Sun microsystems is a leading supplier of computer-related products, including servers, workstations, storage devices, and network switches. in 2009, sun microsystems was acquired by oracle corporation.

in the letter to stockholders as part of the 2001 annual report, president and ceo scott g. mcnealy offered the following remarks:

fiscal 2001 was clearly a mixed bag for sun, the industry, and the economy as a whole. still, we finished with revenue growth of 16 percent—and that's significant. we believe it's a good indication that sun continued to pull away from the pack and gain market share. for that, we owe a debt of gratitude to our employees worldwide, who aggressively brought costs down—even as they continued to bring exciting new products to market.

the statement would not appear to be telling you enough. for example, mcnealy says the year was a mixed bag with revenue growth of 16 percent. but what about earnings? you can delve further by examining the income statement in exhibit 4. also, for additional analysis of other factors, consolidated balance sheet(s) are presented in exhibit 5.

exhibit 1

2001 dollars

2000 dollars

1999 dollars

1998 dollars

net revenues

$ 18,275

$ 15,728

$ 11,820

$ 9,860

costs and expenses:

cost of sales

$ 10,036

$ 7,551

$ 5,661

$ 3,838

research and development

2,013

1,636

1,279

1,023

selling, general and administrative

4,540

4,073

3,201

2,835

goodwill amortization

260

65

18

0.3

in-process research and development

78

11

117

176

total costs and expenses

$ 16,927

$ 13,336

$ 10,276

$ 7,872.3

operating income

$ 1,348

$ 2,392

$ 1,544

$ 1,987.7

gain (loss) on strategic investments

$ -93

$ 208

-

-

interest income, net

$ 363

$ 170

$ 89

$ 46

litigation settlement

-

-

-

-

income before taxes

$ 1,618

$ 2,770

$ 1,633

$ 2,033.7

provision for income taxes

$ 750.41

$ 915.4

$ 548.95

$ 1,271.94

cumulative effect of change in accounting principle, net

$ -55

-

-

-

net income

$ 922.59

$ 1,854.6

$ 1,084.05

$ 761.76

net income per common share-diluted

$ 0.27

$ 0.55

$ 0.33

$ 0.24

shares used in the calculation of net income per common share-diluted

3,417

3,372

3,285

3,174

part a

referring to exhibit 1, compute the annual percentage change in net income per common share-diluted (second numerical line from the bottom) for 1998–1999, 1999–2000, and 2000–2001.

rate of change, 1998 to 1999:

rate of change, 1999 to 2000:

rate of change, 2000 to 2001:

part b

also in exhibit 1, compute net income/net revenue (sales) for each of the four years. begin with 1998.

1998 profit margin:

1999 profit margin:

2000 profit margin:

2001 profit margin: