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
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Rev. Mar. 20, 2013

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

Stock Shares Market

Price Out Cap
Ticker ($) (MM) ($MM)
Primarily Hardware
Advanced Micro Devices AMD 3.56 609 2,168
Apple AAPL 123.42 889 109,713
Dell DELL 11.06 1,944 21,505
EMC EMC 12.81 2,041 26,142
Hewlett-Packard HPQ 36.30 2,416 87,708
Intel INTC 15.60 2,562 39,967
International Business Machines IBM 101.27 1,343 136,052
NetApp NTAP 17.59 330 5,808
Sun Microsystems JAVA 6.69 739 4,941

Primarily Software
Adobe Systems ADBE 24.70 524 12,944
Microsoft MSFT 19.20 8,896 170,795
Novell NOVL 3.94 343 1,353
Oracle ORCL 19.06 5,046 96,180
Red Hat RHT 18.32 190 3,482

Data sources: Yahoo! Finance, Moody’s, Bloomberg, and company filings.

 Exhibit 9
SUN MICROSYSTEMS
IT Companies’ Financial Data
(market data as of April 17, 2009)

BV Cash & LTM LTM LTM

Debt Levered Bond Investments Sales EBIT EBITDA
($MM) Beta Rating ($MM) ($MM) ($MM) ($MM)

4,988 2.19 B 933 5,808 (1,955) (732)

- 1.11 - 24,490 37,096 7,984 8,739
2,011 1.12 A2 9,546 61,101 3,190 3,959
3,404 1.39 - 6,446 14,876 1,569 2,626
20,458 1.25 A2 10,140 118,697 10,354 14,175
1,988 1.20 A1 8,840 37,586 8,954 13,570
33,925 0.93 A1 12,907 103,630 16,715 22,165
1,265 1.80 - 2,604 3,464 116 286
1,257 1.73 Ba1 3,061 13,438 (2,231) (1,757)

350 1.32 - 2,018 3,476 961 1,231

2,000 0.99 Aaa 31,447 61,981 22,128 24,485
122 1.50 B1 1,067 940 10 55
11,238 1.27 A2 12,624 23,630 8,406 10,291
- 1.20 BB 663 628 80 119
 LTM
Earnings EBITDA
($MM) MULTIPLE Sales Multiple EBIT Multiple

(3,098) (8.5) 1.07 (3.18)

5,728 9.8 2.30 10.67
2,478 3.5 0.23 4.38
1,346 8.8 1.55 14.72
8,050 6.9 0.83 9.47
5,292 2.4 0.88 3.70
12,334 7.1 1.52 9.40
101 15.6 1.29 38.37
n/a (1.8) 0.23 (1.41)

809 9.2 3.24 11.74

17,232 5.8 2.28 6.39
(15) 7.4 0.43 41.04
5,739 9.2 4.01 11.28
85 23.7 4.49 35.04

Average 7.0 1.5 12.3

 Exhibit 10
SUN MICROSYSTEMS
Relevant Security Yields, April 2009

Corporate Bond Yields

AAA 5.50%
AA 5.77%
A+ 6.27%
A 6.35%
A- 6.50%
BBB+ 7.54%
BBB 7.62%
BBB- 8.64%
BB+ 11.42%
BB 11.49%
BB- 11.70%
B+ 13.28%
B 14.70%
B- 15.46%

U.S. Treasury Yields

180-Day 0.34%
1-Year 0.54%
3-Year 1.22%
5-Year 1.71%
10-Year 2.82%
30-Year 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) 3,620
Marketable Debt Securities 2,322
Net Receivables 2,964
Inventory 524
Deferred Prepaid Taxes(2) 200
Other Current Assets 1,058
Total Current Assets 10,688
Property, Plant, & Equipment, Net 1,504
Goodwill 2,514
Intangible Assets 633
Other Noncurrent Assets 499
Total Assets 15,838

Liabilities & Equity

Current Liabilities
Accounts Payable Including Accrued Payroll 2,222
Short/Current Long-Term Debt 1
Deferred Taxes(2) 2,047
Other Current Liabilities Including Warranty Reserve 1,182
Total Current Liabilities 5,451
Long-Term Debt 1,264
Deferred Long-Term Charges(2) 659
Other Noncurrent Liabilities(3) 1,285
Total Liabilities 8,659

