<PAGE>

                                   
                               FORM 10-K/A     
                  
               AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM 10-K      
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

(Mark One)

 [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 [FEE REQUIRED]
                    For the fiscal year ended December 31, 1994
                              OR
 [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                    For the transition period from __________ to _________

                        Commission file number 1-10639
 
                            CONNER PERIPHERALS, INC.
            [Exact name of registrant as specified in its charter]
       DELAWARE                                            94-2968210
(State of incorporation)                                (I.R.S. Employer
                                                       Identification No.)

                               3081 ZANKER ROAD
                          SAN JOSE, CALIFORNIA 95134
                   (Address of principal executive offices)
      Registrant's telephone number, including area code: (408) 456-4500

          Securities registered pursuant to Section 12(b) of the Act-
         Title of class and name of each exchange on which registered:
            Common Stock, $.001 par value- New York Stock Exchange
 6-1/2% Convertible Subordinated Debentures due 2002- New York Stock Exchange
 6-3/4% Convertible Subordinated Debentures due 2001- New York Stock Exchange
          Rights to Purchase Series A Participating Preferred Stock- 
                            New York Stock Exchange

       Securities registered pursuant to Section 12(g) of the Act: None

         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 
                                              -----       -----   
         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
         The aggregate value of voting stock held by nonaffiliates of the
Registrant was approximately $538,080,000 as of March 7, 1995 based upon the
closing sales price on the New York Stock Exchange reported for such date.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may, under certain circumstances, be deemed to be affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes. As of March 7, 1995, 52,495,602 shares of
Common Stock were issued and outstanding.

         
<PAGE>

          
                                      
                                  FORM 10-K/A     
                                    
                                AMENDMENT NO. 1
                                      TO
                          ANNUAL REPORT ON FORM 10-K
                                      OF
                           CONNER PERIPHERALS, INC.     

    
     This Amendment No. 1 is being filed to amend the December 31, 1994 Annual 
Report on Form 10-K ("1994 10-K") filed with the Securities and Exchange
Commission by Conner Peripherals, Inc. (the "Company") on March 30, 1995 as
follows:     
    
Part II-Item 8.   Financial Statements and Supplementary Data     
                  
     Item 8 of the 1994 10-K is being amended hereby (i) by deleting the third
paragraph of "Note 15 Litigation" to the Company's Consolidated Financial
Statements for the fiscal year ended December 31, 1994 and inserting the
following two paragraphs in its place:     
   
         During the first quarter of 1995, the Company received a newly issued 
     patent concerning various aspects of the power management features
     incorporated in the Company's disk drives. Promptly following the issuance
     of the patent, the Company filed a complaint with the United States
     International Trade Commission alleging that various disk drives produced
     by IBM infringe the new power management patent, and seeking an exclusion
     order concerning IBM products incorporating these infringing drives. The
     Company filed a lawsuit in Federal Court, Southern District of New York,
     seeking damages and injunctive relief related to the infringement of the
     power management patent.     
    
         On July 25, 1995, the Company and IBM agreed to dismiss all of the 
     litigation against each other and entered into patent cross license
     agreements. The Company and IBM also established a five year commercial
     relationship, whereby, IBM may buy the Company's products. The litigation
     settlement did not have an adverse effect on the Company's results of
     operations or financial position.     
    
(ii) by deleting the second paragraph of the Report of Independent Accountants 
and adding the words, following the date thereof, "except as to Note 15 which is
as of July 25, 1995."     
    
Part IV-Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 
                  8-K.     
   
     Item 14(a)(2) of the 1994 10-K is being amended hereby to make conforming
changes to the Report of Independent Accountants on Financial Statement Schedule
with respect to the amendments to Item 8 just described.     
   
     Item 14(c) of the 1994 10-K is being amended hereby by substituting a new
Exhibit 23.1, Consent of Independent Accountants, filed herewith.     
    
     Except as described above, this Amendment makes no changes to Items 8 and
14 of the 1994 10-K or to any of the documents listed in Item 14 and filed as
part of the 1994 10-K. Exhibit 23.1 has been filed with this Amendment. All
other Exhibits to the 1994 10-K were filed with the 1994 10-K, are not amended
by this Amendment and are not included with this Amendment.     
    
     Pursuant to Rule 12b-15 of the Rules and Regulations under the Securities 
and Exchange Act of 1934, as amended, the complete texts of Items 8 and 14, as 
amended, are included in this Amendment.      

                                       2
<PAGE>
 
          
       Part II - Item 8. Financial Statements and Supplementary Data      

Selected Financial Data

<TABLE>
<CAPTION>
Year Ended December 31,                                 1994            1993           1992           1991           1990
--------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S>                                                <C>            <C>            <C>            <C>            <C>
Net sales                                          $2,365,152     $2,151,672     $2,238,423     $1,598,984     $1,337,593
Gross profit                                       $  468,649     $  237,954     $  458,464     $  316,257     $  328,211
Income/(loss) from operations/1/                   $  166,564     $ (446,430)    $  153,530     $  130,211     $  172,732
Net income/(loss)                                  $  109,687     $ (445,314)    $  121,072     $   92,492     $  130,052
Net income/(loss) per share:
    Primary                                        $     2.10     $    (9.03)    $     2.19     $     1.57     $     2.51
    Fully diluted                                  $     1.77     $    (9.03)    $     1.89     $     1.54     $     2.41
Total assets                                       $1,461,429     $1,464,051     $1,904,707     $1,334,538     $  880,468
Long-term debt, less current portion               $  627,059     $  660,606     $  704,845     $  367,916     $   36,731
</TABLE>


Summary Quarterly Data--Unaudited

<TABLE>
<CAPTION>
                                       Dec. 31  Sept. 30      June 30    Mar. 31      Dec. 31    Sept. 30    June 30    Mar. 31
Quarter Ended                             1994      1994         1994       1994         1993        1993       1993       1993
--------------------------------------------------------------------------------------------------------------------------------
(in thousands,
 except per share amounts)
<S>                                   <C>       <C>          <C>        <C>          <C>        <C>         <C>        <C>
Net sales                             $591,611  $559,504     $650,079   $563,958     $574,449   $ 528,358   $490,575   $558,290
Gross profit                          $ 97,426  $101,181     $142,227   $127,815     $ 87,872   $  20,981   $ 38,581   $ 90,520
Income/(loss) from operations/2/      $ 42,546  $ 21,735     $ 57,400   $ 44,883     $ 15,510   $(381,608)  $(51,765)  $(28,567)
Net income/(loss)                     $ 44,183  $ 10,230     $ 31,470   $ 23,804     $  8,455   $(372,400)  $(58,825)  $(22,544)
Net income/(loss) per share:
    Primary                           $   0.84  $   0.20     $   0.60   $   0.46     $   0.17   $   (7.54)  $  (1.19)  $  (0.46)
    Fully diluted                     $   0.66  $   0.20     $   0.50   $   0.40     $   0.17   $   (7.54)  $  (1.19)  $  (0.46)
</TABLE>

/1/ Income/(loss) from operations includes unusual charges (credits) of
    $(33,019,000), $378,702,000 and $57,611,000 in 1994, 1993 and 1992,
    respectively (see Note 4 to consolidated financial statements).

/2/ Income/(loss) from operations includes unusual charges (credits) of
    $(33,019,000), $330,019,000, $12,300,000 and $36,383,000 for the quarters
    ended December 31, 1994, September 30, 1993, June 30, 1993 and March 31,
    1993, respectively (see Note 4 to consolidated financial statements).

                                    ------
                                       3
                                   
<PAGE>
 
Consolidated Balance Sheets

<TABLE> 
<CAPTION> 

December 31,                                                     1994       1993
--------------------------------------------------------------------------------
(in thousands, except par value and share data)
<S>                                                        <C>        <C> 
Assets

Current assets:
    Cash, cash equivalents and short-term investments      $  443,239 $  517,547
    Accounts receivable, net of reserves and allowances
      of $31,492 in 1994 and $39,430 in 1993                  307,454    333,416
    Inventory                                                 255,880    173,860
    Deferred income taxes                                      51,950     54,944
    Other                                                     111,187     87,348
                                                           ---------------------
      Total current assets                                  1,169,710  1,167,115

Property, plant and equipment, net                            237,066    231,337
Goodwill and other intangibles, net                            39,255     42,944
Other                                                          15,398     22,655
                                                           ---------------------
                                                           $1,461,429 $1,464,051
                                                           =====================

Liabilities and Stockholders' Equity

Current liabilities:
    Accounts payable                                       $  139,559 $  229,721
    Accrued expenses                                          190,372    217,060
    Current portion of long-term debt                          34,922     43,112
                                                           ---------------------
      Total current liabilities                               364,853    489,893

Long-term debt, less current portion                          627,059    660,606
Deferred income taxes                                         129,668     98,162
Other                                                           1,525      4,009
Minority interest                                               1,648      2,530
Commitments and contingencies (Notes 9 and 15)

Stockholders' equity:

    Preferred stock, $0.001 par value; 20,000,000 shares
      authorized, none outstanding                                 --         --
    Common stock and paid-in capital in excess of
      $0.001 par value; 100,000,000 shares authorized,
      52,460,734 and 50,565,083 shares issued and 
      outstanding                                             260,592    242,454
    Retained earnings/(accumulated deficit)                    76,084    (33,603)
                                                           ---------------------
      Total stockholders' equity                              336,676    208,851
                                                           ---------------------
                                                           $1,461,429 $1,464,051
                                                           =====================
</TABLE> 
The accompanying notes are an integral part of these financial statements.

