SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

  X  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
---- Act of 1934 for the quarterly period ended December 31, 1995 or


---- Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934 for the transition period from          to 
                                                        ---------    -----------

                         Commission file number:0-15086

                             SUN MICROSYSTEMS, INC.
             (Exact Name of registrant as specified in its charter)


           Delaware                                       94-2805249
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)              


                2550 Garcia Avenue, Mountain View, CA 94043-1100
             (Address of principal executive offices with zip code)

Registrant's telephone number, including area code:           (415) 960-1300


                                      N/A
                     (Former name, former address and former
                   fiscal year, if changed since last report)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.


               YES    X                         NO
                  --------                        --------

                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                         BANKRUPTCY PROCEEDINGS DURING
                           THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

               YES                              NO
                  --------                        --------

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practical date.


            Class                              Outstanding at December 31, 1995

Common stock - $0.00067 par value                         183,306,237

<PAGE>


                                     INDEX


                                                                           PAGE
                                                                           ----
COVER PAGE                                                                   1

INDEX                                                                        2

PART I - FINANCIAL INFORMATION

        Item 1 - Financial Statements

                Condensed Consolidated Balance Sheets                        3

                Condensed Consolidated Statements of Income                  4

                Condensed Consolidated Statements of Cash Flows              5

                Notes to Condensed Consolidated Financial Statements         6



        Item 2 - Management's Discussion and Analysis of

                Results of Operations and Financial Condition                8

PART II - OTHER INFORMATION

        Item 5 - Other Information                                          13

        Item 6 - Exhibits and Reports on Form 8 - K                         15

SIGNATURES                                                                  16



                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS


                             SUN MICROSYSTEMS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                   December 31,       June 30,
                                                      1995              1995
                                                   -----------      -----------
                                                   (unaudited)
ASSETS
Current assets:
        Cash and cash equivalents                  $   470,591      $   413,869
        Short-term investments                         305,540          814,151
        Accounts receivable, net                     1,072,492        1,041,804
        Inventories                                    379,936          319,672
        Other current assets                           394,162          344,868
                                                   -----------      -----------
             Total current assets                    2,622,721        2,934,364
Property, plant and equipment, at cost               1,148,614        1,045,876
Accumulated depreciation and amortization             (685,841)        (616,871)
                                                   -----------      -----------
                                                       462,773          429,005
Other assets, net                                      183,005          181,184
                                                   -----------      -----------
                                                   $ 3,268,499      $ 3,544,553
                                                   ===========      ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Short-term borrowings                      $    13,877      $    50,786
        Accounts payable                               344,493          303,995
        Accrued liabilities                            695,422          688,325
        Other current liabilities                      222,985          287,676
                                                   -----------      -----------
             Total current liabilities               1,276,777        1,330,782
Long-term debt and other obligations                    65,843           91,176
Stockholders' Equity                                 1,925,879        2,122,595
                                                   -----------      -----------
                                                   $ 3,268,499      $ 3,544,553
                                                   ===========      ===========

                             See accompanying notes


                                       3
<PAGE>

<TABLE>

                             SUN MICROSYSTEMS, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                  (unaudited)

                    (in thousands, except per share amounts)


<CAPTION>
                                                    Three Months Ended                    Six Months Ended
                                               -----------------------------       ------------------------------
                                               December 31,        January 1,        December 31,      January 1,
                                                   1995               1995              1995              1995
                                               ------------        ----------        ----------        ----------

<S>                                              <C>               <C>               <C>               <C>       
Net revenues                                     $1,751,383        $1,475,349        $3,236,661        $2,748,788
Cost and expenses:
        Cost of sales                               984,665           862,113         1,813,698         1,623,491
        Research and development                    167,495           142,862           312,180           272,083
        Selling, general and administrative         421,252           353,415           819,868           682,437
                                                 ----------        ----------        ----------        ----------
            Total costs and expenses              1,573,412         1,358,390         2,945,746         2,578,011