Stockholders’ Equity
Common Stock 6,987
Treasury Stock (311)
Retained Earnings 189
Other Stockholders’ Equity 314
Total Stockholders’ Equity 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 1,876
1,038 1,185
3,019 2,258
680 566
216 188
1,218 995
8,443 7,068
1,611 1,616
3,215 1,743
565 269
506 536
14,340 11,232

2,121 1,600
- 554
2,236 2,341
1,311 1,126
5,668 5,621
1,265 695
683 635
1,136 976
8,752 7,927

7,391 7,582
(2,726) (2,569)
430 (2,055)
493 347
5,588 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 7,020 11,043 12,624
Net Receivables 4,589 5,799 4,430
Inventory - - -
Other Current Assets 1,274 1,261 1,527
Total Current Assets 12,883 18,103 18,581
Property, Plant, & Equipment, Net 1,603 1,688 1,922
Goodwill 13,479 17,991 18,842
Intangible Assets 5,964 8,395 7,269
Other Noncurrent Assets 643 1,091 802
Total Assets 34,572 47,268 47,416

Liabilities & Equity

Current Liabilities
Accounts Payable 315 383 271
Short/Current Long-Term Debt 1,358 1,001 1,001
Other Current Liabilities 7,714 8,645 7,877
Total Current Liabilities 9,387 10,029 9,149
Long-Term Debt 6,235 10,235 9,237
Deferred Long-Term Charges 1,121 1,218 480
Other Noncurrent Liabilities 910 2,761 3,460
Total Liabilities 17,653 24,243 22,326

Stockholders’ Equity
Common Stock 10,293 12,446 12,980
Treasury Stock - - -
Retained Earnings 6,223 9,961 11,894
Other Stockholders’ Equity 403 618 216
Total Stockholders’ Equity 16,919 23,025 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)

Fiscal Year-End May 31

2007 2008 2009E
Software Revenues 14,211 17,843 18,877
Services Revenues 3,785 4,587 4,375
Net Revenue 17,996 22,430 23,252
Selling, General, & Administrative 8,790 10,468 10,217
Research & Development 2,195 2,741 2,767
Amortization of Intangible Assets 878 1,212 1,713
Other Operating Expense 159 165 234
Total Operating Expense 12,022 14,586 14,931
Operating Income 5,974 7,844 8,321
Income Tax on Operations 1,709 2,316 2,380
Net Operating Profit After Tax 4,265 5,528 5,941

Effective Corporate Tax Rate 28.6% 29.5% 28.6%

Data sources: Company filings and case writer estimates.

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

2007 ###
Net Revenue 13,873 13,880
Cost of Sales 7,608 7,425
Gross Margin 6,265 6,455
Selling, General, & Administrative 3,851 3,955
Research & Development 2,008 1,834
Impairment of Goodwill - ###
Other Operating Expense 97 294
Total Operating Expense 5,956 6,083
Operating Income 309 372

Depreciation & Amortization 517 476

as % of Prior Year PP&E 34.4% 29.5%
Net PP&E 1,611 1,616
as % of Sales 11.6% 11.6%

Data sources: Company filings and case writer estimates.

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

Fiscal Year-End June 30

2009E 2010E 2011E 2012E 2013E
11,449 12,665 13,047 13,526 13,885
6,718 7,685 7,583 7,735 7,889
4,731 4,980 5,464 5,791 5,996
3,461
1,648
1,460
398
6,967 4,839 4,992 5,121 5,249
(2,236) 141 472 670 747

474 536 456 470 487

29.3% 30.0% 30.0% 30.0% 30.0%
1,788 1,520 1,566 1,623 1,666
15.6% 12.0% 12.0% 12.0% 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)

2007 ###
Net Revenue 13,873 13,880
Cost of Sales 7,608 7,425
Gross Margin 6,265 6,455
Selling, General, & Administrative 3,851 3,955
Research & Development 2,008 1,834
Impairment of Goodwill - ###
Other Operating Expense 97 294
Total Operating Expense 5,956 6,083
Operating Income 309 372
EBIT*(1-T) 201 242
PPE 1,611 1,616
Net PPE 5
NWC 1,142 1,485
as % of Sales
Net NWC 343
Depreciation & Amortization 517 476
as % of Prior Year PP&E 34.4% 29.5%
Net PP&E 1,611 1,616
as % of Sales 11.6% 11.6%
Without Synergy
FCF
Terminal Value
Enterprise Value
Interest
Tax*(EBIT-Interest)
Equity Cash Flow
Equity Value of Firm