                                    ------
                                       4
<PAGE>
 
Consolidated Statements of Operations

<TABLE> 
<CAPTION> 

Year Ended December 31,                                                                            1994          1993         1992
------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
<S>                                                                                          <C>           <C>           <C> 
Net sales                                                                                    $2,365,152    $2,151,672    $2,238,423
Cost of sales                                                                                 1,896,503     1,913,718     1,779,959
                                                                                             --------------------------------------
Gross profit                                                                                    468,649       237,954       458,464
                                                                                             --------------------------------------
Selling, general and administrative                                                             189,237       186,269       152,671
Research and development                                                                        130,771       137,465        94,652
Amortization of goodwill and other intangibles                                                   15,096        22,248            --
Unusual items                                                                                   (33,019)      338,402        57,611
                                                                                             --------------------------------------
Total operating expenses                                                                        302,085       684,384       304,934
                                                                                             --------------------------------------
Income/(loss) from operations                                                                   166,564      (446,430)      153,530
Interest expense                                                                                (47,237)      (51,213)      (46,866)
Other income, net                                                                                35,224        26,667        49,056
                                                                                             --------------------------------------
Income/(loss) before income taxes                                                               154,551      (470,976)      155,720
Provision/(benefit) for income taxes                                                             44,864       (25,662)       34,648
                                                                                             --------------------------------------
Net income/(loss)                                                                            $  109,687    $ (445,314)  $   121,072
                                                                                             ======================================
Net income/(loss) per share:
    Primary                                                                                  $     2.10    $    (9.03)  $      2.19
                                                                                             ======================================
    Fully diluted                                                                            $     1.77    $    (9.03)  $      1.89
                                                                                             ======================================
Weighted average shares:
    Primary                                                                                      52,253        49,339        55,242
                                                                                             ======================================
    Fully diluted                                                                                74,558        49,339        74,723
                                                                                             ======================================

</TABLE> 

The accompanying notes are an integral part of these financial statements.

                                    ------
                                       5
<PAGE>
 
Consolidated Statements of Cash Flows

<TABLE> 
<CAPTION> 

Year Ended December 31, (in thousands)                                                            1994           1993          1992
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                          <C>          <C>             <C>
Cash flows from operating activities:
    Net income/(loss)                                                                        $ 109,687    $  (445,314)   $  121,072
    Adjustments to reconcile net income/(loss)
      to net cash provided by operating activities:
          Depreciation and amortization                                                         91,681        104,747        77,463
          Non-cash unusual items                                                               (33,019)       230,417        57,611
          Deferred income taxes                                                                 29,728        (32,745)      (13,067)
          Gain on sale of Read-Rite Corporation common stock                                   (22,294)            --       (22,540)
          Loss on asset dispositions                                                             4,569         11,468         5,595
          Minority interest and other                                                           (3,366)           720         9,330
    Changes in assets and liabilities, net of effect of acquired businesses:
        Accounts receivable, net                                                                25,962         67,712      (132,401)
        Inventory                                                                              (82,020)        91,135        39,362
        Other current assets                                                                    (5,175)       (19,006)      (19,193)
        Other non-current assets                                                                 7,486        (20,907)      (18,108)
        Accounts payable and accrued expenses                                                  (67,776)        31,994       164,654
                                                                                             ---------------------------------------
    Total cash provided by operating activities                                                 55,463         20,221       269,778

Cash flows from investing activities:
    Capital expenditures                                                                       (95,011)      (102,111)      (69,744)
    Purchases of short-term investments                                                             --     (1,429,492)   (1,013,148)
    Sales and maturities of short-term investments                                                  --      1,464,986       795,839
    Purchases of investments held to maturity                                                 (313,501)            --            --
    Purchases of investments available for sale                                               (344,511)            --            --
    Maturity of investments held to maturity                                                   394,675             --            --
    Sale of investments available for sale                                                     342,532             --            --
    Purchase of minority interest                                                               (5,000)       (16,000)           --
    Acquisition of acquired businesses, net of cash acquired                                    (8,500)            --      (181,537)
    Acquisition of technology rights                                                                --         (2,078)      (28,061)
    Proceeds from sale of Read-Rite Corporation common stock                                     3,630             --        39,189
                                                                                             --------------------------------------
    Total cash used in investing activities                                                    (25,686)       (84,695)     (457,462)

Cash flows from financing activities:
    Proceeds from other borrowings                                                                 500          2,782       345,672
    Repayments of long-term debt                                                               (42,237)       (10,990)      (24,752)
    Repayments of Archive Corporation long-term debt                                                --        (13,713)      (90,239)
    Issuance of common stock                                                                    16,847         24,909        17,322
    Repurchase of common stock                                                                      --             --      (241,505)
    Contribution by minority stockholder                                                            --             --         8,000
                                                                                             --------------------------------------
    Total cash provided by (used in) financing activities                                      (24,890)         2,988        14,498

Net increase/(decrease) in cash and cash equivalents                                             4,887        (61,486)     (173,186)
Cash and cash equivalents at beginning of the year                                             197,499        258,985       432,171
                                                                                             --------------------------------------
Cash and cash equivalents at end of the year                                                   202,386        197,499       258,985
Short-term investments                                                                         240,853        320,048       355,542
                                                                                             --------------------------------------
Total cash, cash equivalents and short-term investments                                      $ 443,239    $   517,547   $   614,527
                                                                                             ======================================

</TABLE>
The accompanying notes are an integral part of these financial statements.

                                    ------
                                       6
<PAGE>
 
Consolidated Statements of Stockholders' Equity

<TABLE> 
<CAPTION>                                                                                     

                                                                                  Common Stock
                                                                           --------------------------
                                                                                           Par Value      Retained
                                                                                         and Paid-in      Earnings            Total
                                                                                          Capital in  (Accumulated    Stockholders'
                                                                               Shares  Excess of Par      Deficit)           Equity
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except share data)
<S>                                                                      <C>                <C>          <C>              <C>
Balance at December 31, 1991                                               58,089,297      $ 422,186     $ 290,639        $ 712,825
Issuance of common stock under various
    employee stock plans                                                    1,866,677         31,008            --           31,008
Repurchase of common stock, at cost                                       (11,638,802)      (241,505)           --         (241,505)
Income tax benefit of disqualifying dispositions
    of employee stock                                                              --          2,636            --            2,636
Net income                                                                         --             --       121,072          121,072
                                                                           --------------------------------------------------------
Balance at December 31, 1992                                               48,317,172        214,325       411,711          626,036
Issuance of common stock under various
    employee stock plans                                                    2,247,911         24,909            --           24,909
Income tax benefit of disqualifying dispositions
    of employee stock                                                              --          3,220            --            3,220
Net loss                                                                           --             --      (445,314)        (445,314)
                                                                           --------------------------------------------------------
Balance at December 31, 1993                                               50,565,083        242,454       (33,603)         208,851
Issuance of common stock under various
    employee stock plans                                                    1,895,651         16,847            --           16,847
Income tax benefit of disqualifying dispositions
    of employee stock                                                              --          1,291            --            1,291
Net income                                                                         --             --       109,687          109,687
                                                                           --------------------------------------------------------
Balance at December 31, 1994                                               52,460,734      $ 260,592     $  76,084        $ 336,676
                                                                           ========================================================


</TABLE> 
The accompanying notes are an integral part of these financial statements.

                                    ------
                                       7
<PAGE>
 
Notes to Consolidated Financial Statements

Note 1 The Company
------

Conner Peripherals, Inc. ("Company") was incorporated in California in June 
1985, and reincorporated in Delaware in September 1992. The Company sells, 
designs and builds a comprehensive line of information storage solutions 
products, including disk drives, tape drives, storage management software and 
storage systems for a wide range of computer applications.

During each of 1994 and 1993, sales to one customer accounted for 
approximately 13% of net sales.  During 1992, sales to two customers 
accounted for approximately 15% and 12% of net sales.

The Company's fiscal year ends on the Saturday nearest to December 31. 
Results of operations for the years ended in 1994 and 1993 include 52 weeks. 
Results of operations for the year ended 1992 includes 53 weeks. The Company 
reports quarterly results on thirteen-week quarterly periods, each ending on 
the Saturday closest to month-end. For purposes of presentation, the Company 
has indicated its accounting year as ending on December 31 or the month-end 
for interim quarterly periods.

Summary of Significant Accounting Policies

Principles of Consolidation: The accompanying consolidated financial 
statements include the accounts of Conner Peripherals, Inc. and its 
majority-owned subsidiaries. All significant intercompany accounts and 
transactions have been eliminated.

