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 March 30, 1997 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 March 30, 1997
Common stock - $0.00067 par value                           368,872,018


<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 2-  Changes in Securities                                      14
         Item 5 - Other Information                                          15
         Item 6 - Exhibits and Reports on Form 8 - K                         16

  SIGNATURES                                                                 17

                                       2

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

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


                                                     March 30,        June 30,
                                                       1997            1996
                                                   -----------      -----------
                                                   (unaudited)
  ASSETS
Current assets:
       Cash and cash equivalents                   $   484,479      $   528,854
       Short-term investments                          487,581          460,743
       Accounts receivable, net                      1,421,489        1,206,612
       Inventories                                     491,470          460,914
       Deferred tax assets                             203,494          177,554
       Other current assets                            236,132          199,059
                                                   -----------      -----------
            Total current assets                     3,324,645        3,033,736
Property, plant and equipment, at cost               1,591,714        1,282,384
Accumulated depreciation and amortization             (865,256)        (748,535)
                                                   -----------      -----------
                                                       726,458          533,849
Other assets, net                                      171,691          233,324
                                                   -----------      -----------
                                                   $ 4,222,794      $ 3,800,909
                                                   ===========      ===========



  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
       Short-term borrowings                       $     4,556      $    49,161
       Accounts payable                                521,714          325,067
       Accrued liabilities                             864,843          801,550
       Other current liabilities                       240,515          313,491
                                                   -----------      -----------
            Total current liabilities                1,631,628        1,489,269
Long-term debt and other obligations                   107,266           60,154
Stockholders' equity                                 2,483,900        2,251,486
                                                   -----------      -----------
                                                   $ 4,222,794      $ 3,800,909
                                                   ===========      ===========


                             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                 Nine Months Ended
                                                                         ------------------                 -----------------
                                                                     March 30,         March 31,         March 30,         March 31,
                                                                       1997              1996              1997              1996
                                                                    ----------        ----------        ----------        ----------
<S>                                                                 <C>               <C>               <C>               <C>       
Net revenues                                                        $2,114,618        $1,840,028        $6,055,225        $5,076,689
Cost and expenses:
       Cost of sales                                                 1,053,194         1,016,688         3,058,697         2,806,186
       Research and development                                        196,151           164,102           583,429           474,482
       Purchased in-process research and
           development                                                  22,958              --              22,958              --
       Selling, general and administrative                             585,305           457,447         1,701,302         1,303,315
                                                                    ----------        ----------        ----------        ----------
           Total costs and expenses                                  1,857,608         1,638,237         5,366,386         4,583,983
Operating income                                                       257,010           201,791           688,839           492,706
Gain on sale of equity investment                                       62,245              --              62,245              --
Interest income, net                                                     9,438             8,954            21,331            27,958
                                                                    ----------        ----------        ----------        ----------
Income before income taxes                                             328,693           210,745           772,415           520,664
Provision for income taxes                                             105,182            67,438           247,173           166,612
                                                                    ----------        ----------        ----------        ----------
Net income                                                          $  223,511        $  143,307        $  525,242        $  354,052
                                                                    ==========        ==========        ==========        ==========

Net income per common and
       and common-equivalent
       share                                                        $     0.58        $     0.37        $     1.35        $     0.90
                                                                    ==========        ==========        ==========        ==========

Common and common-equivalent
       shares used in the calculation
       of net income per share                                         388,364           391,486           389,073           392,894
                                                                    ==========        ==========        ==========        ==========


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

                                                                 4

<PAGE>


<TABLE>

                                                       SUN MICROSYSTEMS, INC.
                                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                             (unaudited)
                                                           (in thousands)
<CAPTION>

