##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K/ A


Amendment No. 1


|                                            |  |                                                                                             
|------------------------------------------- |  | --------------------------------------------------------------------------------------------
|(Mark One)                                  |  |                                                                                             
|þ                                           |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 25, 2004
|OR                                         
|                                           
|o                                           |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|                                            |  | For the transition period
    from           to           .                                 

Commission file number: 001-16447





Maxtor Corporation


(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|Delaware                        |  | 77-0123732         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|Incorporation or organization)  |  | Identification No.)

500 McCarthy Blvd., Milpitas, California 95035


(Address of
principal executive offices)


Registrants telephone number, including area code:


(408) 894-5000


Securities registered pursuant to Section 12(b) of the
Act:


Common Stock, par value $.01 per share


Securities registered pursuant to Section 12(g) of the
Act:


5.75% Convertible Subordinated Debentures, due
March 1, 2012


þ o


o


þ o




DOCUMENTS INCORPORATED BY REFERENCE












---



EXPLANATORY NOTE


TABLE OF CONTENTS




|                                                                         |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                  
|                                                                         | Item 1. Business                                                                             
|                                                                         | Item 2. Properties                                                                           
|                                                                         | Item 3. Legal Proceedings                                                                    
|                                                                         | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                                                 
|                                                                         | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|                                                                         | Item 6. Selected Consolidated Financial Information                                          
|                                                                         | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|SUPPLEMENTAL FINANCIAL INFORMATION                                      
|CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE                            
|                                                                         | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|                                                                         | Item 8. Consolidated Financial Statements and Supplementary Data                             
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                              
|CONSOLIDATED BALANCE SHEETS                                             
|CONSOLIDATED STATEMENTS OF OPERATIONS                                   
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                 
|                                                                         | Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 
|                                                                         | Item 9A. Controls and Procedures                                                             
|                                                                         | Item 9B. Other Information                                                                   
|PART III                                                                
|                                                                         | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                                         | Item 11. Executive Compensation                                                              
|                                                                         | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                                         | Item 13. Certain Relationships and Related Transactions                                      
|                                                                         | Item 14. Principal Accounting Fees and Services                                              
|PART IV                                                                 
|                                                                         | Item 15. Exhibits, Financial Statement Schedules                                             
|SIGNATURES                                                              
|SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS                        
|INDEX TO EXHIBITS                                                       
|EXHIBIT 23.1                                                            
|EXHIBIT 31.1                                                            
|EXHIBIT 31.2                                                            
|EXHIBIT 32.1                                                            
|EXHIBIT 32.2                                                            



---



##### Table of Contents















| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | Item 6. Selected Financial Data                                                                  
|
| |  | Item 7. Managements Discussion and Analysis of
    Financial Condition and Results of Operations
|
| |  | Item 8. Financial Statements and Supplementary Data                                              
|
| |  | Item 9A. Controls and Procedures                                                                 





| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | Item 15. Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K

1



---



##### Table of Contents





2



---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Overview










Company Background




Industry Background




Desktop Computing Market.




| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the rapid increase in digital data;                                                                                                                                 
|
| |  | the general growth of PC sales in the United States and Western
    Europe;                                                                                         
|
| |  | the growth of non-branded desktop computers in emerging
    economies, specifically China and other parts of Asia, Russia,
    Eastern Europe and Latin America; and
|
| |  | larger file sizes created by multimedia-intensive applications.                                                                                                     

3



---



##### Table of Contents





Enterprise Market.






Consumer Electronics Market.




Our Strategy




Pursue Low-Cost Manufacturing.


4



---



##### Table of Contents





Optimize Supply Chain and Improve Procurement
Efficiencies.


Refocus Operating Expenses.


Rationalize Product Roadmap.


Pursue Opportunities in Growth Markets.


5



---



##### Table of Contents







Maintain Leading Presence With Core Computer Manufacturer,
Distribution and Retail Customers.




Strengthen Core Leadership Team.


Technology and Product Development


Hard Disk Drive Technology.








6



---



##### Table of Contents





Product Development.






| |   |                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | create state-of-the art technologies to be used in our future
    products;                                                                                                  
|
| |  | develop early prototypes to ascertain the feasibility and
    manufacturability of our planned products; and                                                                 
|
| |  | analyze the latest head, disk, channel, motor and application
    specific integrated circuit technologies and designs to broaden
    and strengthen our technology platform.





Products








7



---



##### Table of Contents





|                                       |  |          |           |  |          |  |               |            |  |  |              |  |  |                                                     |                              | 
|-------------------------------------- |  | -------- | --------- |  | -------- |  | ------------- | ---------- |  |  | ------------ |  |  | --------------------------------------------------- | ---------------------------- | 
|                                       |  | Capacity |           |  | Product  |  |               | Rotational |  |  |             
|                                       |  | Per Disk |           |  | Capacity |  |               | Speed      |  |  |             
|Products                               |  | (GB*)    |           |  | (GB*)    |  |               | (RPM)      |  |  | Applications | 
|                                       |  |          |           |  |          |  |               |            |  |  |              | 
|Fireball 3                             |  |          | 40        |  |          |  | 40            |            |  |  | 5,400        |  |  | Entry-level Desktop PCs & Consumer Electronics     
|DiamondMax 16                          |  |          | 60/80     |  |          |  | 60/80/120/160 |            |  |  | 5,400        |  |  | Mainstream Desktop PCs & Consumer Electronics      
|DiamondMax 8                           |  |          | 40        |  |          |  | 40            |            |  |  | 7,200        |  |  | High-performance Desktop PCs & Workstations        
|DiamondMax 8S                          |  |          | 40        |  |          |  | 40            |            |  |  | 7,200        |  |  | Entry-level Desktop PCs transitioning to Serial ATA
|DiamondMax Plus 9                      |  |          | 60/80     |  |          |  | 60/80/120/160 |            |  |  | 7,200        |  |  |                                                     | High-performance Desktop PCs | 
|                                       |  |          |           |  |          |  | 200/250       |            |  |  |              |  |  |                                                     | & Workstations               | 
|DiamondMax 10                          |  |          | 80        |  |          |  | 80/120/160    |            |  |  | 7,200        |  |  |                                                     | High-performance Desktop PCs | 
|                                       |  |          |           |  |          |  | 200/250/300   |            |  |  |              |  |  |                                                     | & Workstations               | 
|MaXLine                                |  |          | 80        |  |          |  | 250/300       |            |  |  | 5,400        |  |  |                                                     | Near-line & Mid-line Storage | 
|MaXLine Plus II                        |  |          | 80        |  |          |  | 250           |            |  |  | 7,200        |  |  |                                                     | Near-line & Mid-line Storage | 
|Atlas 10K                              |  |          | 36.7/73.5 |  |          |  | 36/73/147/300 |            |  |  | 10,000       |  |  | Servers, Workstations & Storage Subsystems         
|Atlas 15K                              |  |          | 18.4/36.7 |  |          |  | 18/36/73/147  |            |  |  | 15,000       |  |  | Servers, Workstations & Storage Subsystems         
|Maxtor OneTouch External Hard Drive    |  |          | 80/100    |  |          |  | 160/200/250/  |            |  |  | 7,200        |  |  |                                                     | Personal Consumer Storage &  | 
|                                       |  |          |           |  |          |  | 300           |            |  |  |              |  |  |                                                     | Data Backup                  | 
|QuickView Expander External Hard Drive |  |          | 80/100    |  |          |  | 160/300       |            |  |  | 7,200        |  |  | DVRs & Set-top Boxes with External Serial ATA Ports






|  |                                                                                                       
|- | ------------------------------------------------------------------------------------------------------
|* | GB = A gigabyte means 1 billion bytes. Total usable
    capacity may vary with operating environments.

Manufacturing












| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | better monitor and control process trends, resulting in improved
    product quality, faster time-to-volume production and overall
    customer satisfaction;
|
| |  | simultaneously manufacture multiple product configurations;                                                                                                  

8



---



##### Table of Contents





| |   |                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | quickly reconfigure our manufacturing cells to respond to
    customer change requests and changes in product and customer mix;                                                           
|
| |  | effectively adapt our inventory management model to something
    closer to a build-to-order business model that many of our
    desktop computer manufacturer customers have adopted; and
|
| |  | add capacities in small increments as needed, allowing for
    better capacity utilization.                                                                                               





Materials and Supply Chain






Customers and Sales Channels




Manufacturers.


Distributors.


9



---



##### Table of Contents



Retailers.




Sales and Marketing






Backlog




Competition






10



---



##### Table of Contents









Intellectual Property








11



---



##### Table of Contents





Employees




Executive Officers




|                   |  |     |    |  |                           |                                                                             
|------------------ |  | --- | -- |  | ------------------------- | ----------------------------------------------------------------------------
|Name               |  | Age |    |  | Position with the Company
|                   |  |     |    |  |                          
|Dr. C.S. Park      |  |     | 57 |  |                           | Chairman and Chief Executive Officer                                        
|Michael J. Wingert |  |     | 44 |  |                           | President and Chief Operating Officer                                       
|Duston M. Williams |  |     | 46 |  |                           | Executive Vice President, Finance and Chief Financial Officer               
|Fariba Danesh      |  |     | 46 |  |                           | Executive Vice President, Operations                                        
|Kurt Richarz       |  |     | 44 |  |                           | Senior Vice President, Worldwide Sales                                      
|John Viera         |  |     | 55 |  |                           | Senior Vice President, Human Resources                                      
|David L. Beaver    |  |     | 51 |  |                           | Senior Vice President, Worldwide Materials and Chief Procurement
    Officer

Dr. C.S. Park


Michael J. Wingert


12



---



##### Table of Contents





Duston M. Williams


Fariba Danesh


Kurt Richarz


John Viera


David L. Beaver


Available Information




13



---



##### Table of Contents








|        |           
|------- | ----------
|Item 2. | Properties


















|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings





14



---



##### Table of Contents












|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders








PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters



|                                                  |  |      |       |  |     |   |      | 
|------------------------------------------------- |  | ---- | ----- |  | --- | - | ---- | 
|                                                  |  | High |       |  | Low |  
|                                                  |  |      |       |  |     |  
|Fiscal 2005 First Quarter (through March 4, 2005) |  | $    | 5.95  |  |     | $ | 4.18 | 
|Fiscal 2004 Fourth Quarter                        |  |      | 5.84  |  |     |   | 2.89 | 
|Fiscal 2004 Third Quarter                         |  |      | 6.68  |  |     |   | 3.57 | 
|Fiscal 2004 Second Quarter                        |  |      | 8.53  |  |     |   | 6.50 | 
|Fiscal 2004 First Quarter                         |  |      | 12.40 |  |     |   | 7.94 | 
|Fiscal 2003 Fourth Quarter                        |  |      | 15.30 |  |     |   | 9.55 | 
|Fiscal 2003 Third Quarter                         |  |      | 13.19 |  |     |   | 7.51 | 
|Fiscal 2003 Second Quarter                        |  |      | 7.52  |  |     |   | 4.85 | 
|Fiscal 2003 First Quarter                         |  |      | 6.72  |  |     |   | 5.02 | 