Revenue Recognition: Revenue from product sales to customers is recognized 
upon shipment. Revenue from sales to certain distributors is subject to 
agreements allowing certain rights of return and price protection on unsold 
merchandise held by those distributors. Accordingly, reserves for estimated 
future returns, exchanges and credits for marketing and other sales 
incentives are also provided upon shipment.

Warranty Expense: The Company provides for the estimated cost which may be 
incurred under its various product warranties upon product shipment.

Cash, Cash Equivalents and Short-Term Investments: The Company considers all 
highly liquid debt instruments with an original maturity of three months or 
less to be cash equivalents. Short-term investments consist primarily of 
certificates of deposit, bankers acceptances, preferred stock, corporate 
debt, municipal debt and U.S. Government agency debt securities. These 
investments generally mature within 12 months and prior to 1994 were carried at 
cost, which approximated market. 

Effective at the beginning of 1994, the Company adopted Statement of 
Financial Accounting Standards No. 115, "Accounting for Certain Investments 
in Debt and Equity Securities" (FAS 115), which requires the Company to 
classify debt and equity securities into one of three categories; held to 
maturity, trading or available for sale. The Company's investments are 
classified as held to maturity and available for sale as of December 31, 
1994. Investment securities classified as held to maturity are measured at 
amortized cost based on the Company's positive intent to hold such securities 
to maturity. Investment securities classified as available for sale are 
measured at market value and net unrealized gains and losses are recorded as 
a separate component of stockholders' equity until realized. Any gains or 
losses on sales of investments are computed on specific identification. As of 
December 31, 1994, net unrealized gains and losses on investments available 
for sale were not material. The cumulative effect of adopting FAS 115 was not 
material to the Company's financial position or results of operations.

Inventory: Inventories are stated at the lower of cost or market, cost being 
determined on a first-in, first-out basis.

Property, Plant and Equipment: Property, plant and equipment are stated at 
cost. Equipment and furniture are depreciated using the straight-line method
based upon the estimated useful lives of the related assets which range from
eighteen months to 5 years. Leasehold improvements are amortized using the
straight-line method based upon the shorter of the estimated useful lives or the
lease term of the respective assets. Buildings 

                                    ------
                                       8
<PAGE>
 
are depreciated using the straight-line method over the estimated useful life of
25 to 30 years.

Land and buildings held for sale, which are no longer used in the Company's 
operations or held for future expansion, are stated at the lower of cost or 
estimated fair value.

Goodwill and Other Intangibles: Goodwill and other intangibles, which include 
patents and acquired technology, are being amortized over their estimated 
useful lives ranging from 2 to 10 years. The Company evaluates the 
recoverability of intangible assets based on future discounted cash flows. 
Charges for impairment of intangible assets are recorded to the extent 
unamortized book value of such assets exceed the related future discounted cash 
flows.

Income Taxes: The Company accounts for income taxes in accordance with the 
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." See Note 7 for additional information regarding the Company's
accounting for income taxes.

Net Income (Loss) Per Share: Primary net income per share is computed using 
the weighted average number of common and dilutive common equivalent shares 
outstanding. Common equivalent shares consist of stock options (using the 
treasury stock method). Fully diluted net income per share is computed using 
the weighted average number of common and dilutive common equivalent shares 
outstanding and assuming the conversion, if dilutive, of all outstanding 
convertible subordinated debentures from the date of issuance for all periods 
in which they remained outstanding. For purposes of the fully diluted 
computation, net income is adjusted by the after-tax interest expense 
applicable to the convertible subordinated debentures. Primary and fully 
diluted net loss per share is computed using the weighted average number of 
common shares outstanding. 

Foreign Currency Translation: The Company currently uses the U.S. dollar as 
the functional currency of its foreign operations. Gains or losses from 
foreign currency translation are included in the determination of net income. 
To date, such amounts have been immaterial.

Concentration of Credit Risk: Financial instruments that potentially subject 
the Company to significant concentrations of credit risk consist principally 
of cash and cash equivalents, short-term investments and trade accounts 
receivable. The Company places its cash and cash equivalents and short-term 
investments in a variety of financial instruments such as certificates of 
deposit, bankers acceptances, preferred stock, corporate debt, municipal debt 
and U.S. Government agency debt securities. The Company, by policy, limits 
the amount of credit exposure to any one financial institution or commercial 
issuer.

The Company sells its products to original equipment manufacturers and 
distributors throughout the world. The Company performs ongoing credit 
evaluations of its customers' financial condition and, generally, requires no 
collateral from its customers. The Company maintains an allowance for 
uncollectible accounts receivable based upon the expected collectibility of 
all accounts receivable.

Foreign Currency Financial Instruments: To hedge against certain balance 
sheet and operating income currency exposures incurred in the ordinary course 
of business, the Company enters into foreign currency forward contracts and 
purchases foreign currency option contracts for periods and amounts 
consistent with the amounts and timing of operating cash flow requirements 
and vendor purchase commitments. Gains and losses are deferred and offset by 
gains and losses on the underlying hedged exposures. The Company does not 
hold or issue financial instruments for trading purposes. The counterparties 
to these contracts consist of international financial institutions. The 
Company monitors the credit ratings and capital and surplus of its 
counterparties.

Presentation: Certain prior year financial statement balances have been 
reclassified to conform to the 1994 presentations.


                                    -------
                                       9
<PAGE>
 
Note 2 Short-Term Investments
------
The amortized cost and estimated fair value of securities held to maturity 
and available for sale as of December 31, 1994, are as follows:
<TABLE> 
<CAPTION> 
                                          Gross      Gross       Gross    Estimated
                                      amortized unrealized  unrealized         fair
                                           cost      gains      losses        value
-----------------------------------------------------------------------------------
(in thousands)
<S>                                   <C>       <C>          <C>           <C>
Held to maturity:
U.S. Government
    and agency bonds                   $ 27,235        $--       $(155)    $ 27,080
State and political
    subdivision bonds                    66,077         --        (380)      65,697
Corporate debt
    securities                           64,085         80        (128)      64,037
Other                                    71,852          5          --       71,857
                                       --------------------------------------------
                                        229,249         85        (663)     228,671
Available for sale-
Auction preferred stock                  94,800         --          --       94,800
                                       --------------------------------------------
Total debt and
    equity securities                   324,049        $85       $(663)    $323,471
                                               ====================================
Less cash
    equivalents                          83,196
                                       --------
Short-term investments                 $240,853
                                       ========
</TABLE> 
The contractual maturities of investments held to maturity and available for
sale are one year or less. The realized gains and losses as of December 31,
1994, had no material impact to the Company's financial position or results of
operations. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

Note 3 Balance Sheet and Statement of Operations Components
------
<TABLE> 
<CAPTION> 
December 31,                                              1994           1993
-----------------------------------------------------------------------------
(in thousands)
<S>                                                   <C>            <C>
Inventories:
    Purchased components                              $ 86,970       $ 81,620
    Work-in-process                                     72,692         37,939
    Finished goods                                      96,218         54,301
                                                      -----------------------
                                                      $255,880       $173,860
                                                      =======================
Property plant and equipment:
    Building                                          $ 28,394       $ 47,335
    Equipment and furniture                            345,689        289,517
    Leasehold improvements                              63,404         60,762
    Construction-in-progress                            28,257         34,026
                                                      -----------------------
                                                       465,744        431,640
Less accumulated depreciation
    and amortization                                   256,131        200,303
                                                      -----------------------
                                                       209,613        231,337
Buildings and improvements
    held for sale, net                                  27,453             --
                                                      -----------------------
                                                      $237,066       $231,337
                                                      =======================
Goodwill and other intangibles:
    Goodwill                                          $  5,073       $     --
    Intangibles                                         70,337         64,003
                                                      -----------------------
                                                        75,410         64,003
Less accumulated amortization                           36,155         21,059
                                                      -----------------------
                                                      $ 39,255       $ 42,944
                                                      =======================
Accrued expenses:
    Accrued employee compensation                     $ 32,997       $ 33,041
    Accrued income taxes                                41,841         14,298
    Accrued warranty costs                              45,422         38,299
    Accrued restructuring costs                          7,549         66,380
    Other liabilities                                   62,563         65,042
                                                      -----------------------
                                                      $190,372       $217,060
                                                      =======================
</TABLE> 
                                    ------
                                      10
<PAGE>
 
<TABLE> 
<CAPTION> 

Year Ended December 31,                             1994        1993       1992
-------------------------------------------------------------------------------
(in thousands)
<S>                                              <C>         <C>        <C>  
Other income, net:
    Interest income                              $16,193     $17,700    $35,050
    Minority interest in joint ventures            2,120         649     (6,457)
    Gain on sale of Read-Rite         
    Corporation common stock                      22,294          --     22,540
    Other                                         (5,383)      8,318     (2,077)
                                                 ------------------------------
                                                 $35,224     $26,667    $49,056
                                                 ==============================
</TABLE> 


Note 4 Unusual Items
------

In the fourth quarter of 1994, the Company recorded $33,019,000 as a net 
pretax credit to income for two unusual items. As discussed below, the 
Company recorded an unusual credit of $38,019,000 for the reduction of 
restructuring reserves established during 1993. This credit was partially 
offset by a $5,000,000 unusual charge taken to write-off in-process research 
and development associated with the acquisition of Quest Development 
Corporation.