                                                                                                        Nine Months Ended
                                                                                                 March 30,                March 31,
                                                                                                   1997                     1996
                                                                                               -----------              -----------
Cash flow from operating activities:
<S>                                                                                            <C>                      <C>        
       Net income                                                                              $   525,242              $   354,052
       Adjustments to reconcile net income
                to operating cash flows:
                Depreciation, amortization and
                         other non-cash items                                                      305,884                  251,811
                Gain on sale of equity investment                                                  (62,245)                    --
                Other non-cash items                                                                22,958                     --
                Increase in accounts receivable                                                   (214,877)                (145,656)
                Increase in inventories                                                            (30,556)                (188,327)
                Increase in accounts payable                                                       196,647                   95,584
                Net increase in other current
                         and non-current assets                                                    (91,890)                 (28,460)
                Net increase in other current
                         and non-current liabilities                                               116,271                   59,107
                                                                                               -----------              -----------
Net cash provided from operating activities                                                        767,434                  398,111
                                                                                               -----------              -----------
Cash flow from investing activities:
       Acquisition of property, plant and equipment                                               (403,589)                (222,691)
       Acquisition of other assets                                                                 (27,270)                 (62,421)
       Payment for LongView Technologies acquisition                                               (22,958)
       Acquisition of short-term investments                                                      (473,939)              (1,131,865)
       Maturities of short-term investments                                                        447,574                1,543,880
                                                                                               -----------              -----------
Net cash (used by) provided from investing activities                                             (480,182)                 126,903
                                                                                               -----------              -----------
Cash flow from financing activities:
       Issuance of common stock                                                                     32,482                   43,515
       Acquisition of treasury stock                                                              (398,267)                (504,640)
       Proceeds from employee stock purchase plans                                                  51,287                   38,104
       Proceeds from sale of equity investment                                                      62,245                     --
       Reduction of short - term borrowings, net                                                   (44,605)                 (23,078)
       Reduction of long - term borrowings                                                         (34,769)                 (39,648)
                                                                                               -----------              -----------
Net cash used by financing activities                                                             (331,627)                (485,747)
                                                                                               -----------              -----------
Net (decrease) increase  in cash and cash equivalents                                          $   (44,375)             $    39,267
                                                                                               ===========              ===========
Supplemental disclosures of cash flow information:
       Cash paid during the period for:
                Interest                                                                       $    10,616              $    13,796
                Income taxes                                                                   $   248,172              $   170,492

<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  transactions   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  1996  Annual  Report  to  Stockholders  which is  incorporated  by
         reference in the Company's 1996 Form 10-K.

INVENTORIES (in thousands)

                                       March 30, 1997      June 30, 1996
                                       --------------      -------------
Raw materials                            $281,534            $267,811

Work in process                            47,094              58,337

Finished goods                            162,842             134,766
                                         --------            --------

                                         $491,470            $460,914
                                         ========            ========


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 a declared  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 18,
1996.  Share and per share amounts  presented  have been adjusted to reflect the
stock dividend.

                                       6

<PAGE>

ACQUISITIONS

On February 14,  1997,  the Company  acquired  all of the  interests of LongView
Technologies LLC, a limited liability development stage company, for $22,957,500
in cash. None of LongView's products had achieved technological  feasibility and
no alternative future uses have been established by the Company. The transaction
was  accounted  for as a  purchase.  The excess of the  purchase  price over the
estimated fair value of net tangible assets has been allocated to purchased in -
process  research  and  development   based  upon  an  independent  third  party
valuation.  The  purchased  in-process  research and  development  resulted in a
write-off of $22,957,500.

RECENT PRONOUNCEMENTS

In 1997 Financial  Accounting Standards No. 128 ("FAS 128") "Earnings Per Share"
was issued and is effective for the fiscal year  commencing  after  December 15,
1997.  The  Company  will be  required  to change the method  currently  used to
compute  earnings  per  share  and  restate  all  prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock options will be excluded.  The impact is expected to result in an increase
in primary  earnings per share for the three month  periods ended March 30, 1997
and March 31, 1996 of $0.03 and $0.02 per share,  respectively  (and an increase
in primary  earnings per share for the nine month  periods  ended March 30, 1997
and March 31,  1996 of $0.07 and $0.05 per share,  respectively).  The impact of
FAS 128 on the calculation of fully diluted earnings per share for these periods
is not expected to be material.

