269
536
11,232

2,121
2,236
1,311
5,668
1,265
683
1,136
8,752

1,600
554
2,341
1,126
5,621
695
635
976
7,927

7,391
(2,726)
430
493
5,588

7,582
(2,569)
(2,055)
347
3,305

14,340

11,232

alents in subsidiaries for operational purposes and to

rketable debt securities.

as a company growth.

ng-term tax liabilities as of June 30, 2009, 2008,

Exhibit 12
SUN MICROSYSTEMS
Oracle Historical and Projected Balance Sheet
(in millions of U.S. dollars)

Fiscal Year-End May 31

2007
2008
2009E
Assets
Current Assets
Cash & Cash Equivalents
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Property, Plant, & Equipment, Net
Goodwill
Intangible Assets
Other Noncurrent Assets
Total Assets

7,020
4,589
1,274
12,883
1,603
13,479
5,964
643
34,572

11,043
5,799
1,261
18,103
1,688
17,991
8,395
1,091
47,268

12,624
4,430
1,527
18,581
1,922
18,842
7,269
802
47,416

Liabilities & Equity

Current Liabilities
Accounts Payable
Short/Current Long-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Deferred Long-Term Charges
Other Noncurrent Liabilities
Total Liabilities

315
1,358
7,714
9,387
6,235
1,121
910
17,653

383
1,001
8,645
10,029
10,235
1,218
2,761
24,243

271
1,001
7,877
9,149
9,237
480
3,460
22,326

Stockholders Equity
Common Stock
Treasury Stock
Retained Earnings
Other Stockholders Equity
Total Stockholders Equity

10,293
6,223
403
16,919

12,446
9,961
618
23,025

12,980
11,894
216
25,090

Total Liabilities & Equity

34,572

47,268

47,416

Data sources: Company filings and case writer estimates.

Exhibit 13
SUN MICROSYSTEMS
Oracle Historical and Projected Income Statement
(in millions of U.S. dollars)

Software Revenues
Services Revenues
Net Revenue
Selling, General, & Administrative
Research & Development
Amortization of Intangible Assets
Other Operating Expense
Total Operating Expense
Operating Income
Income Tax on Operations
Net Operating Profit After Tax
Effective Corporate Tax Rate
Data sources: Company filings and case writer estimates.

2007
14,211
3,785
17,996
8,790
2,195
878

Fiscal Year-End May 31

2008
2009E
17,843
18,877
4,587
4,375
22,430
23,252
10,468
10,217
2,741
2,767
1,212
1,713

159
12,022
5,974
1,709
4,265

165
14,586
7,844
2,316
5,528

234
14,931
8,321
2,380
5,941

28.6%

29.5%

28.6%

Exhibit 14
SUN MICROSYSTEMS
Sun Microsystems Historical and Projected Inc
(in millions of U.S. dollars)

2007
13,873
7,608
6,265
3,851
2,008
97
5,956
309

###
13,880
7,425
6,455
3,955
1,834
###
294
6,083
372

Depreciation & Amortization

as % of Prior Year PP&E

517
34.4%

476
29.5%

Net PP&E

1,611
11.6%

1,616
11.6%

Net Revenue
Cost of Sales
Gross Margin
Selling, General, & Administrative
Research & Development
Impairment of Goodwill
Other Operating Expense
Total Operating Expense
Operating Income

as % of Sales
Data sources: Company filings and case writer estimates.

Exhibit 14
SUN MICROSYSTEMS
stems Historical and Projected Income Statement
(in millions of U.S. dollars)

2009E
11,449
6,718
4,731
3,461
1,648
1,460
398
6,967
(2,236)

Fiscal Year-End June 30

2010E
2011E
12,665
13,047
7,685
7,583
4,980
5,464

2012E
13,526
7,735
5,791

2013E
13,885
7,889
5,996

4,839
141

4,992
472

5,121
670

5,249
747

474
29.3%

536
30.0%

456
30.0%

470
30.0%

487
30.0%

1,788
15.6%

1,520
12.0%

1,566
12.0%

1,623
12.0%

1,666
12.0%

2014E
14,243
8,075
6,168

5,372
796
500
30.0%
1,709
12.0%

Exhibit 14
SUN MICROSYSTEMS
(in millions of U.S. dollars)

Net Revenue
Cost of Sales
Gross Margin
Selling, General, & Administrative
Research & Development
Impairment of Goodwill
Other Operating Expense
Total Operating Expense
Operating Income
EBIT*(1-T)
PPE
Net PPE
NWC
as % of Sales
Net NWC
Depreciation & Amortization
as % of Prior Year PP&E
Net PP&E
as % of Sales
Without Synergy
FCF
Terminal Value
Enterprise Value
Interest
Tax*(EBIT-Interest)
Equity Cash Flow
Equity Value of Firm