During 1993, the Company recorded special charges totaling $378,702,000, of 
which $40,300,000 was charged to cost of sales and $338,402,000 was charged 
to unusual items. The $40,300,000 charge to cost of sales reflected the cost 
of the Company's actions to accelerate the end-of-life of certain disk drive 
products. The $338,402,000 charge included a write-down of goodwill and other 
intangibles of $212,945,000, restructuring charges of $106,457,000 for the 
reduction of excess manufacturing capacity and the streamlining of operations 
and a charge of $19,000,000 for certain contingencies.

The write-down of intangible assets totaling $212,945,000 consisted of 
$180,000,000 for the remaining unamortized balance of goodwill related to the 
Archive Corporation acquisition and $32,945,000 of identified intangibles. 
The Company believes that the write-down of these assets was necessitated by 
the emergence during 1993 of fundamental changes in the storage business, 
primarily the increase in competition and the standardization of technologies 
in the tape drive industry, which caused the value of these assets to be 
permanently impaired.

The restructuring charges totaling $106,457,000 resulted from the Company's 
decision to reduce excess manufacturing capacity to a level more consistent 
with sustainable demand, to streamline operations as well as administrative 
processes to reduce the Company's cost structure and to further integrate and 
reduce selling, general and administrative and research and development 
activities of both the disk and tape drive operations. As part of this 
restructuring, the Company had decided to close certain of its manufacturing 
operations.

In the fourth quarter of 1994, the Company lowered its estimate of the total 
cost of restructuring and recorded an adjustment to its restructuring 
reserves thereby increasing operating income by $38,019,000. This reduction 
resulted from the modification of the Company's operating plans, primarily 
the decision to cancel the closure of certain manufacturing operations due to 
changing business conditions. These changing business conditions primarily 
pertain to the improvement in local economies, the reduction in manufacturing 
cost benefits achieved by shifting production to other locations and certain 
other strategic benefits realized by maintaining a local presence.

                                    ------
                                      11
<PAGE>
 

As of December 31, 1994, the Company has executed all of its restructuring 
actions. As a result, approximately 780 employees from manufacturing, 
research and development, sales and marketing and administrative departments 
have been terminated and facilities have been reduced by approximately 
360,000 square feet. The Company's annual savings from operations resulting 
from these actions was to reduce salaries and benefits by approximately 
$32,000,000, depreciation expense by approximately $7,000,000 and rental 
expense by approximately $2,000,000.

The following table sets forth the Company's restructuring reserves as of 
December 31, 1993 and 1994:

<TABLE> 
<CAPTION> 

                                             Restructuring Reserves
                                  ---------------------------------------------
                                     Severances      Excess  Equipment
                                   and benefits  facilities  and other    Total
-------------------------------------------------------------------------------
(in thousands)
<S>                                <C>           <C>         <C>       <C>
1993 restructuring
    charges                            $22,403    $ 28,511   $ 55,543  $106,457
Cash charges                            (7,077)       (623)    (1,723)   (9,423)
Non-cash charges                            --          --    (30,654)  (30,654)
                                  ---------------------------------------------
Reserve balances,
    December 31, 1993                   15,326      27,888     23,166    66,380
Cash charges                            (3,824)     (2,126)    (7,793)  (13,743)
Non-cash charges                            --        (240)    (6,829)   (7,069)
Adjustments                             (9,482)    (21,595)    (6,942)  (38,019)
                                  ---------------------------------------------
Reserve balances,
    December 31, 1994                  $ 2,020    $  3,927   $  1,602  $  7,549
                                  =============================================

</TABLE> 

The Company expects that substantially all of the remaining employee termination
payments will be paid during 1995. Lease rental obligations included in excess
facilities are net of approximately $2,119,000 of estimated sublease income
expected to be derived from subleasing of the effected facilities. These
obligations will be paid through the year 2018 or sooner to the extent the
Company is able to negotiate a lease settlement or otherwise dispose of the
properties. Write-offs of assets and payments against other reserves at December
31, 1994, are expected to be substantially completed by the end of 1996.

In December 1992, in connection with the acquisition of Archive Corporation, 
the Company recorded an unusual charge of $57,611,000 representing the fair 
value of acquired research and development projects in-process at the date of 
the acquisition.

Note 5 Acquisitions 
------

During 1994, the Company's then wholly-owned subsidiary, Arcada Software, 
Inc. ("Arcada") acquired Quest Development Corporation ("Quest") for 
$8,500,000 in cash and issuance of shares representing approximately 22% 
ownership interest in Arcada. Arcada is engaged in developing, producing and 
marketing software products for data storage management. The effect of the 
acquisition of Quest was not material to the Company's financial condition or 
results of operations with the exception of the write-off of in-process 
research and development of $5,000,000 included in "Unusual Items" (see Note 
4).

During 1994, the Company increased its ownership interest in its joint 
venture, Conner Shenzhen Peripherals Company Ltd., located in Shenzhen, 
People's Republic of China, from 60% to 90% for $7,000,000 of which 
$5,000,000 was paid during 1994. During 1993, the Company purchased for 
$16,000,000 the remaining 49% minority interest owned by Olivetti S.p.A in
Conner Peripherals Europe, S.p.A. ("CPE"), the Company's majority-owned
subsidiary located in Italy. In connection with the acquisition, Olivetti
committed to purchase certain minimum quantities of the Company's products,
subject to certain conditions, for a period of three years. These acquisitions
had no material impact to the Company's financial condition or results of
operations.

                                    ------
                                      12
<PAGE>
 
In December 1992, the Company acquired Archive Corporation ("Archive"), a 
manufacturer and supplier of tape back-up and data storage products for 
$185,000,000 paid in cash, assumption of debt for $104,000,000 (all of which was
repaid during 1993 and 1992) and $17,000,000 for exchange of Archive stock
options and transaction costs. The excess of the purchase price over the fair
market value of the net tangible assets acquired was $303,893,000, of which
$57,611,000 was allocated to in-process research and development, $55,000,000
was allocated to various intangibles and the remaining $191,282,000 was
allocated to goodwill. The in-process research and development of $57,611,000
purchased in connection with the acquisition was expensed in 1992. During the
third quarter of 1993, the Company wrote-off all the unamortized goodwill and
certain other intangibles due to impairment resulting from changes in the
storage business (see Note 4). Operations of Archive have been included in the
Company's consolidated results of operations since the beginning of 1993.

Had the acquisition of Archive occurred as of the beginning of 1992, 
unaudited net sales, net income and earnings per share presented on a pro 
forma basis for the year ended December 31, 1992 would have been 
$2,590,635,000, $157,804,000 and $2.36, respectively. This information was 
prepared as if the acquisition had been consummated as of the beginning of 1992 
and after giving effect to certain pro forma adjustments. The pro forma 
information excludes the effects of the nonrecurring charges of $57,611,000 
for in-process research and development (see Note 4). This pro forma 
information does not purport to be indicative of what would have occurred had
the acquisition been consummated at the beginning of 1992 or of the results
which may occur in the future.

Note 6 Supplemental Cash Flow Disclosure
------

<TABLE> 
<CAPTION> 

Year Ended December 31,                            1994        1993        1992
-------------------------------------------------------------------------------
(in thousands)
<S>                                             <C>         <C>       <C> 
Cash paid during the year for:
    Interest                                    $48,663     $49,896   $  40,506
    Income taxes                                $ 4,821     $20,187   $  17,218
Non-cash investing and
    financing activities:
      Fair market value of
          Archive assets acquired,
          including goodwill                    $    --     $    --   $ 306,485
      Debt assumed                              $    --     $    --   $(104,000)

</TABLE> 

Note 7 Income Taxes
------

Income (loss) before income taxes includes $156,155,000, $(148,738,000), and 
$185,708,000 of income (loss) relating to non-U.S. operations for 1994, 1993 
and 1992, respectively.

