Sun revises earnings
The company garnered $68 million more revenue for its quarter ended June 30 than it reported earlier, the company discloses in a regulatory filing.
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In its annual report, Sun said the revenue adjustment increased its per-share net income from 1 cent to 2 cents for the quarter.
The adjustment stemmed from expense reductions of $42 million in sales commissions and $19 million in vacation accrual, combined with a $7 million gain from an internal company shipment that had been processed incorrectly, Sun said. The adjustment was a relatively small fraction of the overall $3.4 billion of revenue for the quarter.
In addition, Sun said it could be required to take a noncash charge of up to $2.2 billion at the end of 2002 for impairment of goodwill, a measure of intangible value of acquired companies.
If Sun's market capitalization doesn't recover to its April 2002 level of $29.1 billion in its fiscal second quarter, which ends Dec. 31, Sun will reassess the value of acquisitions and investments and see if goodwill has been impaired. Sun's current market capitalization is $8.5 billion.
"This analysis could potentially result in a non-cash goodwill impairment charge, for the entire goodwill balance at June 30, 2002, of up to approximately $2.2 billion," Sun said in the report.
In a separate filing, Sun detailed executive compensation. For the fiscal year ended June 30, Chief Executive Scott McNealy cashed in stock options worth $25 million. He also received a salary of $100,000 and a bonus of $487,500.
McNealy also was granted 3.5 million stock options for the year, all with a strike price of more than double Sun's current stock price.
Sun also disclosed in its annual report that it is in settlement talks with the Commerce Department over an issue stemming from computer equipment shipments to China in 1997 and 1998. "We expect to reach a resolution on this and don't expect a materially adverse impact at all," spokesman Andy Lark said.
"In early February 2002, Sun and two of its subsidiaries received several charging letters from the United States Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement (BIS) claiming that we had violated export control regulations. The letters relate to sales in 1998 in Egypt and in 1997 to a reseller in Hong Kong for subsequent resale in the People's Republic of China," Sun said in the filing. In addition, BIS said it expects to tell Sun of further violations, Sun said.
Sun also doled out cash bonuses and other perquisites to newly promoted executives, the company said.
Sun disclosed that David Yen, in charge of Sun's microprocessors and newly promoted to executive vice president, will receive a $500,000 bonus if he stays at Sun through May 17, 2004.
Pat Suelz, now in charge of Sun's services division, received a bonus of $380,000, half paid now and half if she stays through Oct. 3, 2003. Eva Sage-Gavin, in charge of Sun's Global Talent Organization, received the same bonus.
Sun also disclosed employee agreements with several departing executives. Under one, former Chief Financial Officer Mike Lehman will receive a $600,000 lump sum bonus. Former President and Chief Operating Officer Ed Zander will be paid half his former salary from Jan. 16, 2003, to Sept. 30, 2003, while he helps with Sun's Leadership Institute and customer visits.
John Shoemaker, formerly in charge of Sun's server lines and processors, will receive $1 million cash bonus around June 30, 2003, with a full salary until then and half salary through June 30, 2004.
Masood Jabbar, Sun's former top sales executive, will receive half pay through official retirement on Dec. 31, 2003.