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    Sun Microsystems Case Jasdeep

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    Jasdeep Singh
    The document summarizes Sun Microsystems' financial performance from fiscal years 2007 to 2009 and projected performance from 2010 to 2014. It shows metrics such as net revenue, costs, operating expenses, operating income, EBIT, net property and equipment, cash flow, and enterprise value with and without projected synergies from integration. Sun's revenue and profits declined from 2007 to 2009 and were projected to continue declining without synergies but stabilize and grow with synergies from 2010 to 2014. Valuation metrics including WACC and multiples were also presented to estimate Sun's enterprise value.

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    Sun Microsystems Case Jasdeep

    Uploaded by

    Jasdeep Singh
    245 views6 pages
    The document summarizes Sun Microsystems' financial performance from fiscal years 2007 to 2009 and projected performance from 2010 to 2014. It shows metrics such as net revenue, costs, operating expenses, operating income, EBIT, net property and equipment, cash flow, and enterprise value with and without projected synergies from integration. Sun's revenue and profits declined from 2007 to 2009 and were projected to continue declining without synergies but stabilize and grow with synergies from 2010 to 2014. Valuation metrics including WACC and multiples were also presented to estimate Sun's enterprise value.

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    The document summarizes Sun Microsystems' financial performance from fiscal years 2007 to 2009 and projected performance from 2010 to 2014. It shows metrics such as net revenue, costs, operating expenses, operating income, EBIT, net property and equipment, cash flow, and enterprise value with and without projected synergies from integration. Sun's revenue and profits declined from 2007 to 2009 and were projected to continue declining without synergies but stabilize and grow with synergies from 2010 to 2014. Valuation metrics including WACC and multiples were also presented to estimate Sun's enterprise value.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    245 views6 pages

    Sun Microsystems Case Jasdeep

    Uploaded by

    Jasdeep Singh
    The document summarizes Sun Microsystems' financial performance from fiscal years 2007 to 2009 and projected performance from 2010 to 2014. It shows metrics such as net revenue, costs, operating expenses, operating income, EBIT, net property and equipment, cash flow, and enterprise value with and without projected synergies from integration. Sun's revenue and profits declined from 2007 to 2009 and were projected to continue declining without synergies but stabilize and grow with synergies from 2010 to 2014. Valuation metrics including WACC and multiples were also presented to estimate Sun's enterprise value.

    Copyright:

    © All Rights Reserved
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    of 6

    Exhibit 14

    SUN MICROSYSTEMS
    (in millions of U.S. dollars)
    Fiscal Year-End June 3
    2007 2008 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)
    NET PPE 1,504 1,611 1,616
    Change in NET PPE 107 5
    NWC 1,142 1,485 1,093
    Growth of NWC 8.2% 10.7% 9.5%
    Change in NET WC 343 (392)
    Depreciation & Amortization 517 476 474
    as % of Prior Year PP&E 34.4% 29.5% 29.3%
    Net PP&E 1,504 1,611 1,616
    as % of Sales 10.8% 11.6% 14.1%
    Without Synergy
    FCF (1,066)
    Terminal Value
    Enterprise Value 2,441

    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 (1,066)
    Terminal Value
    Enterprise value

    Less Debt
    Share Price

    Using Multiple
    Industry EBIT multiple
    Industry EBITDA multiple 10021.8
    Industry Sales Multiple 19940 The companies given in exhibit 9 are bigger than Sun Mic
    xhibit 14 Tax Rate
    CROSYSTEMS
    s of U.S. dollars)
    Fiscal Year-End June 30 Staff Expense
    2010E 2011E 2012E 2013E 2014E 25%
    12,665 13,047 13,526 13,885 14,243 20%
    7,685 7,583 7,735 7,889 8,075 23%
    4,980 5,464 5,791 5,996 6,168 4%

    Sun MicroSystem
    Debt (BV)
    Shares
    4,839 4,992 5,121 5,249 5,372 Share Price
    141 472 670 747 796 Equity(MV)
    92 307 436 486 517 Beta (Levered)
    1,520 1,566 1,623 1,666 1,709 Rf
    (96) 46 57 43 43 kd
    1,203 1,239 1,285 1,319 1,353 Rp
    10.6% 3.0% 3.7% 2.7% 2.6% ke
    110 36 46 34 34 WACC
    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 Oracle
    12.0% 12.0% 12.0% 12.0% 12.0% Debt (BV)
    Shares
    78 225 333 408 440 Share Price
    4,783 Equity(MV)
    Beta (Levered)
    Rf
    kd
    Rp
    ke
    Unlevered Beta
    New Beta Levered
    WACC
    12,665 13,047 13,526 13,885 14,243 Growth Rate
    7,685 7,583 7,735 7,889 8,075
    4,980 5,464 5,791 5,996 6,168
    1,307 1,348 2,235 2,291 2,344
    1,545 1,594 1,635 1,676 1,715

    196 203 161 165 169


    4,839 4,992 5,121 5,249 5,372
    45 Cannabilasation
    750 350 Assumption is all integration expenses are exp
    300 300 600 900 Spread out
    (654) 422 970 1,347 1,696
    (425) 274 631 876 1,102
    (439) 192 528 798 1,025
    14690
    10,460.81 15,716
    13,521.81
    12,264.81
    16.60

    iven in exhibit 9 are bigger than Sun Microsystem and hence we may end up over valuing the firm.
    35%

    SG&A R&D
    32% -
    22%
    27% - Avg
    60% 32%

    2009
    1257 Wd 20% Debt 703
    739
    6.69
    4944 We 80% Equity 4944
    1.73 Given Exhibit 9
    2.82% 10 year Exhibit 10 most popular
    11.42% Rating - Ba1 Exhibit 10
    6% assumed
    13.20%
    12.03%

    >2014
    11238 Wd 10%
    5046
    19.06
    96177 We 90%
    1.27 Given Exhibit 9
    2.82% 30 year bond Exhibit 10
    6.35% Rating - A2 Exhibit 10
    6% assumed
    10.68%
    1.22
    1.31
    10.00%
    2.82% Average of last 4 years
    integration expenses are expensed out in initial years

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