                                       7

<PAGE>

<TABLE>
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:
<CAPTION>

                                                          Three Months Ended                   Nine Months Ended
                                                          ------------------                   -----------------
                                                       March 30,        March  31,        March 30,          March 31,
                                                         1997              1996              1997              1996
                                                        ------            ------            ------            ------
<S>                                                     <C>               <C>               <C>               <C>   
Net revenues                                            100.0%            100.0%            100.0%            100.0%

Cost of sales                                            49.8              55.3              50.5              55.3
                                                        ------            ------            ------            ------

         Gross margin                                    50.2              44.7              49.5              44.7

Research and development                                  9.3               8.9               9.6               9.3

Purchased in-process research and
         development                                      1.1                --                .4               --

Selling, general and administrative                      27.6              24.8              28.1              25.7
                                                        ------            ------            ------            ------

Operating income                                         12.2              11.0              11.4               9.7

Gain on sale of equity investment                         2.9                --               1.0               --

Interest income, net                                      0.4               0.5               0.4               0.6
                                                        ------            ------            ------            ------

Income before income taxes                               15.5              11.5              12.8              10.3

Provision for income taxes                                4.9               3.7               4.1               3.3
                                                        ------            ------            ------            ------

         Net income                                      10.6%              7.8%              8.7%              7.0%
                                                        ======            ======            ======            ======
</TABLE>

This following sections contains  forward-looking  statements within the meaning
of the Private  Securities  Litigation Reform Act of 1995. Such  forward-looking
statements  involve risks and  uncertainties  such 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 1996 Annual Report
to  Stockholders  which is  incorporated by reference in the Company's 1996 Form
10-K.

RESULTS OF OPERATIONS

Net revenues

Net revenues were $2.115  billion for the third  quarter and $6.055  billion for
the first nine months of fiscal 1997, representing increases of 14.9% and 19.3%,
respectively,   over  the  comparable  periods  of  fiscal  1996.  

                                       8

<PAGE>

Approximately  eighty-five  percent  of the  growth in  revenues  resulted  from
increased demand for 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  other Sun  businesses,  including  service,
aftermarketing, and microprocessors,  as compared with the corresponding periods
of fiscal 1996.

Domestic  net  revenues  increased  by 20.6% and 22.9% while  international  net
revenues  (including  United  States  exports) grew 10.2% and 16.1% in the third
quarter and first nine months of fiscal 1997,  respectively,  compared  with the
corresponding  periods of fiscal 1996. European net revenues increased 15.1% and
17.8% while net revenues in Rest of World  increased 5.6% and 14.0% in the third
quarter and first nine months of fiscal 1997,  respectively,  when compared with
the same periods of fiscal 1996. The increase in European  revenues in the third
quarter was principally related to improving demand in Germany,  Switzerland and
France.  The increase in such revenues for the nine month period was principally
related  to  higher  levels  of  demand  in  the  United  Kingdom,  Germany  and
Switzerland.

During the third  quarter of fiscal 1997,  the  Company's  revenues in Japan,  a
principal component of the "Rest of World" category,  declined slightly in local
currency.  This decline  somewhat offset the continued  growth in other parts of
Asia, and parts of Latin and South America.  The Company attributes the decrease
in revenues in Japan  principally to the current  economic trends  effecting the
Japanese market and is not expecting significant change in the near term. If the
economic  trends  in Japan  significantly  worsen in a quarter  or  continue  to
decline over an extended  period of time, the Company's  results from operations
and cash flows could be adversely effected.

Compared with the third quarter of fiscal 1996, the dollar has weakened  against
the British pound  sterling and  strengthened  against the Japanese yen,  German
mark,  and French  franc.  For the nine month period  ended March 30, 1997,  the
dollar  has  strengthened  against  the  Japanese  yen and most  major  European
currencies,  compared with the corresponding  period of fiscal 1996.  Management
has  estimated  that  fluctuations  of the  dollar  against  all  other  foreign
currencies  on a net basis  during the quarter  resulted in  approximately  a 3%
reduction in the Company's  revenues for the quarter  ended March 30, 1997.  The
overall impact of currency  fluctuations  on operating  results,  while slightly
unfavorable,  was not  significant in either the third quarter or the first nine
months of fiscal 1997.