With Synergy
Net Revenue 13,873 13,880
Cost of Sales 7,608 7,425
Gross Margin 6,265 6,455
Selling, General, & Administrative 3,851 3,955
Research & Development 2,008 1,834
Impairment of Goodwill - ###
Other Operating Expense 97 294
Total Operating Expense 5,956 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 12931
Industry EBITDA multiple 4187 The companies given in exhibit 9 are b
Industry Sales Multiple 19222 good idea to stick to industry averages

Using EBIT Multiples from Intel 3895

Using EBIT Multiples from IBM 9897
 Exhibit 14
SUN MICROSYSTEMS
(in millions of U.S. dollars)
Fiscal Year-End June 30
2009E 2010E 2011E 2012E 2013E
11,449 12,665 13,047 13,526 13,885
6,718 7,685 7,583 7,735 7,889
4,731 4,980 5,464 5,791 5,996
3,461
1,648
1,460
398
6,967 4,839 4,992 5,121 5,249
(2,236) 141 472 670 747
(1,453) 92 307 436 486
1,788 1,520 1,566 1,623 1,666
172 (268) 46 57 43
1,093 1,209 1,246 1,291 1,326
10.6% 3.0% 3.7% 2.7%
(392) 116 36 46 34
474 536 456 470 487
29.3% 30.0% 30.0% 30.0% 30.0%
1,788 1,520 1,566 1,623 1,666
15.6% 12.0% 12.0% 12.0% 12.0%

(759) 780 680 802 895

11,693
9,269 Share Price 12.54
142.64 79.37 79.37 79.37 79.37
-832.52 21.57 137.42 206.72 233.67
(852) 174 629 750 844
7,335

11,449 12,665 13,047 13,526 13,885

6,718 7,685 7,583 7,735 7,889
4,731 4,980 5,464 5,791 5,996
3,461 2,248 2,319 2,379 2,438
1,648 1,545 1,594 1,635 1,676
1,460
398 143 148 152 155
6,967 3,936 4,061 4,166 4,270
 45
750 350
900 900
(2,236) 249 1,053 1,625 1,726
(1,453) 162 685 1,056 1,122
(759) 850 1,058 1,423 1,532
19794
15,777 Share Price 21.35
144.46 144.46 142.64 79.37 79.37
-833.16 36.47 318.69 541.06 576.37
(853) 202 965 1,371 1,480
13,209

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 35%

2014E Staff Expense SG&A R&D

14,243 25% 32% -
8,075 22% 27% -
6,168 60% 4% 32%

Sun MicroSystem 2009

Debt (BV) 1257 Wd 20%
Shares 739
5,372 Share Price 6.69
796 Equity(MV) 4944 We 80%
517 Beta (Levered) 1.73 Given Exhibit 9
1,709 Rf 3.66% 30 year bond Exhibit 10
43 kd 11.42% Rating - Ba1 Exhibit 10
1,360 Rp 5%
2.6% ke 12.31%
34 WACC 11.32%
500
30.0%
1,709 Oracle >2014
12.0% Debt (BV) 11238 Wd 10%
Shares 5046
940 Share Price 19.06
Equity(MV) 96177 We 90%
Beta (Levered) 1.27 Given Exhibit 9
79.37 Rf 3.66% 30 year bond Exhibit 10
250.82 kd 6.35% Rating - A2 Exhibit 10
889 Rp 5%
ke 11.65%
Unlevered Beta 1.48
New Beta Levered 1.60
WACC 10.86%
14,243 Growth Rate 2.82%
8,075
6,168
2,495
1,715

159
4,370
 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 12%

Equity 4944 W'e 88%

Unlevered Beta 1.48
New Beta 1.62
New ke 11.77%
 Exhibit 14
SUN MICROSYSTEMS
(in millions of U.S. dollars)
Fiscal Yea
### ### 2009E
Net Revenue 13,873 13,880 11,449
Cost of Sales 7,608 7,425 6,718
Gross Margin 6,265 6,455 4,731
Selling, General, & Administrative 3,851 3,955 3,461
Research & Development 2,008 1,834 1,648
Impairment of Goodwill - - 1,460
Other Operating Expense 97 294 398
Total Operating Expense 5,956 6,083 6,967
Operating Income 309 372 (2,236)
EBIT*(1-T) 201 242 (1,453)
PPE 1,611 1,616 1,788
Net PPE 5 172
NWC 1,142 1,485 1,093
as % of Sales
Net NWC 343 (392)
Depreciation & Amortization 517 476 474
as % of Prior Year PP&E 34.4% 29.5% 29.3%
Net PP&E 1,611 1,616 1,788
as % of Sales 11.6% 11.6% 15.6%
Without Synergy
FCF (1,233)
Terminal Value
Enterprise Value 3,239
Interest 142.64
Tax*(EBIT-Interest) -832.52
Equity Cash Flow (1,326)
Equity Value of Firm 1,741