The provision (benefit) for income taxes includes the following:

<TABLE> 
<CAPTION> 
Year Ended December 31,                            1994         1993      1992
------------------------------------------------------------------------------
(in thousands)
<S>                                             <C>         <C>       <C> 
Current:
    Federal                                     $10,669     $  1,902  $ 24,607
    State                                         1,000          142     5,657
    Foreign                                       3,467        5,039    17,451
                                                ------------------------------ 
                                                 15,136        7,083    47,715
                                                ------------------------------ 
Deferred:
    Federal                                      23,097      (27,848)   (8,700)
    State                                         6,631       (4,897)   (4,367)
                                                ------------------------------ 
                                                 29,728      (32,745)  (13,067)
                                                ------------------------------ 
Total                                           $44,864     $(25,662) $ 34,648 
                                                ============================== 
</TABLE> 

                                    ------
                                      13
<PAGE>
 

Deferred taxes are provided for the temporary differences between the 
financial reporting basis and the tax basis of the Company's assets and 
liabilities. Deferred tax liabilities (assets) are comprised of the 
following:

<TABLE> 
<CAPTION> 

December 31,                                           1994                1993
-------------------------------------------------------------------------------
(in thousands)
<S>                                               <C>                 <C>
Inventory valuation                               $ (14,028)          $ (13,552)
Depreciation and amortization                       (11,465)             (9,781)
Accounts receivable reserves                        (11,435)            (15,030)
Accrued expenses and other                          (33,591)            (41,178)
Net operating loss and tax credit
    carryforwards                                   (41,764)            (69,491)
                                                  -----------------------------
                                                   (112,283)           (149,032)
                                                  -----------------------------
Unremitted earnings of foreign
    subsidiaries                                    169,415             138,459
Technology and other intangibles                     11,821              13,328
State income taxes                                    5,375               6,846
                                                  -----------------------------
                                                    186,611             158,633
                                                  -----------------------------
Valuation reserves                                    3,390              33,617
                                                  -----------------------------
Total                                             $  77,718           $  43,218
                                                  =============================

</TABLE> 

A reconciliation of the income tax provision (benefit) computed by applying 
the domestic federal statutory rate to pretax income, to the recorded 
provision (benefit) for income taxes follows:

<TABLE> 
<CAPTION> 

Year Ended December 31,                         1994        1993        1992
----------------------------------------------------------------------------
(in thousands)
<S>                                             <C>        <C>          <C> 
Provision (benefit) at
    statutory rate                              35.0%      (35.0)%      34.0%
Differences between United
    States and foreign taxes
    and limitations on the benefits
    of foreign losses                           (9.9)       12.6       (13.0)
State taxes, net of federal
    benefit                                      3.2        (0.7)        0.6
Goodwill                                          --        13.7          --
Change in federal valuation
    reserve                                       --         1.9          --
Impact of rate change                             --         0.3          --
Other                                            0.7         1.8         0.7
                                                ---------------------------- 
                                                29.0%       (5.4)%      22.3%
                                                ============================ 
</TABLE> 

In connection with the Internal Revenue Service ("IRS") examination of the tax
returns of Archive and its subsidiaries, in 1994 the Company filed amended
federal tax returns reporting certain adjustments to income which reduced the
net operating loss carryforwards relating to pre-acquisition operations of
Archive and its subsidiaries by approximately $86,000,000. These adjustments
resulted in a reduction of the pre-acquisition unremitted foreign earnings of
Archive and its subsidiaries by the same amount. Consequently, the 

                                    ------
                                      14
<PAGE>
 
Company reduced its gross deferred tax assets by approximately $30,000,000 and
made a corresponding reduction to its valuation reserves of approximately
$30,000,000. These adjustments had no impact on the tax provision or the net
deferred tax liabilities of the Company. At December 31, 1994, the Company has
net operating loss carryforwards of approximately $72,000,000 expiring 1997
through 2007, relating to pre-acquisition operations of Archive and its
subsidiaries. These losses may be used to offset future taxable income, subject
to an annual maximum limitation of approximately $12,000,000.
 
At December 31, 1994, the Company had deferred tax assets of approximately 
$9,000,000 relating to post-acquisition net operating loss carryforwards of 
Archive and its subsidiaries and foreign tax credit carryforwards which, 
subject to certain restrictions, are available to reduce taxes on future 
taxable income and expire in 1995 through 2008. At December 31, 1994, the 
Company had not provided U.S. federal and state income taxes of approximately 
$78,300,000 on cumulative unremitted earnings of its consolidated foreign 
subsidiaries which are intended to be indefinitely reinvested.

The Company enjoys a tax holiday in Singapore relating to the manufacture of 
disk drives, which expires in 1997, subject to post-holiday benefits. The 
Company currently enjoys no tax holiday in Singapore with respect to the 
manufacture of tape drives. However, the Company has applied for a Singapore 
tax holiday through June 1997, relating to the manufacture of its newly 
developed tape drives. The Company's initial tax holiday in Malaysia expired 
on December 31, 1994 with respect to the manufacture of disk drives and 
related subassemblies. The Company has applied for a five-year extension of 
the tax holiday with respect to the manufacture of disk drives in Malaysia. 
The Company also enjoys a tax holiday in China through December 1995, 
relating to the manufacture of disk drives. The net impact of these tax 
holidays was to increase net taxable income by $16,000,000 ($0.21 per share 
fully diluted) in 1994, reduce the net loss by approximately $3,000,000 
($0.06 per share fully diluted) in 1993 and increase net income by approximately
$27,800,000 ($0.37 per share fully diluted) in 1992.

The IRS is currently reviewing Archive and its subsidiaries' federal income 
tax returns for 1985 through 1989. In December 1994, the IRS completed its 
review of the Company's federal tax returns for 1989 and 1990 and issued a 
deficiency notice for $43,000,000 in additional taxes. This assessment 
results primarily from adjustments proposed by the IRS to the allocation of 
income between the Company and its foreign manufacturing subsidiaries. The 
Company believes it has meritorious defenses to the proposed adjustments and 
will contest this assessment. Upon final resolution, the deficiency payment, 
if any, will include assessed interest. Management believes that the ultimate 
resolution of the ongoing IRS audits and pending assessments will not have a 
material adverse impact on the Company's financial position or results of 
operations.

Note 8 Long-Term Debt and Lines of Credit
------

<TABLE> 
<CAPTION> 

December 31,                                             1994          1993
---------------------------------------------------------------------------
(in thousands)
<S>                                                  <C>           <C>
Convertible subordinated debentures,
    6.75%, due 2001, convertible into
    7,931,035 shares of common stock                 $230,000      $230,000
Convertible subordinated debentures,
    6.5%, due 2002, convertible into
    14,375,000 shares of common stock                 345,000       345,000
Senior unsecured notes, 8.84% and
    9.08%, due through 1998                            73,333       105,000
Senior unsecured note, 12%                                 --         9,000
Italian Lira debentures and notes,
    7% to 7.38%, due through 2000                      12,393        13,628
Other borrowings                                        1,255         1,090
                                                     ----------------------
                                                      661,981       703,718
Less current portion                                   34,922        43,112
                                                     ----------------------
                                                     $627,059      $660,606
                                                     ======================
</TABLE>


                                    ------
                                      15
<PAGE>
 

During 1993, the Company modified certain terms of the senior unsecured notes.
Under the modified terms, in exchange for revising certain financial covenants,
the Company agreed to increase the interest rates of the notes by half a percent
for periods commencing from October 1, 1993, and ending the earlier of March 31,
1995, or the due dates of the notes.

Based upon quoted market prices, the fair value of the convertible subordinated
debentures was approximately $402,500,000 at December 31, 1994. The estimated
fair value of the Company's remaining long-term debt was $88,573,000 at December
31, 1994. The fair values of debt for which quoted prices were not available has
been determined based upon interest rates available to the Company for the
issuance of debt with similar terms and remaining maturities.

At December 31, 1994, future minimum principal payments on long-term debt and 
capitalized lease obligations were as follows:

<TABLE> 
<CAPTION> 

Year Ended December 31,
--------------------------------------------------------------------------------
(in thousands)
<S>                                                                    <C>      
1995                                                                   $ 34,922
1996                                                                     34,309
1997                                                                      6,993
1998                                                                      7,107
1999                                                                      2,255
Thereafter                                                              576,395
                                                                       --------
                                                                       $661,981 
                                                                       ========
</TABLE> 

On December 23, 1993, the Company entered into a revolving credit facility 
agreement ("Agreement") with a group of banks allowing borrowings of up to 
$100,000,000 through December 23, 1995. Borrowings under the revolving credit 
facility carry interest at the banks' prime rate or, at the option of the 
Company, at an interbank offered rate (as defined in the Agreement). The 
Agreement provides for a commitment fee. As of December 31, 1994, the Company 
had no borrowings under the revolving credit facility. At December 31, 1994, 
the Company had outstanding letters of credit and guarantees of $58,429,000.

The revolving credit facility and senior unsecured notes prohibit the payment 
of cash dividends and require the maintenance of various financial covenants. 
Without the prior consent of the lenders, the Company is also prohibited from 
incurring debt and lease commitments in excess of specified amounts or 
entering into acquisition, sale of business, merger or joint venture 
agreements in excess of certain amounts. At December 31, 1994, the Company 
was in full compliance with all covenants and conditions.

Note 9 Lease Commitments
------

The Company leases certain property, facilities and equipment under 
non-cancelable operating leases. The terms of the leases for property, 
facilities and equipment expire over the next 25 years with renewal options 
in certain instances. In addition, the Company has leased certain equipment 
under capitalized leases with outstanding lease obligations of less than one 
million dollars as of December 31, 1994. These obligations mature sub-
stantially in 1995 and 1996.

Future minimum lease payments under non-cancelable operating leases as of 
December 31, 1994 are as follows:

<TABLE> 
<CAPTION> 

Year Ended December 31,
--------------------------------------------------------------------------------
(in thousands)
<S>                                                                      <C> 
1995                                                                     $17,372
1996                                                                      11,899
1997                                                                       9,445
1998                                                                       7,272
1999                                                                       6,603
Thereafter                                                                36,895
                                                                         -------
                                                                         $89,486
                                                                         =======
</TABLE> 


                                    ------
                                      16
<PAGE>
 
Rent expense for all operating leases was approximately $22,767,000 in 1994, 
$24,446,000 in 1993 and $15,958,000 in 1992.