Dividend Policy




15



---



##### Table of Contents








|        |                                            
|------- | -------------------------------------------
|Item 6. | Selected Consolidated Financial Information



|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |            |         |       |   |            |         |       | 
|--------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------- | ------- | ----------- | ------------ | - | ----------- | ------------ | ----- | ----------- | ------------ | ------- | ----------- | ------------ | ---------- | ------- | ----- | - | ---------- | ------- | ----- | 
|                                                                |                                                      | Fiscal Year                                       |         |             | Fiscal Year  |   |             | Fiscal Year  |       |             | Fiscal Year  |         |             | Fiscal Year  |           
|                                                                |                                                      | Ended                                             |         |             | Ended        |   |             | Ended        |       |             | Ended        |         |             | Ended        |           
|                                                                |                                                      | December 30,                                      |         |             | December 29, |   |             | December 28, |       |             | December 27, |         |             | December 25, |           
|                                                                |                                                      | 2000                                              |         |             | 2001(1)      |   |             | 2002(2)      |       |             | 2003         |         |             | 2004         |           
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|                                                                |                                                      |                                                   |         | Restated(3) |              |   | Restated(3) |              |       | Restated(3) |              |         | Restated(3) |             
|                                                                |                                                      | (In millions, except share and per share amounts) |        
|Consolidated Statement of Operations Data:                      |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |            |         |       |   |            |        
|Net revenues                                                    |                                                      | $                                                 | 2,690.9 |             |              | $ | 3,765.5     |              |       | $           | 3,779.5      |         |             | $            | 4,086.4    |         |       | $ | 3,796.3    |        
|Cost of revenues                                                |                                                      |                                                   | 2,317.7 |             |              |   | 3,403.0     |              |       |             | 3,382.1      |         |             |              | 3,385.4    |         |       |   | 3,423.9    |        
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|                                                                | Gross profit                                         |                                                   |         | 373.2       |              |   |             | 362.5        |       |             |              | 397.4   |             |              |            | 701.0   |       |   |            | 372.4   |      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Operating expenses:                                             |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |            |         |       |   |            |        
|                                                                | Research and development                             |                                                   |         | 211.8       |              |   |             | 413.5        |       |             |              | 403.2   |             |              |            | 356.0   |       |   |            | 325.3   |      
|                                                                | Selling, general and administrative                  |                                                   |         | 99.7        |              |   |             | 232.0        |       |             |              | 148.5   |             |              |            | 131.7   |       |   |            | 127.9   |      
|                                                                | Amortization of goodwill and other intangible assets |                                                   |         |            |              |   |             | 176.0        |       |             |              | 82.2    |             |              |            | 85.3    |       |   |            | 36.0    |      
|                                                                | Purchased in-process research and development        |                                                   |         |            |              |   |             | 95.2         |       |             |              |        |             |              |            |        |       |   |            |        |      
|                                                                | Restructuring and impairment charges                 |                                                   |         |            |              |   |             |             |       |             |              | 9.5     |             |              |            |        |       |   |            | 65.2    |      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|                                                                |                                                      | Total operating expenses                          |         |             | 311.5        |   |             |              | 916.7 |             |              |         | 643.4       |              |            |         | 573.0 |   |            |         | 554.4 | 
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Income (loss) from operations                                   |                                                      |                                                   | 61.7    |             |              |   | (554.2      | )            |       |             | (246.0       | )       |             |              | 128.0      |         |       |   | (182.0     | )      
|Interest expense                                                |                                                      |                                                   | (13.7   | )           |              |   | (25.1       | )            |       |             | (26.6        | )       |             |              | (30.2      | )       |       |   | (31.8      | )      
|Interest income                                                 |                                                      |                                                   | 19.8    |             |              |   | 20.3        |              |       |             | 8.0          |         |             |              | 5.2        |         |       |   | 5.2        |        
|Income from litigation                                          |                                                      |                                                   |        |             |              |   |            |              |       |             |             |         |             |              |           |         |       |   | 24.8       |        
|Other gain (loss)                                               |                                                      |                                                   | 6.3     |             |              |   | (6.2        | )            |       |             | 4.4          |         |             |              | (0.6       | )       |       |   | 0.1        |        
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Income (loss) from continuing operations before income taxes    |                                                      |                                                   | 74.1    |             |              |   | (565.2      | )            |       |             | (260.2       | )       |             |              | 102.4      |         |       |   | (183.7     | )      
|Provision for (benefit from) income taxes                       |                                                      |                                                   | 1.7     |             |              |   | 3.4         |              |       |             | 2.2          |         |             |              | 3.5        |         |       |   | (0.3       | )      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Income (loss) from continuing operations                        |                                                      |                                                   | 72.4    |             |              |   | (568.6      | )            |       |             | (262.4       | )       |             |              | 98.9       |         |       |   | (183.4     | )      
|Income (loss) from discontinued operations                      |                                                      | $                                                 | (40.6   | )           |              | $ | (48.2       | )            |       | $           | (73.5        | )       |             | $            | 2.2        |         |       | $ |           |        
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Net income (loss)                                               |                                                      | $                                                 | 31.8    |             |              | $ | (616.8      | )            |       | $           | (335.9       | )       |             | $            | 101.1      |         |       | $ | (183.4     | )      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Net income (loss) per share  basic Continuing
    operations   |                                                      | $                                                 | 0.64    |             |              | $ | (2.75       | )            |       | $           | (1.10        | )       |             | $            | 0.41       |         |       | $ | (0.74      | )      
|                                                                | Discontinued operations                              |                                                   | $       | (0.36       | )            |   | $           | (0.23        | )     |             | $            | (0.31   | )           |              | $          | 0.01    |       |   | $          |        |      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Total                                                           |                                                      | $                                                 | 0.28    |             |              | $ | (2.98       | )            |       | $           | (1.40        | )*      |             | $            | 0.42       |         |       | $ | (0.74      | )      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Net income (loss) per share  diluted Continuing
    operations |                                                      | $                                                 | 0.61    |             |              | $ | (2.75       | )            |       | $           | (1.10        | )       |             | $            | 0.39       |         |       | $ | (0.74      | )      
|                                                                | Discontinued operations                              |                                                   | $       | (0.34       | )            |   | $           | (0.23        | )     |             | $            | (0.31   | )           |              | $          | 0.01    |       |   | $          |        |      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Total                                                           |                                                      | $                                                 | 0.27    |             |              | $ | (2.98       | )            |       | $           | (1.40        | )*      |             | $            | 0.40       |         |       | $ | (0.74      | )      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Shares used in per share calculation (in thousands):            |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |            |         |       |   |            |        
|                                                                | Basic                                                |                                                   |         | 113,433     |              |   |             | 206,912      |       |             |              | 239,474 |             |              |            | 243,023 |       |   |            | 247,672 |      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|                                                                | Diluted                                              |                                                   |         | 119,116     |              |   |             | 206,912      |       |             |              | 239,474 |             |              |            | 251,136 |       |   |            | 247,672 |      
|                                                                |                                                      |                                                   |         |             |              |   |             |              |       |             |              |         |             |              |           
|Balance Sheet Data:                                             |                                                      |                                                   |         |             |              |   | Restated(3  | )            |       |             | Restated(3   | )       |             |              | Restated(3 | )       |       |   | Restated(3 | )      
|Total assets                                                    |                                                      | $                                                 | 1,024.9 |             |              | $ | 2,530.0     |              |       | $           | 2,175.3      |         |             | $            | 2,536.7    |         |       | $ | 2,107.7    |        
|Total current liabilities                                       |                                                      |                                                   | 628.9   |             |              |   | 1,160.7     |              |       |             | 1,157.6      |         |             |              | 1,254.2    |         |       |   | 1,081.9    |        
|Long-term debt                                                  |                                                      |                                                   | 92.3    |             |              |   | 244.5       |              |       |             | 206.3        |         |             |              | 355.8      |         |       |   | 382.6      |        
|Total stockholders equity                                      |                                                      |                                                   | 303.7   |             |              |   | 929.8       |              |       |             | 620.1        |         |             |              | 746.7      |         |       |   | 576.6      |        






|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(1) | Includes operations of Quantum HDD since April 2, 2001 and
    of MMC since September 2, 2001.
|   
|*   | Does not add due to rounding.                                                                 

16



---



##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Commencing in fiscal 2002, the Company adopted Statement of
    Financial Accounting Standards No. 142, Goodwill and
    Other Intangible Assets (SFAS 142).
    SFAS 142 requires, among other things, the discontinuance
    of goodwill amortization. In addition, the standard included
    provisions upon adoption for the reclassification of certain
    existing recognized intangibles as goodwill, reassessment of the
    useful lives of existing recognized intangibles,
    reclassification of certain intangibles out of previously
    reported goodwill and the testing for impairment of existing
    goodwill and other intangibles. As a result, the Company
    reclassified its existing acquired assembled workforce balance
    to goodwill, as it does not meet the separate recognition
    criterion according to SFAS 142. See note 6 of Notes
    to Consolidated Financial Statements.
|   
|(3) | For additional information regarding the restatement, see
    Note 2 of the Consolidated Financial Statements. See the
    table below regarding the restatement of December 29, 2001
    financial information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|                                               |  |                         |            |   |             |   |            |  
|---------------------------------------------- |  | ----------------------- | ---------- | - | ----------- | - | ---------- | -
|                                               |  | As of December 29, 2001 |           
|                                               |  |                         |           
|                                               |  | As Reported             |            |   | As Restated |  
|                                               |  |                         |            |   |             |  
|Changes to Consolidated Balance Sheet          |  |                         |            |   |             |   |            |  
|Goodwill                                       |  | $                       | 636,087    |   |             | $ | 629,375    |  
|Accrued and other liabilities                  |  |                         | 534,208    |   |             |   | 525,132    |  
|Other liabilities                              |  |                         | 190,797    |   |             |   | 195,019    |  
|Accumulated deficit                            |  | $                       | (1,375,055 | ) |             | $ | (1,376,913 | )
|Changes to Consolidated Results of Operations  |  |                         |            |   |             |   |            |  
|Research and development                       |  | $                       | 411,189    |   |             | $ | 413,571    |  
|Amortization of goodwill and intangible assets |  |                         | 176,358    |   |             |   | 175,960    |  
|Interest expense                               |  |                         | (25,190    | ) |             |   | (25,064    | )
|Net loss                                       |  | $                       | (614,929   | ) |             | $ | (616,787   | )
|Net loss per share  basic                     |  |                         |            |   |             |   |            |  
|Continuing operations                          |  | $                       | (2.74      | ) |             | $ | (2.75      | )
|Total                                          |  | $                       | (2.97      | ) |             | $ | (2.98      | )
|Net loss per share  diluted                   |  |                         |            |   |             |   |            |  
|Continuing operations                          |  | $                       | (2.74      | ) |             | $ | (2.75      | )
|Total                                          |  | $                       | (2.97      | ) |             | $ | (2.98      | )

17



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The following discussion should be read in conjunction with
Item 1: Business, Item 6: Selected Financial
Information and Item 8: Consolidated Financial Statements
and Supplementary Data.