Operating Income                                    177,971           116,959           290,915           170,777
Interest income, net                                  7,395             3,076            19,004             5,768
                                                 ----------        ----------        ----------        ----------
Income before income taxes                          185,366           120,035           309,919           176,545
Provision for income taxes                           59,317            38,411            99,174            56,494
                                                 ----------        ----------        ----------        ----------
Net Income                                       $  126,049        $   81,624        $  210,745        $  120,051
                                                 ==========        ==========        ==========        ==========

Net income per common and
   and common - equivalent
   share                                           $0.65              $0.42             $1.07            $0.62
                                                   =====              =====             =====            =====

Common and common-equivalent
   shares used in the calculation
   of net income per share                          194,300           195,518           196,799           193,954
                                                    =======           =======           =======           =======


<FN>

                            See accompanying notes.
</FN>
</TABLE>


                                       4

<PAGE>
<TABLE>

                             SUN MICROSYSTEMS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (unaudited)

                                 (in thousands)

<CAPTION>
                                                                       Six Months Ended
                                                              ------------------------------------
                                                              December 31,            January 1,
                                                                  1995                    1995
                                                              -----------             -----------

<S>                                                           <C>                     <C>        
Cash flow from operating activities:
        Net income                                            $   210,745             $   120,051
        Adjustments to reconcile net income
                to operating cash flows:
                Depreciation, amortization and
                        other non-cash items                      172,120                 133,581
                Decrease (increase) in accounts receivable        (30,688)                  8,201
                Increase in inventories                           (60,264)                (20,236)
                Increase (decrease) in accounts payable            40,498                 (94,243)
                Net increase in other current
                        and non-current assets                    (35,566)                (41,109)
                Net increase (decrease) in other current
                        and non-current liabilities               (62,899)                117,814
                                                              -----------             -----------
Net cash provided from operating activities                       233,946                 224,059
                                                              -----------             -----------
Cash flow from investing activities:
        Acquisition of property, plant and equipment             (137,380)               (137,174)
        Acquisition of other assets                               (47,892)                (22,164)
        Acquisition of short-term investments                  (1,027,664)             (1,376,229)
        Maturities of short-term investments                    1,538,666               1,418,071
                                                              -----------             -----------
Net cash (used by) provided from investing activities             325,730                (117,496)
                                                              -----------             -----------
Cash flow from financing activities:
        Issuance of common stock                                   29,814                  20,279
        Acquisition of treasury stock                            (484,047)                (18,979)
        Proceeds from employee stock purchase plans                27,770                  21,034
        Reduction of short - term borrowings, net                 (36,909)                (46,181)
        Reduction of long - term borrowings and other             (39,582)                (42,312)
                                                              -----------             -----------
Net cash used by financing activities                            (502,954)                (66,159)
                                                              -----------             -----------
Net increase in cash and cash equivalents                     $    56,722             $    40,404
                                                              ===========             ===========
Supplemental disclosures of cash flow information:
        Cash paid during the period for:
        Interest                                              $     9,669             $     9,057
        Income taxes                                          $   131,396             $    32,978


<FN>
                            See accompanying notes.
</FN>
</TABLE>

                                       5
<PAGE>

                             SUN MICROSYSTEMS, INC.
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


BASIS OF PRESENTATION

The consolidated  financial statements include the accounts of Sun Microsystems,
Inc.  ("Sun" or "the Company") and its wholly owned  subsidiaries.  Intercompany
accounts and transaction have been eliminated.  Certain amounts from prior years
have been reclassified to conform to current year presentation.

While the quarterly financial information is unaudited, the financial statements
included  in this  report  reflect all  adjustments  (consisting  only of normal
recurring accruals) that the Company considers necessary for a fair presentation
of the  results  of  operations  for  the  interim  periods  covered  and of the
financial condition of the Company at the date of the interim balance sheet. The
results for the interim  periods are not  necessarily  indicative of the results
for the entire year. The  information  included in this report should be read in
conjunction with the 1995 Annual Report to Stockholders which is incorporated by
reference in the Company's 1995 Form 10-K.