Note 10 Employee Benefit Plans
-------

Incentive Stock Plans: In 1986, the Company adopted the 1986 Incentive Stock 
Plan ("Plan"). The Plan provides for the issuance of non-transferable stock 
options to employees of the Company and non-statutory stock options and stock 
purchase rights to directors, employees and consultants of the Company. The 
Company has never issued any stock purchase rights. A total of 18,500,000 
shares of common stock have been reserved for issuance of options and stock 
purchase rights under the Plan. At December 31, 1994, 4,086,125 shares were 
available for future grants of options and stock purchase rights.

Stock options are granted at prices of not less than 100% of the fair market 
value of the common stock at the time of grant, except that stock options 
granted to any employee who owns stock representing more than 10% of total 
voting power must have an exercise price of not less than 110% of fair market 
value. Options granted under the Plan prior to July 1992 expire five years 
after the date of grant and vest over a period of four years. In July 1992, 
the Plan was amended to provide an expiration period for subsequent stock 
grants to ten years from the date of grant.

On December 29, 1992, upon completion of the acquisition of Archive, the 
Company assumed the obligations existing under Archive's Incentive Stock 
Option and Restricted Stock Purchase Plans ("Archive Plans"). Effective on 
that date, the Company converted existing options to purchase Archive common 
stock under the Archive Plans into an equivalent number of options to 
purchase the Company's common stock. A total of 1,125,000 shares of the 
Company's common stock were reserved for issuance of options of which 
1,059,258 were issued upon the conversion. These options expire at various 
times through 2002. 

The following table summarizes stock option activity under the Plan and 
Archive Plans:

<TABLE> 
<CAPTION> 

Year Ended December 31,                      1994           1993           1992
-------------------------------------------------------------------------------
<S>                                    <C>            <C>            <C>  
Options outstanding at 
    beginning of the year               8,529,767      8,592,493      5,510,468
Granted                                 2,781,277      3,292,099      3,213,825
Conversion of the
    Archive Plans                              --             --      1,059,258
Exercised ($0.15 per share
    to $23.50 per share)                 (746,332)    (1,329,620)      (868,619)
Canceled                               (1,646,116)    (2,025,205)      (322,439)
                                       ----------------------------------------
Options outstanding at
    end of the year                     8,918,596      8,529,767      8,592,493
                                       ========================================
Options exercisable at
    end of the year                     3,784,502      3,547,071      2,871,736
Range of exercise price
    of outstanding options
    at end of the year                     $ 5.19         $ 5.19         $ 5.00
                                           $26.88         $26.88         $26.88
</TABLE> 

Restricted Stock Plan: In 1992, the Company's stockholders approved the adoption
of the 1992 Restricted Stock Plan ("Restricted Plan"). A total of 1,000,000
shares of common stock are reserved for issuance under the Restricted Plan. The
aggregate fair value of the shares granted under the Restricted Plan is
considered unearned compensation at the time of grant and compensation is earned
ratably over the vesting period of seven years. Total compensation expense
recognized during 1994, 1993 and 1992 was not material. At December 31, 1994,
379,937 shares had been issued under the Restricted Plan.

Arcada Stock Plan: During 1994, the Board of Directors of the Company's 
majority-owned subsidiary, Arcada Holdings, Inc. ("Arcada"), approved a stock 
option plan for employees and consultants of Arcada. This plan provides for 
the issuance of up to 7,667,186 shares of common stock of Arcada. During 
1994, options were granted at prices of $0.08 and $0.09 per 

                                    ------
                                      17

<PAGE>
 

share which represents the fair market value of Arcada common stock at the 
date of grant, as determined by Arcada's Board of Directors. Options granted 
under this plan expire ten years after the date of grant and vest over a 
period of four years. If all options were issued and exercised, they would 
dilute the Company's ownership in Arcada from 78% to approximately 64%. As of 
December 31, 1994, the number of options outstanding was 5,022,341.

Employee Stock Purchase Plan: In 1988, the Company adopted an Employee Stock 
Purchase Plan ("Purchase Plan"). A total of 4,500,000 shares of common stock 
are reserved for issuance under the Purchase Plan. Shares may be purchased by 
participants at the lower of 85% of the fair market value of the common stock 
at the beginning or end of each six-month offering period. Shares are to be 
purchased from payroll deductions which are limited to 15% of an employee's 
compensation. At December 31, 1994, 3,810,557 shares had been issued under 
the Purchase Plan.

Profit Sharing Plan: The Company had a profit sharing plan which provided for 
additional compensation to substantially all employees of the Company, with 
the exception of certain marketing and sales personnel who were compensated 
on a commission basis, Arcada employees and certain non-U.S. employees. Prior 
to 1994, the additional compensation was determined on a quarterly basis, 
based upon a percentage of the amount of operating profit in excess of a 
stipulated return on equity. As a result of operating losses incurred in 
1993, the Company did not distribute profit sharing or record charges to income 
relating to profit sharing. Charges to income for the profit sharing plan 
during 1992 were approximately $14,686,000 which is included in selling, 
general and administrative costs.

During 1994, upon certain stockholder approval, the Company adopted new 
profit sharing and incentive compensation bonus plans ("Plans") for eligible 
employees, with the exception of certain sales-commissioned personnel and 
Arcada employees. Additional compensation is earned and paid on a quarterly 
or semi-annual basis on the achievement by the Company of revenue and operating 
income targets as a percentage of the Company's financial plan established at 
the beginning of the fiscal year. Individual performance for those employees 
participating in the incentive compensation bonus plans are earned and paid 
on a quarterly or semi-annual basis. In addition, certain eligible employees 
participating in plans are entitled to receive additional year end bonus 
awards based on the achievement by the Company of annual revenue and 
operating income targets as a percentage of the Company's financial plan. 
Charges to income for the Plans during 1994 were approximately $9,042,000 
which is included in selling, general and administrative costs.

401(k) Savings Plan: In 1990, the Company adopted a 401(k) savings plan 
("Savings Plan") covering substantially all of its U.S. employees. Under the 
Savings Plan, eligible employees may contribute up to 15% of their 
compensation to the Savings Plan with the Company matching participants' 
contributions up to $250 per employee per year at the rate of 50% of the
employee contribution. Both the participants' and the Company's contributions
are fully vested. To date, the Company's contributions have not been material.

Note 11 Repurchase of Common Stock
-------

As of December 31, 1991, Compaq Computer Corporation ("Compaq") owned 
approximately 21% of the outstanding common stock of the Company. In August 
1992, the Company repurchased and retired 11,638,802 shares of the Company's 
common stock from Compaq, representing substantially all of Compaq's equity 
interest in the Company. 

                                    ------
                                      18
<PAGE>
 
Note 12 Preferred Shares Rights Agreement
-------
On November 29, 1994, the Board of Directors ("Board") adopted a Preferred 
Shares Rights Agreement ("Agreement") and pursuant to the Agreement 
authorized and declared a dividend of one preferred share purchase right 
("Right") for each common share outstanding of the Company on January 10, 
1995. The Rights are designed to protect and maximize the value of the 
outstanding equity interests in the Company in the event of an unsolicited
attempt by an acquirer to take over the Company, in a manner or terms not
approved by the Board. Each Right becomes exercisable to purchase one-hundredth
of a share of Series A Participating Preferred Stock at an exercise price of
$70.00 and expire on November 29, 2004. The Company may redeem the Rights at a
price of $0.01 per Right.

Note 13 Foreign Currency Exposure and Risk Management
-------
The Company enters into foreign currency forward contracts and purchases 
foreign currency option contracts to hedge operating cash flow requirements 
and vendor purchase commitments denominated in foreign currency (principally 
British Pound Sterling, Singapore Dollars, Italian Lira and Japanese Yen). The
terms of such hedging instruments are not more than three months for all
currencies other than those for Yen which are up to eight months. The purpose of
the Company's foreign currency hedging activities is to protect the Company's
foreign currency assets and liabilities and foreign currency operating cash
flows from adverse changes in exchange rates. As of December 31, 1994, the
realized and deferred gains and losses on option and forward contracts were not
material. At December 31, 1994, the Company had outstanding foreign currency
forward contracts and foreign currency option contracts aggregating
approximately $60,890,000 and $22,870,000, respectively. The contract amounts
approximate the fair value of outstanding contracts and options at December 31,
1994. These contracts mature at various periods through April 1995 and are
consistent with the amounts and timing of the underlying anticipated cash flow
requirements and purchase commitments.