This report contains forward-looking statements within the
meaning of the U.S. federal securities laws that involve
risks and uncertainties. The statements contained in this report
that are not purely historical, including, without limitation,
statements regarding our expectations, beliefs, intentions or
strategies regarding the future, are forward-looking statements.
Examples of forward-looking statements in this report include
statements regarding future revenue, gross profit, demand,
average selling prices, cost improvements, capital expenditures,
liquidity, depreciation and amortization charges, impacts of our
restructuring, our indemnification obligations, the results of
litigation, and development and product launch schedules. In
this report, the words anticipate,
believe, expect, intend,
may, will, should,
could, would, project,
plan, estimate, predict,
potential, future, continue,
or similar expressions also identify forward-looking statements.
These statements are only predictions. We make these
forward-looking statements based upon information available on
the date hereof, and we have no obligation (and expressly
disclaim any such obligation) to update or alter any such
forward-looking statements, whether as a result of new
information, future events, or otherwise. Our actual results
could differ materially from those anticipated in this report as
a result of certain factors including, but not limited to, those
set forth in the following section entitled
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Certain Factors
Affecting Future Performance and elsewhere in this
report.


Restatement






18



---



##### Table of Contents





Background










tm




Executive Overview






19



---



##### Table of Contents













20



---



##### Table of Contents







Critical Accounting Policies








| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | revenue recognition;                                                          
|
| |  | sales returns, other sales allowances and allowance for doubtful
    accounts;
|
| |  | valuation of intangibles, long-lived assets and goodwill;                     
|
| |  | warranty;                                                                     
|
| |  | inventory reserves;                                                           
|
| |  | income taxes; and                                                             
|
| |  | restructuring liabilities, litigation and other contingencies.                



| |                    
| | -------------------
| | Revenue Recognition





21



---



##### Table of Contents



















| |                                                                              
| | -----------------------------------------------------------------------------
| | Sales Returns, Other Sales Allowances and Allowance for
    Doubtful Accounts





22



---



##### Table of Contents









| |                                                             
| | ------------------------------------------------------------
| | Valuation of Intangibles, Long-Lived Assets and
    Goodwill





| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | significant under-performance relative to expected historical or
    projected future operating results;         
|
| |  | significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business;
|
| |  | significant negative industry or economic trends;                                                                
|
| |  | significant decline in our stock price for a sustained
    period; and                                           
|
| |  | our market capitalization relative to net book value.                                                            







23



---



##### Table of Contents







| |         
| | --------
| | Warranty







| |                                 
| | --------------------------------
| | (1) Expected future return rate:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We use proprietary statistical modeling software to help
    estimate the future failure rates by product. This statistical
    modeling software relies on historical product design/vintage
    data, field survival data and return data on the product and on
    similar products (early in the product life cycle). The Company
    has comprehensive processes in place to collect data from the
    design phase, in the factory during manufacturing and return
    data from the Companys Enterprise Resource Planning
    (ERP) system. This statistical modeling software
    provides us with an estimate of the total return rates over the
    warranty life of the product. We continue to update this
    estimate each period as we collect additional field survival and
    return data on each product. While we believe that this
    statistical analysis provides us with a reasonable estimate of
    our future return rates, the estimate can be impacted by
    unpredicted field quality issues over the life of the individual
    products. We have encountered significant variability in this
    estimate relating to products which were acquired as part of an
    acquisition and not designed or manufactured by Maxtor. For
    example, in fiscal 2003 we experienced greater than expected
    warranty expirations for products we had acquired as part of the
    Quantum HDD acquisition and which were manufactured by MKE;
    these expirations totaled $30.0 million or 83% of total
    expirations favorably impacting this reserve. We have
    experienced significantly less variability on the expected
    return rates for Maxtor designed and manufactured products. For
    example, in fiscal 2003 we had $9.0 million in expirations
    and in fiscal 2004 we had $0.6 million in expirations
    impacting this reserve.



| |                                                          
| | ---------------------------------------------------------
| | (2) Cost to replace the drive or make the customer whole:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | This represents an estimate of the future cost of replacing or
    making the customer whole for each drive expected to be returned
    in the future. This estimate is currently based on the
    historical cost of fulfilling the obligation to the customer. We
    continue to revise this cost estimate as changes occur in the
    repair/recovery process. Historically we have experienced
    gradual reductions to this cost per unit estimate due to ongoing
    improvements to the repair/recovery process ($8.0 million
    in fiscal year 2004). The Company continues to focus on further
    reducing this cost in the future.                                                               
|
| | The reduction in the estimated cost of future repair is the
    result of improvements in the overall pricing structure with
    third party vendors and relocating repair facilities from the
    United States and Ireland to lower cost locations in Mexico and
    Hungary. The Company also increased yields from its repair
    processes, which increased the number of refurbished units
    available as replacement units and reduced the cost of repair.
    The Company will continue to make operational improvements to
    its repair process throughout 2005 and the impact of these
    improvements on the warranty liability will be reflected in the
    period in which they are achieved.



| |                                                                    
| | -------------------------------------------------------------------
| | (3) The product installed base (number of drives in the
    field):



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | This is transactional in nature and is calculated based on
    shipment data extracted from the Companys ERP system and
    represents the current in warranty installed base.

24



---



##### Table of Contents











| |                    
| | -------------------
| | Inventory Valuation





| |             
| | ------------
| | Income Taxes





25



---



##### Table of Contents





| |                                                                  
| | -----------------------------------------------------------------
| | Restructuring Liabilities, Litigation and Other
    Contingencies



Results of Operations




|                                                             |                                                      |                          |         |       |              |   |         |              |       |   |         |       |       | 
|------------------------------------------------------------ | ---------------------------------------------------- | ------------------------ | ------- | ----- | ------------ | - | ------- | ------------ | ----- | - | ------- | ----- | ----- | 
|                                                             |                                                      | Years Ended              |        
|                                                             |                                                      |                          |        
|                                                             |                                                      | December 28,             |         |       | December 27, |   |         | December 25, |      
|                                                             |                                                      | 2002                     |         |       | 2003         |   |         | 2004         |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|                                                             |                                                      | Restated                 |         |       | Restated     |   |         | Restated     |      
|                                                             |                                                      | (In millions)            |        
|Consolidated Statement of Operations Data:                   |                                                      |                          |         |       |              |   |         |              |       |   |         |      
|Net revenues                                                 |                                                      | $                        | 3,779.5 |       |              | $ | 4,086.4 |              |       | $ | 3,796.3 |      
|Cost of revenues                                             |                                                      |                          | 3,382.1 |       |              |   | 3,385.4 |              |       |   | 3,423.9 |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|                                                             | Gross profit                                         |                          |         | 397.4 |              |   |         | 701.0        |       |   |         | 372.4 |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Operating expenses:                                          |                                                      |                          |         |       |              |   |         |              |       |   |         |      
|                                                             | Research and development                             |                          |         | 403.2 |              |   |         | 356.0        |       |   |         | 325.3 |      
|                                                             | Selling, general and administrative                  |                          |         | 148.5 |              |   |         | 131.7        |       |   |         | 127.9 |      
|                                                             | Amortization of goodwill and other intangible assets |                          |         | 82.2  |              |   |         | 85.3         |       |   |         | 36.0  |      
|                                                             | Restructuring charge                                 |                          |         | 9.5   |              |   |         |             |       |   |         | 65.2  |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|                                                             |                                                      | Total operating expenses |         |       | 643.4        |   |         |              | 573.0 |   |         |       | 554.4 | 
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Income (loss) from operations                                |                                                      |                          | (246.0  | )     |              |   | 128.0   |              |       |   | (182.0  | )    
|Interest expense                                             |                                                      |                          | (26.6   | )     |              |   | (30.2   | )            |       |   | (31.8   | )    
|Interest income                                              |                                                      |                          | 8.0     |       |              |   | 5.2     |              |       |   | 5.2     |      
|Income from litigation                                       |                                                      |                          |        |       |              |   |        |              |       |   | 24.8    |      
|Other gain (loss)                                            |                                                      |                          | 4.4     |       |              |   | (0.6    | )            |       |   | 0.1     |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Income (loss) from continuing operations before income taxes |                                                      |                          | (260.2  | )     |              |   | 102.4   |              |       |   | (183.7  | )    
|Provision for (benefit from) income taxes                    |                                                      |                          | 2.2     |       |              |   | 3.5     |              |       |   | (0.3    | )    
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Income (loss) from continuing operations                     |                                                      |                          | (262.4  | )     |              |   | 98.9    |              |       |   | (183.4  | )    
|Income (loss) from discontinued operations                   |                                                      |                          | (73.5   | )     |              |   | 2.2     |              |       |   |        |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Net income (loss)                                            |                                                      | $                        | (335.9  | )     |              | $ | 101.1   |              |       | $ | (183.4  | )    
|                                                             |                                                      |                          |         |       |              |   |         |              |      