With Synergy
Net Revenue 13,873 13,880 11,449
Cost of Sales 7,608 7,425 6,718
Gross Margin 6,265 6,455 4,731
Selling, General, & Administrative 3,851 3,955 3,461
Research & Development 2,008 1,834 1,648
Impairment of Goodwill - - 1,460
Other Operating Expense 97 294 398
Total Operating Expense 5,956 6,083 6,967
Customer Attrition
Integration Charges
Increase in Operating Income
Operating Income (2,236)
EBIT*(1-T) (1,453)
FCF (1,233)
Terminal Value
Enterprise value 9,747
Interest 144.46
Tax*(EBIT-Interest) -833.16
Equity Cash Flow (1,327)
Equity Value of Firm 7,615

Synergy Effect 6,508

Using Multiple
Industry EBIT multiple 12931
Industry EBITDA multiple 4187 The companies given in exhibit 9 are bigger than Su
Industry Sales Multiple 19222 be a good idea to stick to industry averages.

Using EBIT Multiples from Intel 3895

Using EBIT Multiples from IBM 9897
 Exhibit 14
MICROSYSTEMS
llions of U.S. dollars)
Fiscal Year-End June 30
2010E 2011E 2012E 2013E 2014E
12,665 13,047 13,526 13,885 14,243
7,685 7,583 7,735 7,889 8,075
4,980 5,464 5,791 5,996 6,168

4,839 4,992 5,121 5,249 5,372

141 472 670 747 796
92 307 436 486 517
1,520 1,566 1,623 1,666 1,709
(268) 46 57 43 43
1,209 1,246 1,291 1,326 1,360
10.6% 3.0% 3.7% 2.7% 2.6%
116 36 46 34 34
536 456 470 487 500
30.0% 30.0% 30.0% 30.0% 30.0%
1,520 1,566 1,623 1,666 1,709
12.0% 12.0% 12.0% 12.0% 12.0%

243 224 332 408 440

5,476
Share Price 4.38
79.37 79.37 79.37 79.37 79.37
21.57 137.42 206.72 233.67 250.82
(362) 173 281 357 389

12,665 13,047 13,526 13,885 14,243

7,685 7,583 7,735 7,889 8,075
4,980 5,464 5,791 5,996 6,168
2,248 2,319 2,379 2,438 2,495
1,545 1,594 1,635 1,676 1,715

143 148 152 155 159

3,936 4,061 4,166 4,270 4,370
 45
750 350
900 900 900
249 1,053 1,625 1,726 1,798
162 685 1,056 1,122 1,169
313 602 953 1,045 1,092
13577
Share Price 13.19
144.46 142.64 79.37 79.37 79.37
36.47 318.69 541.06 576.37 601.55
(335) 510 902 993 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 35%

Staff Expense SG&A R&D

25% 32% -
22% 27% -
60% 4% 32%

Sun MicroSystem 2009 2011-2014

Debt (BV) 1257 Wd 20% Debt 703 W'd
Shares 739
Share Price 6.69
Equity(MV) 4944 We 80% Equity 4944 W'e
Beta (Levered) 1.73 Given Exhibit 9 Unlevered Beta
Rf 3.66% 30 year bond Exhibit 10 New Beta
kd 11.42% Rating - Ba1 Exhibit 10 New ke
Rp 5%
ke 12.31%
WACC 11.32%

Oracle >2014
Debt (BV) 11238 Wd 10%
Shares 5046
Share Price 19.06
Equity(MV) 96177 We 90%
Beta (Levered) 1.27 Given Exhibit 9
Rf 3.66% 30 year bond Exhibit 10
kd 6.35% Rating - A2 Exhibit 10
Rp 5%
ke 11.65%
Unlevered Beta 1.48
New Beta Levered 1.60
WACC 10.86%
Growth Rate 2.82%
 12%

88%
1.48
1.62
11.77%