INVENTORIES (in thousands)

                                             December 31, 1995    June 30, 1995
                                             -----------------    -------------

Raw materials                                    $211,072            $170,337

Work in process                                    60,142              32,356

Finished goods                                    108,722             116,979
                                                 --------            --------

                                                 $379,936            $319,672
                                                 ========            ========

INCOME TAXES

The Company accounts for income taxes under the liability method of Statement of
Financial  Accounting  Standards  No. 109. The provision for income taxes during
the interim periods considers  anticipated annual income before taxes,  earnings
of foreign subsidiaries  permanently  invested in foreign operations,  and other
differences.


STOCK DIVIDEND

The Company effected a two-for-one  stock split (effected in the form of a stock
dividend) to  stockholders of record as of the close of business on November 20,
1995.  Share and per share amounts  presented  have been adjusted to reflect the
stock dividend.

                                       6
<PAGE>


SUBSEQUENT EVENT

On January 24, 1996, a punitive class action entitled Abraham and Evelyn Kostick
Trust v. Peter O. Crisp, et al. No. CV755458, was filed in the Superior Court of
the State of California in the County of Santa Clara. The plaintiff claims to be
a representative of a class of public stockholders of Apple Computer, Inc. Named
as  defendants  are Apple  Computer,  Inc.,  the  members of the Apple  Board of
Directors,  and the Company.  The  plaintiff  alleges that Apple's Board and top
management have frustrated  overtures from various companies to acquire Apple at
a premium in order to maintain  "their  lucrative  jobs and their  positions  of
power,  prestige and profits." It is further  alleged that Apple and the Company
"are  on  the  verge"  of  an   acquisition   agreement   with  terms  that  are
"intrinsically  unfair" to Apple  shareholders.  The plaintiff  claims that such
actions  amount to a breach of fiduciary  duty by the Apple Board of  Directors.
The Company is alleged to incur  liability  by "aiding and  abetting"  the Apple
Board's  actions.  The complaint seeks an injunction  against any combination by
Apple with the Company,  and an award of unspecified  compensatory  and punitive
damages. The Company's response to the Complaint is due by February 29, 1996. To
the Company's knowledge,  no formal request for an injunction has yet been filed
by the plaintiff.

                                       7
<PAGE>

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
                OPERATIONS AND FINANCIAL CONDITION

The following table sets forth items from the Condensed Consolidated  Statements
of Income as a percentage of net revenues:



                             Three Months Ended           Six Months Ended
                          -------------------------   ------------------------
                          December 31,   January 1,   December 31,  January 1,
                             1995          1995          1995         1995
                             ----          ----          ----         ----

Net Revenues                 100.0%       100.0%       100.0%       100.0%

Cost of sales                 56.2         58.4         56.0         59.1
                              ----         ----         ----         ----

        Gross margin          43.8         41.6         44.0         40.9

Research and development       9.6          9.7          9.6          9.9

Selling, general 
  and administrative          24.0         24.0         25.3         24.8
                              ----         ----         ----         ----

Operating income              10.2          7.9          9.1          6.2

Interest income, net           0.4          0.2          0.6          0.2
                              ----         ----         ----         ----

Income before income taxes    10.6          8.1          9.7          6.4

Provision for income taxes     3.4          2.6          3.1          2.0
                              ----         ----         ----         ----

        Net income             7.2%         5.5%         6.6%         4.4%
                              ====         ====         ====         ====



RESULTS OF OPERATIONS

Net revenues

Net revenues were $1.751  billion for the second  quarter and $3.237 billion for
the first six months of fiscal 1996, representing increases of 18.7 % and 17.7%,
respectively,   over  the  comparable  periods  of  fiscal  1995.  Approximately
two-thirds  of the growth in revenues  resulted  from  strong  demand for richly
configured servers,  high-end desktop systems, and from memory, storage options,
and accessories shipped as part of system sales. The remaining increase reflects
growth in revenues from memory,  storage  options,  and  accessories  shipped as
separate orders and an increase in revenues from other Sun businesses, including
service,  aftermarketing,  microprocessors,  and software,  in total as compared
with the corresponding periods of fiscal 1995.