The  Company  generally  manages  currency  exposure  through the use of simple,
short-term forward foreign exchange and currency option contracts, the objective
of which is to minimize  the impact of currency  fluctuations  on the results of
operations.  As the Company  utilizes  projected  data to establish  its forward
exchange and currency option contracts,  variances which result from forecasting
differences and the extent of currency  movement during the quarter could have a
material adverse effect on the results of operations and cash flows.

Gross margin

Gross margin was 50.2% for the third quarter and 49.5% for the first nine months
of fiscal 1997, compared with 44.7%, respectively, for the corresponding periods
in fiscal 1996. The increase in gross margin for the periods  compared  reflects
principally  the effects of  increased  revenue  generated  from sales of higher
margin  servers,  memory storage options and  accessories,  as well as continued
component cost decreases by the Company.

The factors  described above resulted in a favorable  impact on gross margin for
the third quarter and first nine months of fiscal 1997. The Company continuously
evaluates the competitiveness of its product offerings.  These evaluations could
result in repricing  actions in the near term.  Sun's future  operating  results
would be  adversely  affected if such  repricing  actions  were to occur and the
Company were unable to mitigate the resulting  margin  pressure by maintaining a
favorable mix of systems, software, service, and other products and by achieving
component cost reductions, operating efficiencies and increasing volumes.

                                       9

<PAGE>

Research and development

Research and development (R&D) expenses were $196.2 million in the third quarter
and $583.4  million  for the first nine  months of fiscal  1997,  compared  with
$164.1 and $474.5 million, respectively, for the same periods of fiscal 1996. As
a  percentage  of net  revenues,  R&D  expenses  increased to 9.3% for the third
quarter  and 9.6% for the first nine months of fiscal  1997,  from 8.9% and 9.3%
,respectively,   for  the  comparable  periods  of  fiscal  1996.  Approximately
one-fourth of the dollar increase in the third quarter and the first nine months
of fiscal 1997 over the comparable  periods in fiscal 1996 reflects  development
of hardware and  software  products  which  utilize the Java  architecture.  The
remaining increase for the third quarter and first nine months of fiscal 1997 is
primarily  attributable to continued development of UltraSPARC systems,  storage
products and further  development of products  acquired through  acquisitions of
Integrated  Micro Products,  plc and Cray Business  Systems,  a division of Cray
Research,  Inc. and  increased  compensation  due  primarily to higher levels of
staffing.

Selling, general and administrative

Selling,  general and administrative  (SG&A) expenses were $585.3 million in the
third  quarter and  $1,701.3  million in the first nine  months of fiscal  1997,
compared with $457.4 and $1,303.3 million, respectively, for the same periods of
fiscal 1996. As a percentage of net revenues, SG&A expenses were 27.6% and 28.1%
in the third  quarter and first nine months of fiscal  1997,  respectively,  and
24.8% and  25.7%,  respectively,  in the  comparable  periods  of  fiscal  1996.
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 primarily resulting from higher
levels  of  headcount.   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 further  expand its demand  creation  programs and service  support
organizations.

Purchased in - process research and development

Purchased  in-process  research  and  development  represents  the  write-off of
purchased  in-process  research and  development  associated  with the Company's
acquisition of Longview Technologies, LLC, a development stage company.

Gain on sale of equity investment

The gain on sale of equity investment  represents the net proceeds from the sale
of the Company's equity investment in Iona Technologies, plc.

Interest income, net

Net interest income was $9.4 million for the third quarter and $21.3 million for
the first nine  months of fiscal  1997,  compared  with $9.0  million  and $28.0
million,  respectively,  for the  corresponding  periods  in  fiscal  1996.  The
increase for the third  quarter of fiscal 1997 is primarily the result of higher
interest  earnings due to a larger average portfolio of cash and investments and
interest  savings from reduced  debt  levels,  as compared to the  corresponding
period in fiscal 1996.  The decrease for the first nine months of fiscal 1997 is
primarily  the  result  of lower  interest  earnings  due to a  smaller  average
portfolio of cash and  investments  as compared to the  corresponding  period in
fiscal 1996.