With Synergy
Net Revenue
Cost of Sales
Gross Margin
Selling, General, & Administrative
Research & Development
Impairment of Goodwill
Other Operating Expense
Total Operating Expense

2007
13,873
7,608
6,265
3,851
2,008
97
5,956
309
201
1,611
1,142

###
13,880
7,425
6,455
3,955
1,834
###
294
6,083
372
242
1,616
5
1,485

517
34.4%
1,611
11.6%

343
476
29.5%
1,616
11.6%

13,873
7,608
6,265
3,851
2,008
97
5,956

13,880
7,425
6,455
3,955
1,834
###
294
6,083

Customer Attrition
Integration Charges
Increase in Operating Income
Operating Income
EBIT*(1-T)
FCF
Terminal Value
Enterprise value
Interest
Tax*(EBIT-Interest)
Equity Cash Flow
Equity Value of Firm

Synergy Effect
Using Multiple
Industry EBIT multiple
Industry EBITDA multiple
Industry Sales Multiple
Using EBIT Multiples from Intel
Using EBIT Multiples from IBM

12931
4187 The companies given in exhibit 9 are b
19222 good idea to stick to industry averages
3895
9897

Exhibit 14
SUN MICROSYSTEMS
(in millions of U.S. dollars)
2009E
11,449
6,718
4,731
3,461
1,648
1,460
398
6,967
(2,236)
(1,453)
1,788
172
1,093

Fiscal Year-End June 30

2010E
2011E
12,665
13,047
7,685
7,583
4,980
5,464

2012E
13,526
7,735
5,791

2013E
13,885
7,889
5,996

(392)
474
29.3%
1,788
15.6%

4,839
141
92
1,520
(268)
1,209
10.6%
116
536
30.0%
1,520
12.0%

4,992
472
307
1,566
46
1,246
3.0%
36
456
30.0%
1,566
12.0%

5,121
670
436
1,623
57
1,291
3.7%
46
470
30.0%
1,623
12.0%

5,249
747
486
1,666
43
1,326
2.7%
34
487
30.0%
1,666
12.0%

(759)

780

680

802

895
11,693

9,269
142.64
-832.52
(852)
7,335

79.37
21.57
174

Share Price
79.37
137.42
629

12.54
79.37
206.72
750

79.37
233.67
844

12,665
7,685
4,980
2,248
1,545

13,047
7,583
5,464
2,319
1,594

13,526
7,735
5,791
2,379
1,635

13,885
7,889
5,996
2,438
1,676

143
3,936

148
4,061

152
4,166

155
4,270

11,449
6,718
4,731
3,461
1,648
1,460
398
6,967

45
750

350

(2,236)
(1,453)
(759)

249
162
850

1,053
685
1,058

900
1,625
1,056
1,423

15,777
144.46
-833.16
(853)
13,209

144.46
36.47
202

Share Price
142.64
318.69
965

21.35
79.37
541.06
1,371

900
1,726
1,122
1,532
19794
79.37
576.37
1,480

6,508

companies given in exhibit 9 are bigger than Sun Microsystem and hence we may end up over valuing the firm. Hence it might b
d idea to stick to industry averages.

Tax Rate

2014E
14,243
8,075
6,168

5,372
796
517
1,709
43
1,360
2.6%
34
500
30.0%
1,709
12.0%
940

79.37
250.82
889

14,243
8,075
6,168
2,495
1,715
159
4,370

35%

Staff Expense

SG&A
25%
22%
60%

Sun MicroSystem
Debt (BV)
Shares
Share Price
Equity(MV)
Beta (Levered)
Rf
kd
Rp
ke
WACC

Oracle
Debt (BV)
Shares
Share Price
Equity(MV)
Beta (Levered)
Rf
kd
Rp
ke
Unlevered Beta
New Beta Levered
WACC
Growth Rate

R&D
32% 27% 4%

32%

2009
1257 Wd
739
6.69
4944 We
1.73 Given
3.66% 30 year bond
11.42% Rating - Ba1
5%
12.31%
11.32%

20%

80%
Exhibit 9
Exhibit 10
Exhibit 10

>2014
11238 Wd
5046
19.06
96177 We
1.27 Given
3.66% 30 year bond
6.35% Rating - A2
5%
11.65%
1.48
1.60
10.86%
2.82%

10%

90%
Exhibit 9
Exhibit 10
Exhibit 10

900
1,798
1,169
1,591

79.37
601.55
1,540

ver valuing the firm. Hence it might be a

2011-2014
Debt
703 W'd

Equity

4944 W'e
Unlevered Beta
New Beta
New ke

12%

88%
1.48
1.62
11.77%

Net Revenue
Cost of Sales
Gross Margin
Selling, General, & Administrative
Research & Development
Impairment of Goodwill
Other Operating Expense
Total Operating Expense
Operating Income
EBIT*(1-T)
PPE
Net PPE
NWC
as % of Sales
Net NWC
Depreciation & Amortization
as % of Prior Year PP&E
Net PP&E
as % of Sales
Without Synergy
FCF
Terminal Value
Enterprise Value
Interest
Tax*(EBIT-Interest)
Equity Cash Flow
Equity Value of Firm