Domestic  net  revenues  increased  by 11.6% and 14.0% while  international  net
revenues  (including  United States  exports) grew 26.0% and 21.7% in the second
quarter and first six months of fiscal  1996,  respectively,  compared  with the
corresponding  periods of fiscal 1995.  Europe net revenues  increased 23.6% and
19.3%  while  net  revenues  in Rest of World  increased  28.9% and 24.5% in the
second quarter and first six months of fiscal 1996, respectively,  when compared
with the same  periods of fiscal  1995.  These  increases  are due  primarily to
continued  strengthening  of the markets in Europe and the expanding  markets in
Asia.


                                       8
<PAGE>

Compared with the second quarter of fiscal 1995, the dollar has weakened against
most major European  currencies and remained  relatively  consistent against the
Japanese yen. For the six month period, the dollar has strengthened  against the
Japanese  Yen and remained  relatively  consistent  against most major  European
currencies,  compared with the corresponding  period in fiscal 1995.  Management
has estimated that the net impact of currency fluctuations on operating results,
while slightly favorable, was not significant in the second quarter or the first
six months of fiscal 1996.

Gross margin

Gross margin was 43.8% for the second quarter and 44.0% for the first six months
of  fiscal  1996,  compared  with  41.6%  and  40.9%,   respectively,   for  the
corresponding  periods of fiscal 1995.  The increase in the gross margin for the
periods compared reflects the effects of increased revenue generated from richly
configured, higher margin servers and memory storage options and accessories.

The factors  described above resulted in a favorable  impact on gross margin for
the  second  quarter  and first six  months of fiscal  1996.  Systems  repricing
actions may be initiated in the future,  which could result in downward pressure
on gross margins.  Sun's future operating results would be adversely affected if
such  repricing  actions were to occur and the Company is unable to mitigate the
margin  pressure by maintaining a favorable mix of systems,  software,  service,
and other  revenues and by achieving  component  cost  reductions  and operating
efficiencies.


Research and development

Research  and  development  (R&D)  expenses  were  $167.5  million in the second
quarter  and $312.2  million for the first six months of fiscal  1996,  compared
with  $142.9 and  $272.1  million  for the same  periods  of fiscal  1995.  As a
percentage of net revenues,  R&D expenses  decreased to 9.6% for both the second
quarter  and  first  six  months  of  fiscal  1996,  from  9.7%  and 9.9% in the
comparable  periods of fiscal 1995. The decrease as a percentage of net revenues
is  primarily  due to the  increase in  revenues in both the second  quarter and
first six months of fiscal  1996 over the  comparable  periods  of fiscal  1995.
Slightly  more than a quarter of the dollar  increase in the second  quarter and
more than a third of the dollar increase for the first six months of fiscal 1996
over the comparable  periods in fiscal 1995 reflect increases in compensation as
a result of increased  staffing and achievement of specified  performance goals.
The  remaining  increase  in  absolute  dollars is due to Sun's  development  of
UltraSPARC and the Company's  continuing  emphasis on technological  advancement
for both hardware and software products, as well as microprocessor technologies.
To maintain its  competitive  position in the industry,  the Company  expects to
continue  to  invest  significant  resources  in  new  hardware,   software  and
microprocessor  product  development,  as well as in  enhancements  to  existing
products.