                                       10

<PAGE>

Income taxes

The Company's effective income tax rate for the third quarter and the first nine
months of both fiscal 1997 and 1996 was 32%.

FUTURE OPERATING RESULTS

The market for Sun's products and services is intensely  competitive and subject
to  continuous,  rapid  technological  change,  short  product  life  cycles and
frequent  product  performance  improvements  and price  reductions.  Due to the
breadth of the Company's  product lines and the  scalability of its products and
network  computing model, Sun competes in many segments of the network computing
market across a broad spectrum of customers. The Company expects the markets for
its products and technologies,  as well as its competitors  within such markets,
will continue to change as the rightsizing trend shifts customer buying patterns
to network  based systems which often employ  solutions  from multiple  vendors.
Competition  in these  markets  will also  continue to  intensify as Sun and its
competitors,  principally  Hewlett-Packard Co.,  International Business Machines
Corporation,   Digital  Equipment  Corporation,   and  Silicon  Graphics,  Inc.,
aggressively  position  themselves  to benefit  from this  shifting  of customer
buying patterns and demand.  The Company is also facing  competition  from these
competitors,  as well as other systems  manufacturers,  such as Compaq  Computer
Corporation  and  Dell  Computer  Corporation,   whose  products  are  based  on
microprocessors  from Intel Corporation coupled with Windows NT operating system
software from Microsoft Corporation. These products demonstrate the viability of
certain networked personal computer solutions and have increased the competitive
pressure, particularly in the Company's workstation and lower-end server product
lines.  Finally,  the timing of  introductions  of new  products and services by
Sun's  competitors  may negatively  impact the future  operating  results of the
Company, particularly when such introductions occur in periods leading up to the
Company's  introduction  of its own new enhanced  products.  The Company expects
this  pressure to continue and to intensify  throughout  the remainder of fiscal
1997 and into  fiscal  1998.  While many other  technical,  service  and support
capabilities affect a customer's buying decision, the Company's future operating
results will depend, in part, on its ability to compete with these technologies.

The Company's future operating  results will depend to a considerable  extent on
its  ability to rapidly  and  continuously  develop,  introduce,  and deliver in
quantity  new  systems,   software,   and  service  products,  as  well  as  new
microprocessor  technologies,  that offer its customers enhanced  performance at
competitive prices. The development of new high - performance computer products,
such as the Company's development of the UltraSPARC  microprocessor is a complex
and uncertain  process  requiring  high levels of innovation  from the Company's
designers  and  suppliers,   as  well  as  accurate   anticipation  of  customer
requirements and technological trends. Once a hardware product is developed, 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.  Future
operating results will depend to a considerable  extent on the Company's ability
to  closely  manage  product  introductions,  in order to  minimize  unfavorable
patterns of customer  orders,  to reduce levels of older inventory and to ensure
that adequate supplies of 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  market
conditions as well as the variability and timing of customer orders with respect
to the Company's 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 for the mix of products. Because the Company is continuously
engaged in this product development,  introduction,  and transition process, its
operating results may be subject to considerable fluctuation,  particularly when
measured on a quarterly basis.

                                       11

<PAGE>

The Company is increasingly dependent on the ability of its suppliers to design,
manufacture,   and  deliver   advanced   components   required  for  the  timely
introduction  of new products.  The failure of any of these suppliers to deliver
components  on time or in  sufficient  quantities,  or the failure of any of the
Company's  own  designers to develop  advanced  innovative  products on a timely
basis, could result in a significant  adverse impact on the Company's  operating
results. The inability to secure enough components to build products,  including
new products, in the quantities and configurations required, or to produce, test
and  deliver  sufficient  products  to meet  demand  in a timely  manner,  would
adversely  affect the Company's net revenues and  operating  results.  To secure
components for development,  production,  and introduction of new products,  the
Company frequently makes advanced payments to certain suppliers and often enters
into  noncancelable  purchase  commitments  with  vendors  early  in the  design
process.  Due to the variability of material requirement  specifications  during
the  design  process,   the  Company  must  closely  manage  material   purchase
commitments and respective delivery  schedules.  In the event of a delay or flaw
in the  Company's  design  process,  the  Company's  operating  results could be
adversely   affected  due  to  the   Company's   obligations   to  fulfill  such
noncancelable purchase commitments.