26



---



##### Table of Contents



|                                                             |                                                      |                          |       |      |              |  |       |              |      |  |       |     |      | 
|------------------------------------------------------------ | ---------------------------------------------------- | ------------------------ | ----- | ---- | ------------ |  | ----- | ------------ | ---- |  | ----- | --- | ---- | 
|                                                             |                                                      | December 28,             |       |      | December 27, |  |       | December 25, |     
|                                                             |                                                      | 2002                     |       |      | 2003         |  |       | 2004         |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|                                                             |                                                      | Restated                 |       |      | Restated     |  |       | Restated     |     
|As a Percentage of Revenue:                                  |                                                      |                          |       |      |              |  |       |              |      |  |       |    
|Net revenues                                                 |                                                      |                          | 100.0 | %    |              |  | 100.0 | %            |      |  | 100.0 | %  
|Cost of revenues                                             |                                                      |                          | 89.5  |      |              |  | 82.8  |              |      |  | 90.2  |    
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|                                                             | Gross profit                                         |                          |       | 10.5 |              |  |       | 17.2         |      |  |       | 9.8 |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Operating expenses:                                          |                                                      |                          |       |      |              |  |       |              |      |  |       |    
|                                                             | Research and development                             |                          |       | 10.7 |              |  |       | 8.7          |      |  |       | 8.6 |     
|                                                             | Selling, general and administrative                  |                          |       | 3.9  |              |  |       | 3.2          |      |  |       | 3.4 |     
|                                                             | Amortization of goodwill and other intangible assets |                          |       | 2.2  |              |  |       | 2.1          |      |  |       | 0.9 |     
|                                                             | Restructuring charge                                 |                          |       | 0.3  |              |  |       |             |      |  |       | 1.7 |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|                                                             |                                                      | Total operating expenses |       |      | 17.0         |  |       |              | 14.0 |  |       |     | 14.6 | 
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Income (loss) from operations                                |                                                      |                          | (6.5  | )    |              |  | 3.1   |              |      |  | (4.8  | )  
|Interest expense                                             |                                                      |                          | (0.7  | )    |              |  | (0.7  | )            |      |  | (0.8  | )  
|Interest income                                              |                                                      |                          | 0.2   |      |              |  | 0.0   |              |      |  | 0.1   |    
|Income from litigation                                       |                                                      |                          |      |      |              |  |      |              |      |  | 0.7   |    
|Other gain (loss)                                            |                                                      |                          | 0.0   |      |              |  | 0.0   |              |      |  | 0.0   |    
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Income (loss) from continuing operations before income taxes |                                                      |                          | (7.0  | )    |              |  | 2.5   |              |      |  | (4.8  | )  
|Provision for (benefit from) income taxes                    |                                                      |                          | 0.1   |      |              |  | 0.1   |              |      |  | 0.0   |    
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Income (loss) from continuing operations                     |                                                      |                          | (6.9  | )    |              |  | 2.4   |              |      |  | (4.8  | )  
|Income (loss) from discontinued operations                   |                                                      |                          | (1.9  | )    |              |  | 0.1   |              |      |  | 0.0   |    
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Net income (loss)                                            |                                                      |                          | (8.9  | )%   |              |  | 2.5   | %            |      |  | (4.8  | )% 
|                                                             |                                                      |                          |       |      |              |  |       |              |     



| |                                                
| | -----------------------------------------------
| | Fiscal Year 2004 Compared With Fiscal Year 2003

Net Revenues.








27



---



##### Table of Contents



















Cost of Revenues; Gross Profit.


28



---



##### Table of Contents







| |                   
| | ------------------
| | Operating Expenses

Research and Development Expense.


Selling, General and Administrative Expense.


Restructuring and Impairment Charges.






29



---



##### Table of Contents









Stock-based Compensation.




| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | All Quantum HDD options and Quantum HDD restricted stock held by
    employees who accepted our offers of employment, or
    transferred employees, whether or not options or
    restricted stock had vested;            
|
| |  | Vested Quantum HDD options and vested Quantum HDD restricted
    stock held by Quantum Corporation (Quantum)
    employees whose employment was terminated prior to the
    separation, or former service providers; and
|
| |  | Vested Quantum HDD restricted stock held by any other individual.                                                                                                                                                           





|                                       |  |               |     |  |              |   |     | 
|-------------------------------------- |  | ------------- | --- |  | ------------ | - | --- | 
|                                       |  | Years Ended   |    
|                                       |  |               |    
|                                       |  | December 27,  |     |  | December 25, |  
|                                       |  | 2003          |     |  | 2004         |  
|                                       |  |               |     |  |              |  
|                                       |  | (In millions) |    
|Research and development               |  | $             | 0.7 |  |              | $ | 0.2 | 
|Selling, general and administrative    |  |               | 0.2 |  |              |   |    | 
|                                       |  |               |     |  |              |  
|Total stock-based compensation expense |  | $             | 0.9 |  |              | $ | 0.2 | 
|                                       |  |               |     |  |              |  

Amortization of Goodwill and Other Intangible Assets.




30



---



##### Table of Contents











Interest Expense.




Interest Income.


Income from Litigation Settlement.


Other Gain (Loss)


Provision for (Benefit from)Income Taxes.




31



---



##### Table of Contents







Loss from Discontinued Operations. tm




|                                         |  |              |     |  |              |   |   | 
|---------------------------------------- |  | ------------ | --- |  | ------------ | - | - | 
|                                         |  | Years Ended 
|                                         |  |             
|                                         |  | December 27, |     |  | December 25,
|                                         |  | 2003         |     |  | 2004        
|                                         |  |              |     |  |             
|Revenue from discontinued operations     |  | $            |    |  |              | $ |  | 
|Gain (loss) from discontinued operations |  | $            | 2.2 |  |              | $ |  | 





| |                                                
| | -----------------------------------------------
| | Fiscal Year 2003 Compared With Fiscal Year 2002

Net Revenues.


32



---



##### Table of Contents



















Cost of Revenues; Gross Profit.


33



---



##### Table of Contents







| |                   
| | ------------------
| | Operating Expenses

Research and Development Expense.


Selling, General and Administrative Expense.


Restructuring Charge.


Stock-based Compensation.




| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | All Quantum HDD options and Quantum HDD restricted stock held by
    employees who accepted our offers of employment, or
    transferred employees, whether or not options or
    restricted stock had vested;            
|
| |  | Vested Quantum HDD options and vested Quantum HDD restricted
    stock held by Quantum Corporation (Quantum)
    employees whose employment was terminated prior to the
    separation, or former service providers; and
|
| |  | Vested Quantum HDD restricted stock held by any other individual.                                                                                                                                                           



34



---



##### Table of Contents





|                                       |  |               |     |  |              |   |     | 
|-------------------------------------- |  | ------------- | --- |  | ------------ | - | --- | 
|                                       |  | Years Ended   |    
|                                       |  |               |    
|                                       |  | December 28,  |     |  | December 27, |  
|                                       |  | 2002          |     |  | 2003         |  
|                                       |  |               |     |  |              |  
|                                       |  | (In millions) |    
|Cost of revenue                        |  | $             | 0.3 |  |              | $ |    | 
|Research and development               |  |               | 2.4 |  |              |   | 0.7 | 
|Selling, general and administrative    |  |               | 1.5 |  |              |   | 0.2 | 
|                                       |  |               |     |  |              |  
|Total stock-based compensation expense |  | $             | 4.2 |  |              | $ | 0.9 | 
|                                       |  |               |     |  |              |  



|                                                    |  |               |     |  |              |   |   | 
|--------------------------------------------------- |  | ------------- | --- |  | ------------ | - | - | 
|                                                    |  | Years Ended  
|                                                    |  |              
|                                                    |  | December 28,  |     |  | December 27,
|                                                    |  | 2002          |     |  | 2003        
|                                                    |  |               |     |  |             
|                                                    |  | (In millions)
|Cost of revenue                                     |  | $             | 0.3 |  |              | $ |  | 
|Research and development                            |  |               | 2.8 |  |              |   |  | 
|Selling, general and administrative                 |  |               | 1.0 |  |              |   |  | 
|                                                    |  |               |     |  |              |  
|Total amortization related to DSS restricted shares |  | $             | 4.1 |  |              | $ |  | 
|                                                    |  |               |     |  |              |  

Amortization of Goodwill and Other Intangible Assets.










35



---



##### Table of Contents





Interest Expense.




Interest Income.


Other Gain (Loss).


Provision for Income Taxes.






Loss from Discontinued Operations. tm


36



---



##### Table of Contents







|                                         |  |              |       |   |              |   |     | 
|---------------------------------------- |  | ------------ | ----- | - | ------------ | - | --- | 
|                                         |  | Years Ended  |      
|                                         |  |              |      
|                                         |  | December 28, |       |   | December 27, |  
|                                         |  | 2002         |       |   | 2003         |  
|                                         |  |              |       |   |              |  
|Revenue from discontinued operations     |  | $            | 20.4  |   |              | $ |    | 
|Gain (loss) from discontinued operations |  | $            | (73.5 | ) |              | $ | 2.2 | 



|                                          |  |   |      | 
|----------------------------------------- |  | - | ---- | 
|Personnel related                         |  | $ | 13.0 | 
|Goodwill and other intangibles write-offs |  | $ | 32.5 | 
|Non-cancelable purchase commitments       |  | $ | 4.2  | 





| |                                
| | -------------------------------
| | Liquidity and Capital Resources







37



---



##### Table of Contents















| |                        
| | -----------------------
| | Contractual Obligations



|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |         |        |  |   |         |        | 
|------------------------- | ----------------- | ----- | --------- | --------- | ------ | - | ------- | --------- |  | - | --------------- | ------ |  | ------------- | ------- | ------ |  | - | ------- | ------ | 
|                          |                   |       |           | Less Than |        |   |         |           |  |   | More Than       |       
|                          |                   | Total |           |           | 1 Year |   |         | 1-3 Years |  |   | 3-5 Years(1)(2) |        |  | 5 Years(1)(2) |        
|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |        
|Long-term Debt            |                   | $     | 459,041   |           |        | $ | 77,352  |           |  | $ | 47,378          |        |  | $             | 70,000  |        |  | $ | 264,311 |       
|                          | Interest Payments |       |           | 126,550   |        |   |         | 26,607    |  |   |                 | 44,466 |  |               |         | 39,894 |  |   |         | 15,583 | 
|Capital Lease Obligations |                   |       | 6,090     |           |        |   | 5,209   |           |  |   | 873             |        |  |               | 8       |        |  |   |        |       
|                          | Interest Payments |       |           | 227       |        |   |         | 212       |  |   |                 | 15     |  |               |         |       |  |   |         |       | 
|Operating Leases(3)       |                   |       | 278,241   |           |        |   | 34,241  |           |  |   | 64,753          |        |  |               | 61,838  |        |  |   | 117,409 |       
|Purchase Obligations(4)   |                   |       | 718,913   |           |        |   | 713,716 |           |  |   | 5,197           |        |  |               |        |        |  |   |        |       
|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |        
|Total                     |                   | $     | 1,589,062 |           |        | $ | 857,337 |           |  | $ | 162,682         |        |  | $             | 171,740 |        |  | $ | 397,303 |       
|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |        

38



---



##### Table of Contents








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include $103 million which may be borrowed under a
    facility in a U.S.-dollar-denominated loan, to be secured by our
    facilities in Suzhou, China, drawable until April 2007, and
    repayable in eight semi- annual installments commencing October
    2007; the borrowings under this facility will bear interest at
    LIBOR plus 50 basis points (subject to adjustment to
    60 basis points).                                                                                                                                                                                                                                                      
|   
|(2) | Does not include $67 million which we are obligated to
    contribute to our China subsidiary to allow drawdown under the
    facilities described under footnote (1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | Includes future minimum annual rental commitments, including
    amounts accrued as restructuring liabilities as of
    December 25, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(4) | Purchase obligations are defined as contractual obligations for
    purchase of goods or services, which are enforceable and legally
    binding on the Company and that specify all significant terms,
    including fixed or minimum quantities to be purchased, fixed,
    minimum or variable price provisions and the approximate timing
    of the transaction. The expected timing of payment of the
    obligations set forth above is estimated based on current
    information. Timing of payments and actual amounts paid may be
    different depending on the time of receipt of goods or services
    or changes to agreed-upon amounts for some obligations.