Selling, general and administrative

Selling,  general and administrative  (SG&A) expenses were $421.3 million in the
second  quarter  and  $819.9  million  in the first six  months of fiscal  1996,
compared with $353.4 and $682.4  million for the same periods of fiscal 1995. As
a percentage of net  revenues,  SG&A expenses were 24.0% and 25.3% in the second
quarter and first six months of fiscal 1996, respectively,  and 24.0% and 24.8%,
respectively in the comparable periods of fiscal 1995. Approximately half of the
dollar  increases are  attributable to increased  marketing costs related to new
product introductions and other promotional  programs,  and increases related to
compensation  resulting  from increased  headcount and  achievement of specified
performance goals. The remaining  increases reflect costs incurred in connection
with the  Company's  ongoing  efforts to improve  business  processes  and cycle
times.  The  Company  expects  to  continue  to invest  in  efforts  to  achieve
additional  operating  efficiencies  through continual review and improvement of
business  processes  . In  addition,  the  Company  expects to  continue to hire
personnel  to  drive  its  demand   creation   programs   and  service   support
organizations.



                                      9
<PAGE>

Interest income, net

Net interest  income was $7.4 million for the second  quarter and $19.0  million
for the first six months of fiscal  1996,  compared  with $3.1  million and $5.8
million,  respectively,  in net interest income for the corresponding periods in
fiscal  1995.  The  increase is  primarily  the result of interest  savings from
reduced debt levels in fiscal 1996 as compared to the  corresponding  periods in
fiscal 1995.


Income taxes

The Company's effective income tax rate for the second quarter and the first six
months of both fiscal 1996 and 1995 was 32%.


FUTURE OPERATING RESULTS

This following section of the report contains forward-looking  statements within
the  meaning  of the  Private Securities  Litigation  Reform  Act of 1995.  Such
forward-looking  statements  involve  risks  and  uncertainties  so that  actual
results may vary materially.

The future  operating  results  discussed below  represent  specific risks which
could impact the  financial  condition  and results over the next few  quarters.
This information below should be read in conjunction with the 1995 Annual Report
to  Stockholders  which is  incorporated by reference in the Company's 1995 Form
10-K.

Sun introduced  and began  shipments of its new enhanced  desktop  systems based
upon the  UltraSPARC  processors  in the second  quarter of this fiscal year. In
addition,  Sun's enhanced server systems based upon the UltraSPARC processor are
intended to be  introduced in the second half of fiscal 1996.  Future  operating
results will depend to a considerable extent on the Company's ability to closely
manage the  introduction  of  products  based  upon  UltraSPARC  processors.  In
addition,  the timing of  introductions  of new  products  and services by Sun's
competitors may negatively  affect the future operating  results of the Company,
particularly when occurring in periods leading up to the Company's  introduction
of its own new or enhanced products, such as the UltraSPARC products.  These new
UltraSPARC products include advanced components  manufactured  internally and by
third party  suppliers.  The  manufacture  and timely  delivery of the Company's
UltraSPARC  products depends on the ability of certain  suppliers to manufacture
and deliver  advanced  components  in  sufficient  quantity and quality to build
these products.  Furthermore,  in order to secure  components for production and
introduction  of these new  products,  the  Company  frequently  makes  advanced
payments  to certain  suppliers  and often  enters into  noncancelable  purchase
commitments with vendors with respect to the purchase of components.  Due to the
variability  of  material  requirement  specifications  during  development  and
production,  the Company must closely manage material  purchase  commitments and
respective  delivery  schedules.  The  inability of the Company to secure enough
components  to build  the new  products  in the  quantities  and  configurations
required or to produce, test and deliver sufficient products to meet demand in a
timely manner, and any delays in production or variability of customer demand in
light of the Company's noncancelable purchase commitments would adversely affect
the Company's net revenues and operating results.