Generally,  the  computer  systems  sold by Sun,  such as the  UltraSPARC  based
products, are the result of 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 adopting 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.

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.  Additionally,  the Company plans to continue to evaluate and, when
appropriate,  make  acquisitions  of  complementary  technologies,  products  or
businesses.  As part of this process,  the Company will continue to evaluate the
changing value of its assets,  and when  necessary,  make  adjustments  thereto.
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
result in significant  volatility in the Company's future  performance and stock
price.

                                       12

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

The  sufficiency  of  the  Company's   capital  resources  are  forward  looking
statements  which involve risks and  uncertainties  and actual  results may vary
materially.

Total assets at March 30, 1997 increased by approximately $422 million from June
30, 1996, due  principally to increases in accounts  receivable of $215 million,
property, plant and equipment-net of $193 million,  inventory of $31 million and
other current assets of $63 million,  offset by decreases in other assets of $62
million and cash  equivalents  and short term  investments  of $17 million.  The
increase in accounts  receivable reflects a larger percentage of sales occurring
near the end of the quarter  and the timing of cash  receipts as compared to the
fourth  quarter of fiscal 1996.  The increase in property,  plant and  equipment
reflects  the  purchase  of  Phase  II of the  campus  located  in  Menlo  Park,
California  for  approximately  $100  million and capital  additions  to support
increased  headcount,  primarily in  engineering,  service and marketing.  Other
current  assets  increased due to the timing of payments for insurance and other
taxes.  Cash was  principally  used for the repurchase of 14.2 million shares of
common  stock for $398  million,  capital  expenditures  of  approximately  $303
million,  purchase of Phase II of the campus  located in Menlo  Park,  scheduled
debt repayments of $40 million,  and net acquisitions of short-term  investments
of $26 million and cash provided from operations. The reduction in other current
assets  reflects  amortization  related to  capitalized  software and intangible
assets.

Total  current  liabilities  increased  $142  million  from June 30,  1996,  due
principally  to an  increase  in accounts  payable of $196  million  offset by a
decrease in  short-term  borrowings  of $45  million.  The  increase in accounts
payable reflects increased inventory receipts during the last three weeks of the
quarter as  compared  to the fourth  quarter of fiscal  1996.  The  decrease  in
short-term borrowings reflects the final payment related to the Company's senior
notes and scheduled debt repayments.

At March 30, 1997, the Company's primary sources of liquidity consisted of cash,
cash  equivalents  and  short-term  investments  of $972 million and a revolving
credit facility with banks aggregating $300 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
arrangement  described  above will be sufficient  to meet the Company's  capital
requirements  through fiscal 1998.  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.

                                       13

<PAGE>


                           PART II - OTHER INFORMATION

ITEM 2 - CHANGES IN SECURITIES

On  February  14,  1997,  former  shareholders  of  LongView   Technologies  LLC
("LongView") who are now employees of the Company were sold 87,049 shares of the
Company's  common  stock , $.00067  par value (the  "Shares").  The Shares  were
purchased  at $0.01 per share and are  subject to  repurchase  by the Company at
such purchase price in the event certain  vesting  restrictions  with respect to
the Shares are not met.  These Shares were sold  pursuant to Section 4(2) of the
Securities  Act  of  1993.  The  Shares  were  issued  to six  individuals  in a
transaction  not  involving  a public  offering  for  proceeds to the Company of
$870.49.