39



---



##### Table of Contents











| |                         
| | ------------------------
| | New Accounting Standards



40



---



##### Table of Contents













41



---



##### Table of Contents





42



---



##### Table of Contents






SUPPLEMENTAL FINANCIAL INFORMATION


Unaudited Quarterly Results of Operations


|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |             |  |   |           |             |  |   |           |             | 
|------------------------------------------ | ----------------------- | -------------------------------------------------- | ------- | ----------- | ----------- | - | ------- | ----------- |  | - | ----------- | ----------- |  | ------------- | ------- | ----------- | ------------- | - | --------- | ------------ |  | - | ------------ | ----------- |  | - | --------- | ----------- |  | - | --------- | ----------- | 
|                                           |                         | Three Months Ended                                 |        
|                                           |                         |                                                    |        
|                                           |                         | March 29,                                          |         |             | March 29,   |   |         | June 28,    |  |   | June 28,    |             |  | September 27, |         |             | September 27, |   |           | December 27, |  |   | December 27, |            
|                                           |                         | 2003                                               |         |             | 2003        |   |         | 2003        |  |   | 2003        |             |  | 2003          |         |             | 2003          |   |           | 2003         |  |   | 2003         |            
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|                                           |                         | Reported                                           |         |             | Restated(1) |   |         | Reported    |  |   | Restated(1) |             |  | Reported      |         |             | Restated(1)   |   |           | Reported     |  |   | Restated(1)  |            
|                                           |                         | (In thousands, except share and per share amounts) |        
|Net revenues                               |                         | $                                                  | 938,889 |             |             | $ | 938,889 |             |  | $ | 910,903     |             |  | $             | 910,903 |             |               | $ | 1,065,531 |              |  | $ | 1,065,531    |             |  | $ | 1,171,120 |             |  | $ | 1,171,120 |            
|Gross profit                               |                         |                                                    | 171,847 |             |             |   | 171,847 |             |  |   | 149,246     |             |  |               | 149,246 |             |               |   | 182,425   |              |  |   | 182,425      |             |  |   | 197,535   |             |  |   | 197,535   |            
|Income (loss) from continuing operations   |                         |                                                    | 27,408  |             |             |   | 26,889  |             |  |   | 6,196       |             |  |               | 5,861   |             |               |   | 29,887    |              |  |   | 29,531       |             |  |   | 36,969    |             |  |   | 36,620    |            
|Income (loss) from discontinued operations |                         |                                                    |        |             |             |   |        |             |  |   |            |             |  |               |        |             |               |   |          |              |  |   |             |             |  |   | 2,211     |             |  |   | 2,211     |            
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|Net income (loss)                          |                         | $                                                  | 27,408  |             |             | $ | 26,889  |             |  | $ | 6,196       |             |  | $             | 5,861   |             |               | $ | 29,887    |              |  | $ | 29,531       |             |  | $ | 39,180    |             |  | $ | 38,831    |            
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|Net income (loss) per share  basic        |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |             |  |   |           |             |  |   |           |            
|                                           | Continuing operations   |                                                    | $       | 0.11        |             |   | $       | 0.11        |  |   | $           | 0.03        |  |               | $       | 0.02        |               |   | $         | 0.12         |  |   | $            | 0.12        |  |   | $         | 0.15        |  |   | $         | 0.15        | 
|                                           | Discontinued operations |                                                    |         |            |             |   |         |            |  |   |             |            |  |               |         |            |               |   |           |             |  |   |              |            |  |   |           | 0.01        |  |   |           | 0.01        | 
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|                                           | Total                   |                                                    | $       | 0.11        |             |   | $       | 0.11        |  |   | $           | 0.03        |  |               | $       | 0.02        |               |   | $         | 0.12         |  |   | $            | 0.12        |  |   | $         | 0.16        |  |   | $         | 0.16        | 
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|Net income (loss) per share  diluted      |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |             |  |   |           |             |  |   |           |            
|                                           | Continuing operations   |                                                    | $       | 0.11        |             |   | $       | 0.11        |  |   | $           | 0.03        |  |               | $       | 0.02        |               |   | $         | 0.12         |  |   | $            | 0.12        |  |   | $         | 0.14        |  |   | $         | 0.14        | 
|                                           | Discontinued operations |                                                    |         |            |             |   |         |            |  |   |             |            |  |               |         |            |               |   |           |             |  |   |              |            |  |   |           | 0.01        |  |   |           | 0.01        | 
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|                                           | Total                   |                                                    | $       | 0.11        |             |   | $       | 0.11        |  |   | $           | 0.03        |  |               | $       | 0.02        |               |   | $         | 0.12         |  |   | $            | 0.12        |  |   | $         | 0.15        |  |   | $         | 0.15        | 
|                                           |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |            
|Shares used in per share calculation:      |                         |                                                    |         |             |             |   |         |             |  |   |             |             |  |               |         |             |               |   |           |              |  |   |              |             |  |   |           |             |  |   |           |            
|                                           | Basic                   |                                                    |         | 243,634,139 |             |   |         | 243,634,139 |  |   |             | 241,120,075 |  |               |         | 241,120,075 |               |   |           | 241,618,320  |  |   |              | 241,618,320 |  |   |           | 245,439,935 |  |   |           | 245,439,935 | 
|                                           | Diluted                 |                                                    |         | 246,866,117 |             |   |         | 246,866,117 |  |   |             | 245,259,831 |  |               |         | 245,259,831 |               |   |           | 252,343,682  |  |   |              | 252,343,682 |  |   |           | 256,714,105 |  |   |           | 256,714,105 | 

|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |             |   |   |           |             |   |   |           |             |  
|------------------------------------------ | ----------------------- | -------------------------------------------------- | --------- | ----------- | ----------- | - | --------- | ----------- |  | - | ----------- | ----------- | - | ------------- | ------- | ----------- | ------------- | - | ------- | ------------ | - | - | ------------ | ----------- | - | - | --------- | ----------- | - | - | --------- | ----------- | -
|                                           |                         | Three Months Ended                                 |          
|                                           |                         |                                                    |          
|                                           |                         | March 27,                                          |           |             | March 27,   |   |           | June 26,    |  |   | June 26,    |             |   | September 25, |         |             | September 25, |   |         | December 25, |   |   | December 25, |            
|                                           |                         | 2004                                               |           |             | 2004        |   |           | 2004        |  |   | 2004        |             |   | 2004          |         |             | 2004          |   |         | 2004         |   |   | 2004         |            
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|                                           |                         | Reported                                           |           |             | Restated(1) |   |           | Reported    |  |   | Restated(1) |             |   | Reported      |         |             | Restated(1)   |   |         | Reported     |   |   | Restated(1)  |            
|                                           |                         | (In thousands, except share and per share amounts) |          
|Net revenues                               |                         | $                                                  | 1,019,688 |             |             | $ | 1,019,688 |             |  | $ | 818,254     |             |   | $             | 818,254 |             |               | $ | 927,204 |              |   | $ | 927,204      |             |   | $ | 1,031,182 |             |   | $ | 1,031,182 |            
|Gross profit                               |                         |                                                    | 155,063   |             |             |   | 155,063   |             |  |   | 73,786      |             |   |               | 73,786  |             |               |   | 59,524  |              |   |   | 59,524       |             |   |   | 84,006    |             |   |   | 84,006    |            
|Income (loss) from continuing operations   |                         |                                                    | 9,163     |             |             |   | 8,730     |             |  |   | (26,098     | )           |   |               | (26,451 | )           |               |   | (94,781 | )            |   |   | (95,146      | )           |   |   | (70,203   | )           |   |   | (70,572   | )          
|Income (loss) from discontinued operations |                         |                                                    |          |             |             |   |          |             |  |   |            |             |   |               |        |             |               |   |        |              |   |   |             |             |   |   |          |             |   |   |          |            
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|Net income (loss)                          |                         | $                                                  | 9,163     |             |             | $ | 8,730     |             |  | $ | (26,098     | )           |   | $             | (26,451 | )           |               | $ | (94,781 | )            |   | $ | (95,146      | )           |   | $ | (70,203   | )           |   | $ | (70,572   | )          
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|Net income (loss) per share  basic        |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |             |   |   |           |             |   |   |           |            
|                                           | Continuing operations   |                                                    | $         | 0.04        |             |   | $         | 0.04        |  |   | $           | (0.11       | ) |               | $       | (0.11       | )             |   | $       | (0.38        | ) |   | $            | (0.38       | ) |   | $         | (0.28       | ) |   | $         | (0.28       | )
|                                           | Discontinued operations |                                                    |           |            |             |   |           |            |  |   |             |            |   |               |         |            |               |   |         |             |   |   |              |            |   |   |           |            |   |   |           |            |  
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|                                           | Total                   |                                                    | $         | 0.04        |             |   | $         | 0.04        |  |   | $           | (0.11       | ) |               | $       | (0.11       | )             |   | $       | (0.38        | ) |   | $            | (0.38       | ) |   | $         | (0.28       | ) |   | $         | (0.28       | )
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|Net income (loss) per share  diluted      |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |             |   |   |           |             |   |   |           |            
|                                           | Continuing operations   |                                                    | $         | 0.04        |             |   | $         | 0.03        |  |   | $           | (0.11       | ) |               | $       | (0.11       | )             |   | $       | (0.38        | ) |   | $            | (0.38       | ) |   | $         | (0.28       | ) |   | $         | (0.28       | )
|                                           | Discontinued operations |                                                    |           |            |             |   |           |            |  |   |             |            |   |               |         |            |               |   |         |             |   |   |              |            |   |   |           |            |   |   |           |            |  
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|                                           | Total                   |                                                    | $         | 0.04        |             |   | $         | 0.03        |  |   | $           | (0.11       | ) |               | $       | (0.11       | )             |   | $       | (0.38        | ) |   | $            | (0.38       | ) |   | $         | (0.28       | ) |   | $         | (0.28       | )
|                                           |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |            
|Shares used in per share calculation:      |                         |                                                    |           |             |             |   |           |             |  |   |             |             |   |               |         |             |               |   |         |              |   |   |              |             |   |   |           |             |   |   |           |            
|                                           | Basic                   |                                                    |           | 246,590,255 |             |   |           | 246,590,255 |  |   |             | 247,367,176 |   |               |         | 247,367,176 |               |   |         | 248,728,113  |   |   |              | 248,728,113 |   |   |           | 250,026,784 |   |   |           | 250,026,784 |  
|                                           | Diluted                 |                                                    |           | 256,960,154 |             |   |           | 256,960,154 |  |   |             | 247,367,176 |   |               |         | 247,367,176 |               |   |         | 248,728,113  |   |   |              | 248,728,113 |   |   |           | 250,026,784 |   |   |           | 250,026,784 |  






|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(1) | For additional information on the restatement, see Note 2
    of the Notes to Consolidated Financial Statements.