Note 14 Foreign Operations
-------
The Company operates in one industry segment (see Note 1). The following is a 
summary of the Company's operations:
<TABLE> 
<CAPTION> 
Year Ended December 31                       1994           1993           1992
-------------------------------------------------------------------------------
(in thousands)
<S>                                   <C>            <C>            <C> 
Sales to third-party
    customers:
    United States:
     Customers in        
      United States                   $ 1,240,099    $   997,764    $   867,916
     Customers in        
      Europe & Asia                       902,896        859,447        892,506
                                      -----------------------------------------
                                        2,142,995      1,857,211      1,760,422
                                      -----------------------------------------
    Asia                                  142,562        193,257        326,502
    Europe                                 79,595        101,204        151,499
                                      -----------------------------------------
                                        2,365,152      2,151,672      2,238,423
                                      -----------------------------------------
Intercompany
    sales between
    geographic areas:
      United States                       239,341        285,250         74,579
      Asia                              1,787,390      1,426,370      1,388,617
      Europe                                2,929         98,007        106,037
                                      -----------------------------------------
                                        2,029,660      1,809,627      1,569,233
                                      -----------------------------------------
Consolidation
    eliminations                       (2,029,660)    (1,809,627)    (1,569,233)
                                      -----------------------------------------
Net sales                             $ 2,365,152    $ 2,151,672    $ 2,238,423
                                      -----------------------------------------
Operating income:
      United States                   $    14,000    $  (295,722)   $    (3,287)
      Asia                                110,194        (88,303)       119,348
      Europe                               42,370        (62,405)        37,469
                                      -----------------------------------------
                                      $   166,564    $  (446,430)   $   153,530
                                      =========================================
Identifiable assets:
      United States                   $   666,106    $   577,962    $   815,382
      Asia                                295,359        313,319        404,506
      Europe                               56,725         55,223         70,292
                                      -----------------------------------------
                                        1,018,190        946,504      1,290,180
General corporate assets                  443,239        517,547        614,527
                                      -----------------------------------------
Total assets                          $ 1,461,429    $ 1,464,051    $ 1,904,707
                                      =========================================
</TABLE>
                                    ------
                                      19
<PAGE>

Intercompany sales are accounted for at prices intended to approximate those 
that would be charged to unaffiliated customers. At December 31, 1994, 1993 
and 1992, foreign liabilities (excluding intercompany balances) were 
$143,038,000, $273,288,000 and $280,053,000, respectively.

Note 15 Litigation
-------

The Company and certain of its officers and directors are defendants in a 
securities class action lawsuit which purports to represent a class of 
investors who purchased or otherwise acquired the Company's common stock 
between January 1992 and May 1993. Certain officers and directors are also 
defendants in a related stockholders derivative suit. The complaints seek 
unspecified damages and other relief. The Company intends to defend the 
actions vigorously.
    
In August 1993, the Company was served with a patent infringement complaint,
filed by IBM, alleging that products manufactured by the Company have infringed
certain patents owned by IBM. In addition, the complaint seeks declaratory
relief to the effect that disk drives produced by IBM do not infringe certain
patents held by the Company and seeks to have such patents declared invalid. The
Company answered the complaint, denying all material allegations and
counterclaiming that IBM disk drives infringe certain patents owned by Conner,
including those patents contained in the IBM complaint.     
    
During the first quarter of 1995, the Company received a newly issued patent
concerning various aspects of the power management features incorporated in the
Company's disk drives. Promptly following the issuance of the patent, the
Company filed a complaint with the United States International Trade Commission
alleging that various disk drives produced by IBM infringe the new power
management patent, and seeking an exclusion order concerning IBM products
incorporating these infringing drives. The Company filed a lawsuit in Federal
Court, Southern District of New York, seeking damages and injunctive relief
related to the fringement of the power management patent.     
    
On July 25, 1995, the Company and IBM agreed to dismiss all of the litigation 
against each other and entered into patent cross license agreements. The Company
and IBM also established a five year commercial relationship, whereby, IBM may 
buy the Company's products. The litigation settlement did not have an adverse 
effect on the Company's results of operations or financial position.      

In 1992, the Company filed a patent infringement lawsuit against Western 
Digital Corporation ("Western Digital") alleging the infringement of five of 
the Company's patents by Western Digital. Western Digital has filed a 
counterclaim alleging infringement of certain of its patents by the Company. 
The Company believes it has valid claims against Western Digital and 
meritorious defenses to the claims asserted by Western Digital.

In 1994, the Company was served with a patent litigation claim alleging that 
the Company's DC2000 tape drives infringe a patent held by Iomega Corporation 
("Iomega"). This claim was settled by the Company and Iomega during 1994 and 
had no material effect on the results of operations.

                                      20
<PAGE>
 
Report of Independent Accountants

To the Board of Directors and
Stockholders of Conner Peripherals, Inc.

In our opinion, the accompanying consolidated balance sheets and the related 
consolidated statements of operations, of stockholders' equity and of cash 
flows present fairly, in all material respects, the financial position of 
Conner Peripherals, Inc. and its subsidiaries at December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles. These consolidated financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
         



/s/ Price Waterhouse LLP
    
PRICE WATERHOUSE LLP
San Jose, California
January 11, 1995, except
as to Note 15 which
is as of July 25, 1995      


                                    ------
                                      21
<PAGE>
 
PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          -------------------------------------------------------
          FORM 8-K
          --------
(a)    The financial statements listed in the following index to consolidated
       financial statements are filed as part of this Amendment No. 1 to Annual
       Report on Form 10-K.
<TABLE>     
<CAPTION>
                                                                  Page
                                                                  ----
 <S>                                                              <C> 
  1.   Financial Statements                                           
                                                                       
                                                          
       Consolidated Balance Sheets at December 31, 1994         
       and December 31, 1993                                        4
                                                            
       Consolidated Statements of Operations for the             
       three years ended December 31, 1994                          5
                                                          
       Consolidated Statements of Cash Flows for the            
       three years ended December 31, 1994                          6
                                                          
       Consolidated Statement of Stockholders' Equity            
       for the three years ended December 31, 1994                  7
                                                          
       Notes to Consolidated Financial Statements                   8
                                                            
       Report of Independent Accountants                           21
      
  2.   Financial Statement Schedule
</TABLE>      
<TABLE>     
<CAPTION> 
       Schedule         Description                               Page
       --------         -----------                               ----
       <S>              <C>                                       <C> 
       II               Valuation and Qualifying Accounts         S-1
       (formerly
       Schedule VIII)  
                        Report of Independent Accountants on      
                        Financial Statement Schedule              S-2
</TABLE>     
       Schedules not listed above have been omitted because they are
       inapplicable.

  3.   Exhibits
 
       Refer to (c) below.
 
(b)    Reports on Form 8-K

       No reports on Form 8-K were filed on behalf of Registrant during the
       quarter ended December 31, 1994.

                                       22
<PAGE>
 
(c)  Exhibits

              2.1(5)        Agreement and Plan of Merger between Conner
                            Peripherals, Inc., a Delaware corporation, and
                            Conner Peripherals, Inc., a California corporation,
                            dated July 13, 1992.

              2.2(6)        Agreement and Plan of Merger between Archive
                            Corporation, Conner Acquisition Corp. and Conner
                            Peripherals, Inc. dated November 18, 1992, as
                            amended.

              3.1(5)        Certificate of Incorporation of Registrant, as
                            amended to date.

              3.2           Bylaws of Registrant, as amended to date.

              3.3(10)       Certificate of Designation of Rights Preferences and
                            Privileges of Series A Participating Preferred Stock
                            of Registrant.

              4.1(2)        Form of Indenture relating to Registrant's 
                            6-3/4% Convertible Subordinated Debentures due 2001.

              4.2(3)        Form of Indenture relating to Registrant's 
                            6-1/2% Convertible Subordinated Debentures due 2002.

              4.3(10)       Preferred Shares Rights Agreement dated November 29,
                            1994 between Registrant and The First National Bank
                            of Boston, Rights Agent.

              10.1*         Summary of Registrant's Profit Sharing Plan.
                      
              10.2(8)*      Registrant's 1986 Incentive Stock Plan, together
                            with forms of agreements thereunder, as amended.
                      
              10.3*         Registrant's Employee Stock Purchase Plan, as
                            amended.
                      
              10.4(4)*      Registrant's 1992 Restricted Stock Plan.
                      
              10.5(7)*      Stock Option and Restricted Stock Purchase Plan -
                            1981 and form of option agreement with respect
                            thereto.
                      
              10.6(7)*      Incentive Stock Option Plan - 1981 and form of
                            option agreement with respect thereto.

                                       23
<PAGE>
 
<TABLE> 
               <C>          <S> 
               10.7*        Registrant's 1995 Director Stock Plan.

               10.8(5)*     Form of Officer and Director Amended and Restated
                            Indemnification Agreement.
 
               10.9*        Summaries of Registrant's Executive Incentive Plans.

               10.10*       Form of Change of Control Agreement entered into by
                            Registrant and Mr. Finis F. Conner.

               10.11*       Form of Change of Control Agreement entered into by
                            Registrant and Mr. David T. Mitchell and Mr. P.
                            Jackson Bell.

               10.12*       Form of Change of Control and Severence Agreement
                            entered into by Registrant and Mr. Donald Massaro,
                            Mr. Kenneth Potashner and Dr. Michael Workman.

               10.13*       Employment Contract/Termination Agreement between
                            Registrant and David T. Mitchell and form of
                            Employment Contract/Termination Agreement between
                            Registrant and P. Jackson Bell.