The  introduction  of the  UltraSPARC  products  requires  that the Company must
rapidly  bring such  products to volume  manufacturing,  a process that requires
accurate forecasting of volumes, mix of products and configurations, among other
things in order to achieve  acceptable yields and costs. The Company must manage
the  transition  from  older,  displaced  products to  minimize  disruptions  in
customer ordering patterns, reduce levels of older product inventory, and ensure
that  adequate  volumes of the new products  can be  delivered to meet  customer
demand.  The  ability  of the  Company  to match  supply  and  demand is further
complicated  by  the  Company's  need  to  adjust  prices  to  reflect  changing
competitive  and market  conditions and the  variability  and timing of customer
orders  taken with respect to its older  products.  As a result,  the  Company's
operating  results  could be  adversely  affected  if the Company is not able to
correctly  anticipate  the level of demand and the mix 


                                       10
<PAGE>

of  products.  Because  the  Company is  continuously  engaged  in this  product
development,  introduction and transition process,  its operating results may be
subject to considerable  fluctuations  particularly when measured on a quarterly
basis.

Generally,  the computer  systems sold by Sun, such as the UltraSPARC  products,
are the result of both  adopting  hardware and software  development,  such that
delays in the software  development can delay the ability of the Company to ship
new hardware  products.  In addition,  adoption of a new release of an operating
system may require  effort on the part of the  customer  and porting by software
vendors providing  applications.  As a result, the timing of conversion to a new
release is inherently  unpredictable.  Moreover, delays by customers in of a new
release of an operating system can limit the  acceptability of hardware products
tied to that release.  Such delays could adversely  affect the future  operating
results of the Company. Sun's systems based on the UltraSPARC processors operate
using the Company's  recently released version of its operating system,  Solaris
2.5. In attempts to minimize the aforementioned  risks, the Company has expended
significant  effort  toward  making  Solaris  2.5  binary  compatible  with  the
applications  currently  running on Solaris 2.x, so customers should not need to
modify these  applications  to run on UltraSPARC-  based systems.  The Company's
operating  results  would be adversely  affected if Solaris 2.5 does not achieve
market acceptance in a timely manner.

The Company's order backlog at December 31, 1995 was approximately $378 million,
an increase of $55 million from the backlog level of approximately  $323 million
at June  30,  1995 due in part to the  introduction  of the  UltraSPARC  - based
systems.  Backlog includes only orders for which a delivery  schedule within six
months has been  specified  by the  customer.  Backlog  levels vary with demand,
product  availability  and the Company's  delivery lead times and are subject to
decreases as a result of customer  order delays,  changes or  cancellations.  As
such, backlog levels are not a reliable indicator of future operating results.

The Company receives questions from time to time from stockholders regarding the
fluctuation of operating  results.  The Company's future operating  results will
continue  to be subject to  quarterly  variations  based upon a wide  variety of
factors, including volume, mix, and timing of orders received during the period,
the ability to develop,  manufacture  and introduce new products,  the timing of
new product  introductions,  the  availability  of  components,  price  erosion,
conditions in the computer  hardware and software  industries  generally and the
general economy, such as recessionary periods, political instability, changes in
trade policies,  fluctuations  in interest or currency  exchange rates and other
competitive  factors.  Seasonality also affects the Company's operating results,
particularly  in the  first  quarter  of each  fiscal  year.  In  addition,  the
Company's  operating  expenses are increasing as the Company continues to expand
its  operations,  and future  operating  results will be  adversely  affected if
revenues do not  increase  accordingly.  While the Company  cannot  predict what
effect these various  factors may have on its financial  results,  the aggregate
effect of these and other factors could results in significant volatility in the
Company's future performance and stock price.