                                       14

<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 March 30, 1997:

    OFFICER/                DATE             PRICE           NUMBER OF
    DIRECTOR                                                SHARES SOLD
================================================================================
  Kenneth Alvares          2/05/97          $33.625           16,000
                           2/05/97          $33.625            9,200
                           2/07/97          $33.875            8,000
                           2/11/97          $34.125              548
                           2/13/97          $34.875            1,200
                           2/13/97          $34.875            6,000

  Mel Friedman             2/03/97          $33.00            30,000

  Michael Lehman           1/28/97          $32.625            8,000
                           2/19/97          $34.00            10,000
                           2/19/97          $34.75            10,000

  Michael  Morris          1/28/97          $32.625            2,568

  George Reyes             1/28/97          $32.8715             424

  Joseph Roebuck           2/18/97          $34.25           100,000
                           2/19/97          $34.036           70,000

  Edward Saliba            1/23/97          $33.25             2,388

  Eric Schmidt             2/04/97          $32.125            5,000
                           2/05/97          $33.25             5,000
                           2/18/97          $33.625            5,000
                           2/19/97          $34.50             5,000
                           2/19/97          $34.50               568
                           2/19/97          $34.6250          10,000
                           2/24/97          $32.25             5,000
                           2/24/97          $32.125            5,000
                           2/27/97          $32.25            10,000
                           2/28/97          $30.875            5,000
                           2/28/97          $30.75             5,000

  John Shoemaker           1/21/97          $33.2486          12,800
                           1/29/97          $32.33065          8,000
                           2/10/97          $33.815            8,000

                                       15

<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 March 30, 1997

       b) REPORTS ON FORM 8-K

            No reports on form 8-K were filed during the quarter ended March 30,
            1997.

                                       16

<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:   May 13, 1997

                                       17

<PAGE>


                               EXHIBITS TO REPORT
                                  ON FORM 10-Q
                  FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1997


                                       18

<PAGE>

<TABLE>
                                                       SUN MICROSYSTEMS, INC.
                                             CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                             (unaudited)
                                              (in thousands, except per share amounts)
<CAPTION>

PRIMARY
-------

                                                                          Three Months Ended                   Nine Months Ended
                                                                          ------------------                   -----------------
                                                                      March 30,          March 31,        March 30,        March 31,
                                                                        1997              1996              1997              1996
                                                                      --------          --------          --------          --------
<S>                                                                   <C>               <C>               <C>               <C>     
Net income                                                            $223,511          $143,307          $525,242          $354,052
                                                                      ========          ========          ========          ========

Weighted average common
shares outstanding                                                     368,247           367,346           367,915           371,306

Common - equivalent shares
attributable to stock options and warrants                              20,117            24,140            21,158            21,588
                                                                      --------          --------          --------          --------

Total common and common -
equivalent shares outstanding                                          388,364           391,486           389,073           392,894
                                                                      ========          ========          ========          ========

Net income per common and
common - equivalent share                                             $   0.58          $   0.37          $   1.35          $   0.90
                                                                      ========          ========          ========          ========
</TABLE>

                                                                 19

<PAGE>



<TABLE>

                                                       SUN MICROSYSTEMS, INC.
                                             CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                             (unaudited)
                                              (in thousands, except per share amounts)
<CAPTION>

FULLY DILUTED
-------------

                                                                          Three Months Ended                 Nine Months Ended
                                                                          ------------------                 -----------------
                                                                       March 30,        March 31,         March 30,        March 31,
                                                                        1997              1996              1997              1996
                                                                      --------          --------          --------          --------

<S>                                                                   <C>               <C>               <C>               <C>     
Net income                                                            $223,511          $143,307          $525,242          $354,052
                                                                      ========          ========          ========          ========

Weighted average common
shares outstanding                                                     368,247           367,346           367,915           371,306

Common - equivalent shares
attributable to stock options and warrants                              20,662            24,782            21,743            22,426
                                                                      --------          --------          --------          --------

Total common and common -
equivalent shares outstanding                                          388,909           392,128           389,658           393,732
                                                                      ========          ========          ========          ========

Net income per common and
common - equivalent share                                             $   0.58          $   0.37          $   1.35          $   0.90
                                                                      ========          ========          ========          ========
</TABLE>

                                                                 20