43



---



##### Table of Contents






CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE




| |                                         
| | ----------------------------------------
| | We have a history of significant losses.





| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The decline of average selling prices in the hard disk
    drive industry could cause our operating results to suffer and
    make it difficult for us to achieve or maintain
    profitability.





| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Intense competition in the hard disk drive market could
    reduce the demand for our products or the prices of our
    products, which could adversely affect our operating
    results.





| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | consolidate or establish strategic relationships to lower their
    product costs or to otherwise compete more effectively against
    us;
|
| |  | lower their product prices to gain market share;                                                                                          
|
| |  | sell their products with other products to increase demand for
    their products;                                                        
|
| |  | develop new technology which would significantly reduce the cost
    of their products;                                                   

44



---



##### Table of Contents





| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | get to the market with the next generation product faster or
    ramp more effectively; or                                                                
|
| |  | offer more products than we do and therefore enter into
    agreements with customers to supply hard disk drives as part of
    a larger supply agreement.





| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to qualify as a supplier to computer
    manufacturers or their subcontractors for a future generation of
    hard disk drives, then these manufacturers or subcontractors may
    not purchase any units of an entire product line, which will
    have a significant adverse impact on our sales.





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because we are substantially dependent on desktop computer
    drive sales, a decrease in the demand for desktop computers
    could reduce demand for our products.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | The loss of one or more significant customers or a
    decrease in their orders of products would cause our revenues to
    decline.



45



---



##### Table of Contents







| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our efforts to improve operating efficiencies through
    restructuring activities may not be successful, and the actions
    we take to this end could limit our ability to compete
    effectively.



If we do not expand into
new hard drive markets, our revenues will suffer.




46



---



##### Table of Contents







| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | If we do not successfully introduce new products or
    experience product quality problems, our revenues will
    suffer.





| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to develop and maintain relationships with our
    key distributors, if we experience problems associated with
    distribution channels, or if our key distributors favor our
    competitors products over ours, our operating results
    could suffer.





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Our customers have adopted a subcontractor model that
    increases our credit risk and could result in an increase in our
    operating costs.





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | If we fail to match production with product demand or to
    manage inventory, our operating results could suffer.



47



---



##### Table of Contents







| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to new environmental legislation enacted by
    the European Union, if we do not comply our sales could be
    adversely impacted.





| |                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because we purchase a significant portion of our parts
    from a limited number of third party suppliers, we are subject
    to the risk that we may be unable to acquire quality components
    in a timely manner, and these component shortages could result
    in delays of product shipments and damage our business and
    operating results.





| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We purchase most of our components from third party
    suppliers, and may have higher costs or more supply chain risks
    than our competitors who are more vertically integrated.





48



---



##### Table of Contents







| |                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we encounter any problems in qualifying our new China
    manufacturing facility for production with any of our major OEM
    customers, or we have difficulties with transition of
    manufacturing to China or a disaster occurs at one of our
    plants, our business, financial condition and operating results
    could suffer.





| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to risks related to product defects, which
    could subject us to warranty claims in excess of our warranty
    provision or which are greater than anticipated due to the
    unenforceability of liability limitations.





| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Our quarterly operating results have fluctuated
    significantly in the past and are likely to fluctuate in the
    future.





| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the average selling price of our products;                                                                                                                                                                           
|
| |  | fluctuations in the demand for our products as a result of the
    seasonal nature of the desktop computer industry and the markets
    for our customers products, as well as the overall
    economic environment;
|
| |  | market acceptance of our products;                                                                                                                                                                                   
|
| |  | our ability to qualify our products successfully with our
    customers;                                                                                                                                             
|
| |  | changes in purchases by our primary customers, including the
    cancellation, rescheduling or deferment of orders;                                                                                                  
|
| |  | changes in product and customer mix;                                                                                                                                                                                 
|
| |  | actions by our competitors, including announcements of new
    products or technological innovations;                                                                                                                
|
| |  | our ability to execute future product development and production
    ramps effectively;                                                                                                                              

49



---



##### Table of Contents





| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | the availability, and efficient use, of manufacturing capacity;                                                                            
|
| |  | our ability to retain key personnel;                                                                                                       
|
| |  | our inability to reduce a significant portion of our fixed costs
    due, in part, to our ongoing capital expenditure
    requirements; and
|
| |  | our ability to procure and purchase critical components at
    competitive prices.                                                         





| |                                                                           
| | --------------------------------------------------------------------------
| | We face risks from our substantial international
    operations and sales.





| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties with staffing and managing international operations;                                                                                                                                                         
|
| |  | transportation and supply chain disruptions and increased
    transportation expense as a result of epidemics, terrorist
    activity, acts of war or hostility, increased security and less
    developed infrastructure;
|
| |  | economic slowdown and/or downturn in foreign markets;                                                                                                                                                                     
|
| |  | international currency fluctuations;                                                                                                                                                                                      
|
| |  | political and economic uncertainty caused by epidemics,
    terrorism or acts of war or hostility;                                                                                                                        
|
| |  | legislative and regulatory responses to terrorist activity such
    as increased restrictions on cross-border movement of products
    and technology;                                                                    
|
| |  | legislative, regulatory, police, or civil responses to epidemics
    or other outbreaks of infectious diseases such as quarantines,
    factory closures, or increased restrictions on transportation or
    travel;      
|
| |  | general strikes or other disruptions in working conditions;                                                                                                                                                               
|
| |  | labor shortages;                                                                                                                                                                                                          
|
| |  | political instability;                                                                                                                                                                                                    
|
| |  | changes in tariffs;                                                                                                                                                                                                       
|
| |  | generally longer periods to collect receivables;                                                                                                                                                                          
|
| |  | unexpected legislative or regulatory requirements;                                                                                                                                                                        
|
| |  | reduced protection for intellectual property rights in some
    countries;                                                                                                                                                
|
| |  | significant unexpected duties or taxes or other adverse tax
    consequences;                                                                                                                                             
|
| |  | difficulty in obtaining export licenses and other trade barriers;                                                                                                                                                         

50



---



##### Table of Contents





| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | seasonality;                                                                                                                                                                  
|
| |  | increased transportation/shipping costs;                                                                                                                                      
|
| |  | credit and access to capital issues faced by our international
    customers; and                                                                                             
|
| |  | compliance with European Union directives implementing strict
    mandates on electronic equipment waste and ban the use of
    certain materials in electronic manufacturing.





| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | Our operations and prospects in China are subject to
    significant political, economic and legal uncertainties.



51



---



##### Table of Contents





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We may need additional capital in the future which may not
    be available on favorable terms or at all.





| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | the rate of our sales growth;                                                                                                               
|
| |  | the level of our profits or losses;                                                                                                         
|
| |  | the timing and extent of our spending to expand manufacturing
    capacity, support facilities upgrades and product development
    efforts;
|
| |  | the timing and size of business or technology acquisitions;                                                                                 
|
| |  | the timing of introductions of new products and enhancements to
    our existing products; and                                              
|
| |  | the length of product life cycles.                                                                                                          





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We significantly increased our leverage as a result of the
    sale of the 6.8% convertible senior notes.





| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | The asset-backed credit facility of up to
    $100 million has certain financial covenants with which we
    will have to comply to use the facility.



52



---



##### Table of Contents







| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Any failure to adequately protect and enforce our
    intellectual property rights could harm our business.





| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to existing claims relating to our
    intellectual property which are costly to defend and may harm
    our business.



53



---



##### Table of Contents













| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Quantum incurs non-insured tax liabilities as a result
    of its separation of Quantum HDD from Quantum Corporation in
    connection with our acquisition of the Quantum HDD business, our
    financial condition and operating results could be negatively
    affected.



54



---



##### Table of Contents







| |                                                   
| | --------------------------------------------------
| | The loss of key personnel could harm our business.





| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have experienced significant turnover of senior
    management, our current executive management team has been
    together for a limited time and we are continuing to hire new
    senior executives, and these changes may impact our ability to
    develop strategic plans or to execute effectively on our
    business objectives, which could adversely impact our business
    and operating results.





| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be subject to environmental liabilities which
    could increase our expenses and harm our business, financial
    condition and results of operations.



55



---



##### Table of Contents









| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The market price of our common stock fluctuated
    substantially in the past and is likely to fluctuate in the
    future as a result of a number of factors, including the release
    of new products by us or our competitors, the loss or gain of
    significant customers or changes in stock market analysts
    estimates.





| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | quarterly fluctuations in operating results;                                                                                
|
| |  | announcements of new products by us or our competitors such as
    products that address additional hard disk drive markets;
|
| |  | gains or losses of significant customers;                                                                                   
|
| |  | changes in stock market analysts estimates;                                                                                
|
| |  | the presence of short-selling of our common stock;                                                                          
|
| |  | sales of a high volume of shares of our common stock by our
    large stockholders;                                         
|
| |  | events affecting other companies that the market deems
    comparable to us;                                                
|
| |  | general conditions in the semiconductor and electronic systems
    industries; and                                          
|
| |  | general economic conditions in the United States and abroad.                                                                



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results. As a result, current and potential stockholders could
    lose confidence in our financial reporting, which would harm our
    business and the trading price of our stock.





56



---



##### Table of Contents







Internal Control  Integrated
Framework






| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Decreased effectiveness of equity compensation could
    adversely affect our ability to attract and retain employees,
    and proposed changes in accounting for equity compensation could
    adversely affect earnings.



57



---



##### Table of Contents







| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Anti-takeover provisions in our certificate of
    incorporation could discourage potential acquisition proposals
    or delay or prevent a change of control.