LIQUIDITY AND CAPITAL RESOURCES

Total assets at December 31, 1995 decreased by  approximately  $276 million from
June 30, 1995,  due  principally  to a decrease in cash,  cash  equivalents  and
short-term  investments  ($452 million) offset by increases in inventories  ($60
million), other current assets ($49 million), property, plant and equipment- net
($33  million)  and  accounts  receivable  ($31  million).  Cash and  short-term
investments  decreased primarily due to the repurchase of 17.2 million shares of
common stock for $455 million during the first quarter of fiscal 1996 and due to
scheduled debt  repayments.  The increase in inventories  reflects a build-up of
supply to meet anticipated  customer demand for new products to be introduced in
the second half of fiscal 1996. Other current assets  increased  principally due
to the timing of payments  for income and other  taxes.  Increase  in  property,
plant and equipment  reflects  additions to the Company's  Menlo Park campus and
capital  additions  to support  the  increased  headcount.  Accounts  receivable
increase  reflects an increase in quarterly  revenues from the fourth quarter of
fiscal 1995 to the second quarter of fiscal 1996 of $103 million.


                                       11
<PAGE>

Total  liabilities  decreased $80 million from June 30, 1995, due principally to
decreases in income taxes  payable ($62  million) and  short-term  and long term
debt  obligations  ($62 million) offset by an increase in accounts  payable ($41
million).  Income tax payable  decreased  due to timing of income tax  payments.
Short-term  and long term debt  obligations  decreased  as a result of scheduled
debt repayments.  The increase in accounts payable primarily  reflects increased
inventory  receipts  in the last two weeks of the  quarter  as  compared  to the
fourth quarter of fiscal 1995.

At December 31, 1995, the Company's  primary  sources of liquidity  consisted of
cash,  cash  equivalents  and  short-term  investments  of  $776  million  and a
revolving  credit  facility  with  banks  aggregating  $150  million,  which was
available  subject to compliance with certain  covenants.  The Company  believes
that the liquidity provided by existing cash and short-term  investment balances
and the borrowing  arrangements  described  above will be sufficient to meet the
Company's  capital  requirements  through  fiscal  1996.  However,  the  Company
believes the level of financial resources is a significant competitive factor in
its industry and may choose at any time to raise additional capital through debt
or equity financing to strengthen its financial position,  facilitate growth and
provide the Company with  additional  flexibility  to take advantage of business
opportunities that may arise.



                                       12
<PAGE>
                          PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On January 24, 1996, a punitive class action entitled Abraham and Evelyn Kostick
Trust v. Peter O. Crisp, et al. No. CV755458, was filed in the Superior Court of
the State of California in the County of Santa Clara. The plaintiff claims to be
a representative of a class of public stockholders of Apple Computer, Inc. Named
as  defendants  are Apple  Computer,  Inc.,  the  members of the Apple  Board of
Directors,  and the Company.  The  plaintiff  alleges that Apple's Board and top
management have frustrated  overtures from various companies to acquire Apple at
a premium in order to maintain  "their  lucrative  jobs and their  positions  of
power,  prestige and profits." It is further  alleged that Apple and the Company
"are  on  the  verge"  of  an   acquisition   agreement   with  terms  that  are
"intrinsically  unfair" to Apple  shareholders.  The plaintiff  claims that such
actions  amount to a breach of fiduciary  duty by the Apple Board of  Directors.
The Company is alleged to incur  liability  by "aiding and  abetting"  the Apple
Board's  actions.  The complaint seeks an injunction  against any combination by
Apple with the Company,  and an award of unspecified  compensatory  and punitive
damages. The Company's response to the Complaint is due by February 29, 1996. To
the Company's knowledge,  no formal request for an injunction has yet been filed
by the plaintiff.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On November 1, 1995, the Annual Meeting of  Stockholders of the Company was held
in Menlo Park, California.  An election of directors was held with the following
individuals being elected to the Board of Directors of the Company:

                                           Share Voted For     Votes Withheld
                                           ---------------     --------------

      Scott G. McNealy                        81,210,675           362,472
      L. John Doerr                           81,224,075           249,072
      Judith L. Estrin                        81,187,563           285,584
      Robert J. Fisher                        81,212,332           260,815
      Robert L. Long                          81,213,709           259,438
      M. Kenneth Oshman                       81,222,174           250,973
      A. Michael Spence                       73,361,361         8,111,786

The seven  nominees who  received the highest  number of votes (all of the above
individuals)  were elected to the Board of  Directors.  Votes  withheld from any
nominee were counted for  purposes of  determining  the presence or absence of a
quorum.

