Fitch affirms Sun Microsystems

Fitch Ratings said it affirmed Sun Microsystems, Inc.'s issuer default rating and senior unsecured debt at BBB-.

The outlook is stable.

The agency said the ratings reflect Sun's ample liquidity and improving free cash flow, strong balance sheet, expanding operating EBITDA margins, rebounding server market share and solid and improving credit metrics driven by increasing profitability.

Fitch's concerns center on the risk of additional cash-based acquisitions and associated integration risk, Sun's minimal operating profit, the potential acceleration of shareholder-friendly activities, execution risks related to Sun's extensive and ongoing restructuring program, the company's lackluster organic revenue performance for data management products thus far in fiscal 2007, and the long-term effect on server demand from server consolidations enabled by the growing adoption of virtualization software and multi-core processors.

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