58



---



##### Table of Contents








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk

Derivatives




Investments






|                      |  |          |         |    |          |   |         |              |  |   |         |    |  |         |         |  |          |   |         |          |  |   |         |   |  |   |         |  
|--------------------- |  | -------- | ------- | -- | -------- | - | ------- | ------------ |  | - | ------- | -- |  | ------- | ------- |  | -------- | - | ------- | -------- |  | - | ------- | - |  | - | ------- | -
|                      |  |          |         |    |          |   |         | Fair Value   |  |   |         |    |  |         |        
|                      |  |          |         |    |          |   |         | as of        |  |   |         |    |  |         |        
|                      |  |          |         |    |          |   |         | December 25, |  |   |         |    |  |         |        
|                      |  | +150 bps |         |    | +100 bps |   |         | +50 bps      |  |   | 2004    |    |  | -50 bps |         |  | -100 bps |   |         | -150 bps | 
|                      |  |          |         |    |          |   |         |              |  |   |         |    |  |         |         |  |          |   |         |          | 
|                      |  | ($000)   |        
|Financial Instruments |  | $        | 102,806 |    |          | $ | 103,192 |              |  | $ | 103,578 |    |  | $       | 103,969 |  |          | $ | 104,359 |          |  | $ | 104,761 |   |  | $ | 105,158 |  
|% Change              |  |          | (1.12   | )% |          |   | (0.75   | )%           |  |   | (0.38   | )% |  |         |         |  |          |   | 0.38    | %        |  |   | 0.76    | % |  |   | 1.14    | %



|                             |  |                                |       |       |              |   |       |                                         |  |   |       |    |  |   |        |  |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------- |  | ------------------------------ | ----- | ----- | ------------ | - | ----- | --------------------------------------- |  | - | ----- | -- |  | - | ------ |  |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                             |  |                                |       |       |              |   |       | Fair Value                              |  |   |       |    |  |   |       
|                             |  |                                |       | as of |              |   |      
|                             |  | Valuation of Security Given X% |       |       | December 25, |   |       | Valuation of Security Given X% Increase | 
|                             |  | Decrease in the Security Price |       |       | 2004         |   |       | in the Security Price                   | 
|                             |  |                                |       |       |              |   |       |                                         | 
|                             |  | ($000)                         |      
|Corporate equity investments |  | $                              | 5,021 |       |              | $ | 7,532 |                                         |  | $ | 8,536 |    |  | $ | 10,042 |  |  | $ | 11,548 |   |  | $ | 12,553 |   |  | $ | 15,063 |  
|% Change                     |  |                                | (50   | )%    |              |   | (25   | )%                                      |  |   | (15   | )% |  |   |        |  |  |   | 15     | % |  |   | 25     | % |  |   | 50     | %

59



---



##### Table of Contents








|        |                                                             
|------- | ------------------------------------------------------------
|Item 8. | Consolidated Financial Statements and Supplementary
    Data




INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                                        |  |      |     | 
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                        |  | Page |    
|                                                                                                                                        |  |      |    
|Consolidated Financial Statements of Maxtor Corporation                                                                                 |  |      |     | 
|Consolidated Balance Sheets  December 27, 2003
    and December 25, 2004                                                               |  |      | 61  | 
|Consolidated Statements of Operations  Fiscal years
    ended December 28, 2002, December 27, 2003 and
    December 25, 2004           |  |      | 62  | 
|Consolidated Statements of Stockholders Equity 
    Fiscal years ended December 28, 2002, December 27,
    2003 and December 25, 2004 |  |      | 63  | 
|Consolidated Statements of Cash Flows  Fiscal years
    ended December 28, 2002, December 27, 2003 and
    December 25, 2004           |  |      | 64  | 
|Notes to Consolidated Financial Statements                                                                                              |  |      | 65  | 
|Report of Independent Registered Public Accounting Firm                                                                                 |  |      | 100 | 
|                                                                                                                                       
|Financial Statement Schedules:                                                                                                          |  |      |     | 



|                                              |  |  |     | 
|--------------------------------------------- |  |  | --- | 
|Schedule II Valuation and Qualifying Accounts |  |  | 109 | 



60



---



##### Table of Contents



MAXTOR CORPORATION







CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |         |           | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ------- | ------------ |  | ---------- | ------- | --------- | 
|                                           |                                                                                                                                                                                                                                                       | December 27,                               |            |         | December 25, | 
|                                           |                                                                                                                                                                                                                                                       | 2003                                       |            |         | 2004         | 
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Restated                                   |            |         | Restated     | 
|                                           |                                                                                                                                                                                                                                                       | (In thousands, except share and            |           
|                                           |                                                                                                                                                                                                                                                       | per share amounts)                         |           
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |        
|                                           | Cash and cash equivalents                                                                                                                                                                                                                             |                                            | $          | 530,816 |              |  | $          | 378,065 |          
|                                           | Restricted cash                                                                                                                                                                                                                                       |                                            |            | 37,154  |              |  |            | 24,561  |          
|                                           | Marketable securities                                                                                                                                                                                                                                 |                                            |            | 44,543  |              |  |            | 103,969 |          
|                                           | Restricted marketable securities                                                                                                                                                                                                                      |                                            |            | 42,337  |              |  |            |        |          
|                                           | Accounts receivable, net of allowance of doubtful accounts of
    $11,220 at December 27, 2003 and $8,228 at
    December 25, 2004                                                                                                                    |                                            |            | 540,943 |              |  |            | 425,528 |          
|                                           | Other receivables                                                                                                                                                                                                                                     |                                            |            | 37,964  |              |  |            | 40,838  |          
|                                           | Inventories                                                                                                                                                                                                                                           |                                            |            | 218,011 |              |  |            | 229,410 |          
|                                           | Prepaid expenses and other                                                                                                                                                                                                                            |                                            |            | 38,301  |              |  |            | 36,336  |          
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Total current assets                       |            |         | 1,490,069    |  |            |         | 1,238,707 | 
|Property, plant and equipment, net         |                                                                                                                                                                                                                                                       |                                            | 342,679    |         |              |  | 347,934    |        
|Goodwill                                   |                                                                                                                                                                                                                                                       |                                            | 628,463    |         |              |  | 489,482    |        
|Other intangible assets, net               |                                                                                                                                                                                                                                                       |                                            | 61,619     |         |              |  | 1,450      |        
|Other assets                               |                                                                                                                                                                                                                                                       |                                            | 13,908     |         |              |  | 30,168     |        
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Total assets                               |            | $       | 2,536,738    |  |            | $       | 2,107,741 | 
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities:                       |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |        
|                                           | Short-term borrowings, including current portion of long-term
    debt                                                                                                                                                                                |                                            | $          | 77,037  |              |  | $          | 82,561  |          
|                                           | Accounts payable                                                                                                                                                                                                                                      |                                            |            | 730,056 |              |  |            | 674,947 |          
|                                           | Accrued and other liabilities                                                                                                                                                                                                                         |                                            |            | 447,063 |              |  |            | 324,369 |          
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Total current liabilities                  |            |         | 1,254,156    |  |            |         | 1,081,877 | 
|Long-term debt, net of current portion     |                                                                                                                                                                                                                                                       |                                            | 355,809    |         |              |  | 382,570    |        
|Other liabilities                          |                                                                                                                                                                                                                                                       |                                            | 180,088    |         |              |  | 66,695     |        
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Total liabilities                          |            |         | 1,790,053    |  |            |         | 1,531,142 | 
|Commitments and contingencies (Note 11)    |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |        
|Stockholders equity:                      |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |        
|                                           | Preferred stock, $0.01 par value, 95,000,000 shares
    authorized; no shares issued or outstanding                                                                                                                                                   |                                            |            |        |              |  |            |        |          
|                                           | Common stock, $0.01 par value, 525,000,000 shares
    authorized; 259,246,819 shares issued and
    246,001,081 shares outstanding at December 27, 2003
    and 263,413,578 shares issued and 250,167,840 shares
    outstanding at December 25, 2004 |                                            |            | 2,592   |              |  |            | 2,634   |          
|Additional paid-in capital                 |                                                                                                                                                                                                                                                       |                                            | 2,410,082  |         |              |  | 2,429,551  |        
|Deferred stock-based compensation          |                                                                                                                                                                                                                                                       |                                            | (110       | )       |              |  |           |        
|Accumulated deficit                        |                                                                                                                                                                                                                                                       |                                            | (1,611,744 | )       |              |  | (1,795,183 | )      
|Cumulative other comprehensive income      |                                                                                                                                                                                                                                                       |                                            | 10,804     |         |              |  | 4,536      |        
|Treasury stock (13,245,738 shares) at cost |                                                                                                                                                                                                                                                       |                                            | (64,939    | )       |              |  | (64,939    | )      
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Total stockholders equity                 |            |         | 746,685      |  |            |         | 576,599   | 
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                       | Total liabilities and stockholders equity |            | $       | 2,536,738    |  |            | $       | 2,107,741 | 
|                                           |                                                                                                                                                                                                                                                       |                                            |            |         |              | 



61



---



##### Table of Contents



MAXTOR CORPORATION







CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                             |                                      |                                                    |           |         |              |   |           |              |             |   |           |         |             | 
|------------------------------------------------------------ | ------------------------------------ | -------------------------------------------------- | --------- | ------- | ------------ | - | --------- | ------------ | ----------- | - | --------- | ------- | ----------- | 
|                                                             |                                      | Years Ended                                        |          
|                                                             |                                      |                                                    |          
|                                                             |                                      | December 28,                                       |           |         | December 27, |   |           | December 25, |            
|                                                             |                                      | 2002                                               |           |         | 2003         |   |           | 2004         |            
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|                                                             |                                      | Restated                                           |           |         | Restated     |   |           | Restated     |            
|                                                             |                                      | (In thousands, except share and per share amounts) |          
|Net revenues                                                 |                                      | $                                                  | 3,779,514 |         |              | $ | 4,086,443 |              |             | $ | 3,796,328 |        
|Cost of revenues                                             |                                      |                                                    | 3,382,099 |         |              |   | 3,385,390 |              |             |   | 3,423,949 |        
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|                                                             | Gross profit                         |                                                    |           | 397,415 |              |   |           | 701,053      |             |   |           | 372,379 |            
|Operating expenses:                                          |                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|                                                             | Research and development             |                                                    |           | 403,209 |              |   |           | 356,069      |             |   |           | 325,309 |            
|                                                             | Selling, general and administrative  |                                                    |           | 148,486 |              |   |           | 131,703      |             |   |           | 127,932 |            
|                                                             | Amortization of intangible assets    |                                                    |           | 82,248  |              |   |           | 85,279       |             |   |           | 35,994  |            
|                                                             | Restructuring and impairment charges |                                                    |           | 9,495   |              |   |           |             |             |   |           | 65,148  |            
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|                                                             |                                      | Total operating expenses                           |           |         | 643,438      |   |           |              | 573,051     |   |           |         | 554,383     | 
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Income (loss) from operations                                |                                      |                                                    | (246,023  | )       |              |   | 128,002   |              |             |   | (182,004  | )      
|Interest expense                                             |                                      |                                                    | (26,626   | )       |              |   | (30,144   | )            |             |   | (31,782   | )      
|Interest income                                              |                                      |                                                    | 8,012     |         |              |   | 5,160     |              |             |   | 5,255     |        
|Income from litigation                                       |                                      |                                                    |          |         |              |   |          |              |             |   | 24,750    |        
|Other gain (loss)                                            |                                      |                                                    | 4,370     |         |              |   | (613      | )            |             |   | 81        |        
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Income (loss) from continuing operations before income taxes |                                      |                                                    | (260,267  | )       |              |   | 102,405   |              |             |   | (183,700  | )      
|Provision for (benefit from) income taxes                    |                                      |                                                    | 2,175     |         |              |   | 3,504     |              |             |   | (261      | )      
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Income (loss) from continuing operations                     |                                      |                                                    | (262,442  | )       |              |   | 98,901    |              |             |   | (183,439  | )      
|Income (loss) from discontinued operations                   |                                      |                                                    | (73,501   | )       |              |   | 2,211     |              |             |   |          |        
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Net income (loss)                                            |                                      | $                                                  | (335,943  | )       |              | $ | 101,112   |              |             | $ | (183,439  | )      
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Net income (loss) per share  basic                          |                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|Continuing operations                                        |                                      | $                                                  | (1.10     | )       |              | $ | 0.41      |              |             | $ | (0.74     | )      
|Discontinued operations                                      |                                      | $                                                  | (0.31     | )       |              | $ | 0.01      |              |             | $ |          |        
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Total                                                        |                                      | $                                                  | (1.40     | )*      |              | $ | 0.42      |              |             | $ | (0.74     | )      
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Net income (loss) per share  diluted                        |                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|Continuing operations                                        |                                      | $                                                  | (1.10     | )       |              | $ | 0.39      |              |             | $ | (0.74     | )      
|Discontinued operations                                      |                                      | $                                                  | (0.31     | )       |              | $ | 0.01      |              |             | $ |          |        
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Total                                                        |                                      | $                                                  | (1.40     | )*      |              | $ | 0.40      |              |             | $ | (0.74     | )      
|                                                             |                                      |                                                    |           |         |              |   |           |              |            
|Shares used in per share calculation                         |                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|                                                             |                                      |  basic                                            |           |         | 239,474,179  |   |           |              | 243,022,694 |   |           |         | 247,671,870 | 
|                                                             |                                      |  diluted                                          |           |         | 239,474,179  |   |           |              | 251,135,683 |   |           |         | 247,671,870 | 