The stockholders also approved an amendment to the Company's 1990 Employee Stock
Purchase Plan which  increased the number of shares of Common Stock reserved for
issuance  thereunder by 3,900,000  shares,  from 7,550,000  shares to 11,450,000
shares.  There were 64,363,131 shares voted for the amendment,  6,909,677 shares
voted against the amendment, 214,278 abstentions and 9,986,061 broker non-votes.
The  stockholders  also  approved am amendment to the Company's  1990  Long-Term
Equity  Incentive  Plan in order to increase  the number of shares  reserved for
issuance  thereunder by 12,100,000 shares,  from 13,250,000 shares to 25,350,000
shares. There were 43,565,969 shares voted in favor of the amendment, 26,808,787
shares voted against the amendment,  350,460  abstentions and 10,747,931  broker
non-votes.  Additionally, the stockholders approved the Company's Section 162(m)
Performance-Based Executive Bonus Plan (the "Bonus Plan"). There were 70,865,909
shares  voted in favor of the Bonus Plan,  7,378,059  shares  voted  against the
Bonus Plan, 291,296 abstentions and 2,937,983 broker non-votes.  The affirmative
vote of the holders of a majority of the Common Stock  represented  in person or
by proxy and entitled to vote at the Annual Meeting ("Votes Cast") was needed in
order to approve the foregoing proposals.  Votes cast against the proposals were
counted for purposes of determining  (i) the presence or absence of a quorum for
the  transaction  of business  and (ii) the number of votes cast with respect to
each such  proposal.  An  abstention  had the same effect as a vote  against the
proposal. Broker non-votes were counted for purposes of determining the presence
or absence of a quorum, but were non counted as Votes Cast.

                                       13
<PAGE>

ITEM 5 - OTHER INFORMATION


SCHEDULE OF SALES BY EXECUTIVE OFFICERS DURING THE QUARTER

The  following  is a summary of all sales of the  Company's  Common Stock by the
Company's  executive officers and directors who are subject to Section 16 of the
Securities  Exchange Act of 1934,  as amended,  during the fiscal  quarter ended
December 31, 1995:



OFFICER /                DATE           PRICE                   NUMBER OF
DIRECTOR                                                        SHARES SOLD
============================================================================

William Hearst *        11/8/95         $84.375                  5,000

Masood Jabbar           11/3/95         $83.00                   5,284





*Former director of Sun Microsystems, Inc


The  amounts  above do not  reflect  the stock  dividend  which was  effected on
November 20, 1995.

                                       14

<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K


a) EXHIBITS


          11.0            Statement re: Computation of Earnings Per Share

          27.0            Financial data for the period ended December 31, 1995


b) REPORTS ON FORM 8-K

A report on Form 8-K was filed on November 7, 1995 reporting that on November 2,
1995,  the Company  amended its First Amended and Restated  Common Shares Rights
Agreement  between  the  Company  and the First  National  Bank of Boston  dated
December  14,  1990,  as amended to date,  in order to  increase  the  "Purchase
Price",  as defined  therein,  from $100 to $200 ( effectively  $50 to $100 on a
post-split basis reflecting the Company's  two-for-one stock split,  effected in
the form of a stock dividend,  the record date and the payment date of which was
November 20, 1995 and December 11, 1995, respectively).



                                       15

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                           SUN MICROSYSTEMS, INC.



                           BY



                                 /s/  Michael E. Lehman
                                      -----------------------------
                                      Michael E. Lehman
                                      Vice President and Chief Financial Officer




                                 /s/  George Reyes
                                      -----------------------------
                                      George Reyes
                                      Vice President and Corporate Controller,
                                      Chief Accounting Officer



Dated:   January 31, 1996



                                       16