               10.14(1)     Lease Agreement dated August 19, 1988 between
                            Registrant and Corporate Plaza, Phase I, a
                            California general partnership, for certain land and
                            improvements commonly known as Corporate Plaza,
                            located in San Jose, California.

               10.15        Amendments One, Two and Three to Lease Agreement
                            dated August 19, 1988 between Registrant and
                            Corporate Plaza, Phase I referenced above.

               10.16(1)     Lease Agreement dated June 16, 1988 between Conner
                            Peripherals, Singapore, Ltd. and Newton Investment
                            Ltd. for the sixth story of 151 Lorong Chuan,
                            Singapore.

               10.17(1)     Lease Agreement dated December 8, 1988 between
                            Conner Peripherals Singapore, Ltd. for the fifth
                            story of 151 Lorong Chuan, Singapore.
</TABLE> 

                                       24
<PAGE>
 
<TABLE> 
               <C>          <S> 
               10.18(3)     Amendment to Lease Agreements dated June 16, 1988
                            and December 8, 1988 between Conner Peripherals,
                            Singapore, Ltd. and Newton Investment Ltd. for the
                            sixth and fifth stories, respectively, of 151 Lorong
                            Chuan, Singapore, dated October 23, 1991. See
                            Exhibits 10.16 and 10.17 listed above.

               10.19(9)     Sixth Amendment dated December 22, 1993 ("Sixth
                            Amendment") to Note Purchase Agreement among
                            Registrant and Principal Mutual Life Insurance
                            Company, Northwestern National Life Insurance
                            Company, Northern Life Insurance Company, The North
                            Atlantic Life Insurance Company of America and
                            Ministers Life - a Mutual Life Insurance Company
                            dated June 1, 1989 ("Note Purchase Agreement").
                            Exhibit A to the Sixth Amendment is a copy of the
                            Amended and Restated Note Purchase Agreement which
                            includes all amendments and agreements entered into
                            to date with respect to the Note Purchase Agreement.

               10.20(9)     Fifth Amendment dated December 22, 1993 ("Fifth
                            Amendment") to the Note Agreement dated as of March
                            29, 1991 ("Note Agreement") among Registrant and the
                            Purchasers listed in such agreement relating to the
                            Registrant's Series A and Series B Senior Notes.
                            Exhibit A to the Fifth Amendment is a copy of the
                            Amended and Restated Note Agreement which includes
                            all amendments and agreements entered into to date
                            with respect to the Note Agreement.

               10.21        Sixth Amendment dated October 31, 1994 to the Note
                            Agreement dated as of March 29, 1991 among
                            Registrant and the Purchasers listed in such
                            agreement relating to the Registrant's Series A and
                            Series B Senior Notes.

               10.22(5)     Lease Agreement to supersede the Lease Agreement
                            that is dated August 1, 1989, on August 1, 1992 for
                            Building 1 at 2400 Trade Centre Drive, Longmont, CO.

               10.23(5)     Stock Purchase Agreement between Compaq Computer
                            Corporation and Registrant dated July 28, 1992.
 
               10.24(8)     Lease Agreement dated March 21, 1992 between Newton
                            Investment Ltd. and Conner Peripherals Pte. Ltd. for
                            the third story of 151 Lorong Chuan, Singapore.
</TABLE> 

                                       25

<PAGE>
 
<TABLE>     
               <C>          <S> 
               10.25(9)     Sublease Agreement between the Registrant and
                            General Signal Corporation for the property located
                            at 195 South Milpitas Boulevard, Milpitas,
                            California, dated February 20, 1993.

               10.26(9)     Credit Agreement dated December 23, 1993 among
                            Registrant and Bank of America National Trust and
                            Savings Association, as Agent, and the other
                            financial institutions which are parties thereto.

               10.27        First Amendment dated October 19, 1994 to Credit
                            Agreement dated December 23, 1993 among Registrant
                            Bank of America National Trust and Savings
                            Association, as Agent, and the other financial
                            institutions which are parties thereto.

               10.28        Second Amendment dated November 16, 1994 to Credit
                            Agreement dated December 23, 1993 among Registrant
                            Bank of America National Trust and Savings
                            Association, as Agent, and the other financial
                            institutions which are parties thereto.

               11.1         Statement regarding computation of Registrant's
                            earnings per share.

               13.1         1994 Annual Report to Stockholders.

               21.1         Subsidiaries of Registrant.

               23.1+        Consent of Independent Accountants. 
                          
               24.1         Power of Attorney (incorporated by reference from 
                            the Company's Report on Form 10-K for the fiscal 
                            year ended December 31, 1994 filed on March 30,
                            1995).

               27.0         Article 5 of Regulation S-X - Financial Data
                            Schedule.
</TABLE>      

______________________
   
+ Filed with this Amendment No. 1 on Form 10-K/A to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.    

                                       26

<PAGE>
 
(1)  Incorporated by reference to exhibit filed with Registration Statement No.
     33-26831.

(2)  Incorporated by reference to exhibit filed with Registrant's Report on Form
     10-K for the fiscal year ended December 31, 1990.

(3)  Incorporated by reference to exhibit filed with Registrant's Report on Form
     10-K for the fiscal year ended December 31, 1991.

(4)  Incorporated by reference to exhibit filed with Registrant's Registration
     Statement No. 33-46886.

(5)  Incorporated by reference to exhibit filed with Registrant's Form 8-B filed
     with the Securities and Exchange Commission on September 9, 1992.

(6)  Incorporated by reference to exhibit filed with the Tender Offer Statement
     on Schedule 14D-1, as amended, of Conner Acquisition Corporation and Conner
     Peripherals, Inc., filed with the Securities and Exchange Commission on
     November 24, 1992.

(7)  Incorporated by reference to exhibit filed with Registrant's Registration
     Statement No. 33-56878.

(8)  Incorporated by reference to exhibit filed with Registrant's Report on Form
     10-K for the fiscal year ended December 31, 1992.

(9)  Incorporated by reference to exhibit filed with Registrant's Report on Form
     10-K for the fiscal year ended December 31, 1993.

(10) Incorporated by reference to exhibit filed with Registrant's Registration
     Statement on Form 8-A filed with the Securities and Exchange Commission on
     November 30, 1994.
___________________________

*  Denotes a management contract or compensatory plan or arrangement.
         
Unless otherwise noted, all exhibits were filed with the Company's Annual 
Report on Form 10-K for the year ended December 31, 1994.    

                                       27
<PAGE>
 
                                  SIGNATURES

   
  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized.    



CONNER PERIPHERALS, INC.

 
By:/s/ P. Jackson Bell
   --------------------------------------
        
    P. Jackson Bell, Executive Vice President
    and Chief Financial Officer 
    (Duly Authorized Signatory)    
    
Dated: November 15, 1995     

         

         


                                       28
<PAGE>
 
                              
                           AMENDMENT NO. 1 TO      
                             
                        ANNUAL REPORT ON FORM 10-K      
                                         
                                      OF      
                           CONNER PERIPHERALS, INC. 

                     Index to Financial Statement Schedule

<TABLE>    
<CAPTION>
         Schedule            Description                                    Page
      -----------            -----------                                   -----
      <S>                    <C>                                           <C>
           II                Valuation and Qualifying Accounts              S-1
                             Report of Independent Accountants on
                             Financial Statement Schedule                   S-2
</TABLE>     

                                       29
<PAGE>
 
                           CONNER PERIPHERALS, INC.
                   
                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS      

<TABLE>
<CAPTION>
                            Balance at       Charged    Charged to                             Balance
                          Beginning of      to Costs         Other                              at End
Description                     Period  and Expenses  Accounts /1/       Deductions /2/      of Period
--------------                  ------  ------------  ------------       --------------      ---------

<S>                       <C>           <C>           <C>               <C>                <C>
1992:
Allowance for accounts
    receivable             $10,054,000   $19,339,000    $4,299,000        $          --    $33,692,000


1993:
Allowance for accounts
    receivable             $33,692,000   $ 9,749,000    $       --        $  (4,011,000)   $39,430,000


1994:
Allowance for accounts     $39,430,000   $ 2,273,000    $       --        $ (10,211,000)   $31,492,000
    receivable
</TABLE>









____________________________________
/1/ Charged to Other Accounts in 1992 includes reserves relating to Archive
    Corporation.

/2/ Accounts written off, net of recoveries.

                                     S - 1
<PAGE>
 
                     REPORT OF INDEPENDENT ACCOUNTANTS ON
                     -------------------------------------
                         FINANCIAL STATEMENT SCHEDULE
                         ----------------------------

To the Board of Directors
of Conner Peripherals, Inc.
    
Our audits of the consolidated financial statements referred to in our report
dated January 11, 1995, except as to Note 15 which is dated as of July 25, 1995,
appearing in this Form 10-K/A also included an audit of the Financial Statement
Schedule listed in item 14(a) of this Form 10-K/A. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.      


/s/ PRICE  WATERHOUSE  LLP

Price Waterhouse LLP
San Jose, CA
January 11, 1995
 

                                     S - 2