Key questions and answers from the first quarter earnings call conducted by Sun Microsystems Inc. (JAVA: chart) on October 30, 2008.

David Wong (Wachovia): When you said you saw a shift of high-end spark to volume systems, are you referring to volume Niagara-based system or do you mean x86?

Jonathan Schwartz: In general, companies running the Niagara platforms tend to be more focused on very high scale and power efficiency and those running x64 systems were a little more focused on kind of single thread performance.

So, overall, I am not sure it's as much frankly as a shift from high-end to volume systems as a slowing of the high-end which, by definition, makes it look like the low-end is going to grow. I think the low-end was kind of be growing anyway.

In terms of the profitability, over the long-term, the profitability of the low-end systems, I mean the high-end systems come from somewhere. They come from the low-end continuing to grow and expand and upgrade.

Richard Gardner (Citigroup): Could you give us some sort of indication of solaris attach rates on your volume systems these days and whether that's going up or down or sideways?

Jonathan Schwartz: For the most part, it's going up. What we are seeing and clearly you can see this on the open storage line, the open storage are almost completely solaris-based. On the others, you know, on the broader x64 platforms and some of the blade offerings, it's a pretty strong mix between Linux, Windows and Solaris.

And frankly, we tend to be more exposed to the Linux and solaris side than we do to the traditional windows side given that hasn't been our historical focus but it's a pretty even balance at this point and we've a good proposition both on our own x64 systems as well as non-Sun platforms.

Richard Gardner (Citigroup): Can you give a sense of the trend though?

Jonathan Schwartz:The trend on solaris is up. We are seeing more customers specifically drawn to Sun because of ZFS, which is the file system at the core of solaris. But the fact that we have really built out the ISV portfolio really been added, we continue to talk to customers who had originally thought they might move away from solaris who are now moving back and not only on our own hardware but on third-party hardware.

We have just got a lot of customers, and frankly we are seeing more customers today that are coming to Sun, running solaris, not on sun and then wanting to know what else we have to offer. So, it's always going to be a mix.

We want our hardware platforms to run non-Sun operating systems and we want our operating systems to run on non-Sun hardware. What we want is it's not the intersection we necessarily want to grow. It's the win diagraph we want to grow.

Bill Shope (Credit Suisse): How do you consider balancing the needs for R&D investments and sales investments when there's clearly deterioration on the gross profit line?

Jonathan Schwartz:We are very focused on examining all of the line items at Sun to make sure that we're going to optimize for the new reality and there is very much a new reality in the marketplace. We're obviously very focused on that.

Probably the most important thing we can do at Sun isn't necessarily to look at our existing financial services customers and just go spend more time with them and hope they buy more.

And the way we meet those customers is by looking to the marketplace, finding out who's running MySQL and again, we know at a fine level of detail, exactly who is and then going to sell to them.

The biggest cost we can take down is the cost of acquiring a new customer. We are very focused on continuing to go to market with that model, which is selling to customers that are already running our core intellectual property and selling commercial software as well as commercial services and systems.

And in terms of what other line items we have at our disposal, we have got a fair amount of flexibility in how we go to market. We are very much focused on the long-term and the long-term is going to be from where we sit, going to be defined by the kinds of open innovations we have been delivering and for Sun, probably a change in how we welcome those customers into Sun.

Shannon Cross (Cross Research): Have you had any changes in terms of your thought on the use of cash and the level of cash that you feel comfortable holding?

Mike Lehman:We certainly are pleased with our cash conversion cycle. We are going to stay focused on that. We generated cash during the quarter. Even in a difficult environment on an operating basis.