With Synergy
Net Revenue
Cost of Sales
Gross Margin
Selling, General, & Administrative
Research & Development
Impairment of Goodwill
Other Operating Expense
Total Operating Expense

###
13,873
7,608
6,265
3,851
2,008
97
5,956
309
201
1,611
1,142

###
13,880
7,425
6,455
3,955
1,834
294
6,083
372
242
1,616
5
1,485

517
34.4%
1,611
11.6%

343
476
29.5%
1,616
11.6%

Exhibit 14
SUN MICROSYSTEMS
(in millions of U.S. dollars)
Fiscal Yea
2009E
11,449
6,718
4,731
3,461
1,648
1,460
398
6,967
(2,236)
(1,453)
1,788
172
1,093
(392)
474
29.3%
1,788
15.6%
(1,233)
3,239
142.64
-832.52
(1,326)
1,741

13,873
7,608
6,265
3,851
2,008
97
5,956

13,880
7,425
6,455
3,955
1,834
294
6,083

11,449
6,718
4,731
3,461
1,648
1,460
398
6,967

Customer Attrition
Integration Charges
Increase in Operating Income
Operating Income
EBIT*(1-T)
FCF
Terminal Value
Enterprise value
Interest
Tax*(EBIT-Interest)
Equity Cash Flow
Equity Value of Firm

(2,236)
(1,453)
(1,233)
9,747
144.46
-833.16
(1,327)
7,615

Synergy Effect
Using Multiple
Industry EBIT multiple
Industry EBITDA multiple
Industry Sales Multiple
Using EBIT Multiples from Intel
Using EBIT Multiples from IBM

6,508

12931
4187 The companies given in exhibit 9 are bigger than Su
19222 be a good idea to stick to industry averages.
3895
9897

Exhibit 14
MICROSYSTEMS
llions of U.S. dollars)
Fiscal Year-End June 30
2010E
2011E
12,665
13,047
7,685
7,583
4,980
5,464

2012E
13,526
7,735
5,791

2013E
13,885
7,889
5,996

2014E
14,243
8,075
6,168

4,839
141
92
1,520
(268)
1,209
10.6%
116
536
30.0%
1,520
12.0%

4,992
472
307
1,566
46
1,246
3.0%
36
456
30.0%
1,566
12.0%

5,121
670
436
1,623
57
1,291
3.7%
46
470
30.0%
1,623
12.0%

5,249
747
486
1,666
43
1,326
2.7%
34
487
30.0%
1,666
12.0%

5,372
796
517
1,709
43
1,360
2.6%
34
500
30.0%
1,709
12.0%

243

224

332

408
5,476

440

79.37
21.57
(362)

Share Price
79.37
137.42
173

4.38
79.37
206.72
281

79.37
233.67
357

79.37
250.82
389

12,665
7,685
4,980
2,248
1,545

13,047
7,583
5,464
2,319
1,594

13,526
7,735
5,791
2,379
1,635

13,885
7,889
5,996
2,438
1,676

14,243
8,075
6,168
2,495
1,715

143
3,936

148
4,061

152
4,166

155
4,270

159
4,370

45
750

350

249
162
313

1,053
685
602

900
1,625
1,056
953

144.46
36.47
(335)

Share Price
142.64
318.69
510

13.19
79.37
541.06
902

900
1,726
1,122
1,045
13577

900
1,798
1,169
1,092

79.37
576.37
993

79.37
601.55
1,040

n exhibit 9 are bigger than Sun Microsystem and hence we may end up over valuing the firm. Hence it might
to industry averages.

Tax Rate

Staff Expense

35%

SG&A R&D
25%
32% 22%
27% 60%
4%

32%

Sun MicroSystem
Debt (BV)
Shares
Share Price
Equity(MV)
Beta (Levered)
Rf
kd
Rp
ke
WACC

2009
1257 Wd
739
6.69
4944 We
1.73 Given
3.66% 30 year bond
11.42% Rating - Ba1
5%
12.31%
11.32%

Oracle
Debt (BV)
Shares
Share Price
Equity(MV)
Beta (Levered)
Rf
kd
Rp
ke
Unlevered Beta
New Beta Levered
WACC
Growth Rate

>2014
11238 Wd
5046
19.06
96177 We
1.27 Given
3.66% 30 year bond
6.35% Rating - A2
5%
11.65%
1.48
1.60
10.86%
2.82%

2011-2014
20% Debt
703 W'd

80% Equity
Exhibit 9
Exhibit 10
Exhibit 10

10%

90%
Exhibit 9
Exhibit 10
Exhibit 10

4944 W'e
Unlevered Beta
New Beta
New ke

12%

88%
1.48
1.62
11.77%