|  |                                
|- | -------------------------------
|* | Does not total due to rounding.



62



---



##### Table of Contents



MAXTOR CORPORATION







CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


AND COMPREHENSIVE INCOME


|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |         |   |  |   |          |   |  |   |          |          |  
|----------------------------------------------------------------------- | -------------------- | ------------------------------------ | ----------- |  | ---------- | - | ----- | ----------- |  | ---------- | ------------ | - | ----- | ------------- | ------ | - | -------- | ----- | ---------- | ------------- | ------------- | - | ------ | - |  | ------ | ------- | - |  | - | -------- | - |  | - | -------- | -------- | -
|                                                                        |                      |                                      |             |  |            |   |       |             |  | Cumulative |              |   |       |               |        |   |         
|                                                                        |                      | Common Stock                         |             |  | Additional |   |       | Deferred    |  |            |              |   | Other |               |        |   |          | Total |            |               | Comprehensive |  
|                                                                        |                      |                                      |             |  | Paid-In    |   |       | Stock-Based |  |            | Accumulated  |   |       | Comprehensive |        |   | Treasury |       |            | Stockholders |               |   | Income |  
|                                                                        |                      | Shares                               |             |  | Amount     |   |       | Capital     |  |            | Compensation |   |       | Deficit       |        |   | Income   |       |            | Stock         |               |   | Equity |   |  | (Loss) |        
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|                                                                        |                      |                                      |             |  |            |   |       |             |  | Restated   |              |   |       |               |        |   | Restated |       |            | Restated      |              
|                                                                        |                      | (In thousands, except share amounts) |            
|Balance, December 29, 2001                                              |                      |                                      | 241,977,795 |  |            |   | 2,420 |             |  |            | 2,323,885    |   |       |               | (3,809 | ) |          |       | (1,376,913 | )             |               |   | 4,211  |   |  |        | (20,000 | ) |  |   | 929,794  |   |  |   |          |         
|Net loss                                                                |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       | (335,943   | )             |               |   |       |   |  |        |        |   |  |   | (335,943 | ) |  | $ | (335,943 | )       
|Unrealized loss on investments in equity securities                     |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       |           |               |               |   | (1,834 | ) |  |        |        |   |  |   | (1,834   | ) |  |   | (1,834   | )       
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|                                                                        | Comprehensive loss   |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |         |   |  |   |          |   |  |   | $        | (337,777 | )
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|Issuance of stock under stock option plan and related benefit
    plans |                      |                                      | 5,529,449   |  |            |   | 55    |             |  |            | 22,422       |   |       |               |       |   |          |       |           |               |               |   |       |   |  |        |        |   |  |   | 22,477   |   |  |   |          |         
|Stock-based compensation                                                |                      |                                      |            |  |            |   |      |             |  |            | 2,946        |   |       |               | 2,616  |   |          |       |           |               |               |   |       |   |  |        |        |   |  |   | 5,562    |   |  |   |          |         
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|Balance, December 28, 2002                                              |                      |                                      | 247,507,244 |  |            |   | 2,475 |             |  |            | 2,349,253    |   |       |               | (1,193 | ) |          |       | (1,712,856 | )             |               |   | 2,377  |   |  |        | (20,000 | ) |  |   | 620,056  |   |  |   |          |         
|Net income                                                              |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       | 101,112    |               |               |   |       |   |  |        |        |   |  |   | 101,112  |   |  | $ | 101,112  |         
|Unrealized gain on investments in equity securities                     |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       |           |               |               |   | 8,427  |   |  |        |        |   |  |   | 8,427    |   |  |   | 8,427    |         
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|                                                                        | Comprehensive income |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |         |   |  |   |          |   |  |   | $        | 109,539  |  
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|Issuance of stock Under stock option plan and related benefit
    plans |                      |                                      | 11,739,575  |  |            |   | 117   |             |  |            | 60,989       |   |       |               |       |   |          |       |           |               |               |   |       |   |  |        |        |   |  |   | 61,106   |   |  |   |          |         
|Stock-based compensation                                                |                      |                                      |            |  |            |   |      |             |  |            | (160         | ) |       |               | 1,083  |   |          |       |           |               |               |   |       |   |  |        |        |   |  |   | 923      |   |  |   |          |         
|Treasury shares repurchased at cost                                     |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       |           |               |               |   |       |   |  |        | (44,939 | ) |  |   | (44,939  | ) |  |   |          |         
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|Balance, December 27, 2003                                              |                      |                                      | 259,246,819 |  |            | $ | 2,592 |             |  | $          | 2,410,082    |   |       | $             | (110   | ) |          | $     | (1,611,744 | )             |               | $ | 10,804 |   |  | $      | (64,939 | ) |  | $ | 746,685  |   |  |   |          |         
|Net loss                                                                |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       | (183,439   | )             |               |   |       |   |  |        |        |   |  |   | (183,439 | ) |  | $ | (183,439 | )       
|Unrealized loss on investments in equity securities                     |                      |                                      |            |  |            |   |      |             |  |            |             |   |       |               |       |   |          |       |           |               |               |   | (6,268 | ) |  |        |        |   |  |   | (6,268   | ) |  |   | (6,268   | )       
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|                                                                        | Comprehensive loss   |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |         |   |  |   |          |   |  |   | $        | (189,707 | )
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|Issuance of stock under stock option plan and related benefit
    plans |                      |                                      | 4,166,759   |  |            |   | 42    |             |  |            | 19,343       |   |       |               |       |   |          |       |           |               |               |   |       |   |  |        |        |   |  |   | 19,385   |   |  |   |          |         
|Stock-based Compensation                                                |                      |                                      |            |  |            |   |      |             |  |            | 126          |   |       |               | 110    |   |          |       |           |               |               |   |       |   |  |        |        |   |  |   | 236      |   |  |   |          |         
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        
|Balance, December 25, 2004                                              |                      |                                      | 263,413,578 |  |            | $ | 2,634 |             |  | $          | 2,429,551    |   |       | $             |       |   |          | $     | (1,795,183 | )             |               | $ | 4,536  |   |  | $      | (64,939 | ) |  | $ | 576,599  |   |  |   |          |         
|                                                                        |                      |                                      |             |  |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |   |  |        |        



63



---



##### Table of Contents



MAXTOR CORPORATION







CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |         |          |          |  
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------- | ---------------------------------------------------------------------------------- | ------- | ------------ | ------- | -------- | ------------ | -------- | -------- | -------- | ------- | -------- | -------- | -
|                                                                                                                                 |                                                                                     | Years Ended                       |                                                                                   
|                                                                                                                                 |                                                                                     |                                   |                                                                                   
|                                                                                                                                 |                                                                                     | December 28,                      |                                                                                    |         | December 27, |         |          | December 25, |         
|                                                                                                                                 |                                                                                     | 2002                              |                                                                                    |         | 2003         |         |          | 2004         |         
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|                                                                                                                                 |                                                                                     | Restated                          |                                                                                    |         | Restated     |         |          | Restated     |         
|                                                                                                                                 |                                                                                     | (In thousands)                    |                                                                                   
|Cash Flows from Operating Activities:                                                                                            |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |        
|Net income (loss) from continuing operations                                                                                     |                                                                                     | $                                 | (262,442                                                                           | )       |              | $       | 98,901   |              |          | $        | (183,439 | )      
|Adjustments to reconcile net income (loss) from continuing
    operations to net cash provided by (used in) operating activities |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |        
|                                                                                                                                 | Depreciation and amortization                                                       |                                   |                                                                                    | 155,829 |              |         |          | 156,639      |          |          |          | 146,020 |         
|                                                                                                                                 | Amortization of goodwill and other intangible assets                                |                                   |                                                                                    | 82,248  |              |         |          | 85,279       |          |          |          | 35,994  |         
|                                                                                                                                 | Intangible asset impairment                                                         |                                   |                                                                                    |        |              |         |          |             |          |          |          | 24,175  |         
|                                                                                                                                 | Amortization of deferred compensation related to Quantum DSS
    restricted shares  |                                   |                                                                                    | 4,103   |              |         |          |             |          |          |          |        |         
|                                                                                                                                 | Stock-based compensation expense                                                    |                                   |                                                                                    | 5,562   |              |         |          | 923          |          |          |          | 236     |         
|                                                                                                                                 | Restructuring charge                                                                |                                   |                                                                                    | 9,495   |              |         |          |             |          |          |          | 24,502  |         
|                                                                                                                                 | Loss on sale of property, plant and equipment and other assets                      |                                   |                                                                                    | 2,568   |              |         |          | 3,235        |          |          |          | 1,729   |         
|                                                                                                                                 | Loss on asset revaluation                                                           |                                   |                                                                                    |        |              |         |          |             |          |          |          | 7,776   |         
|                                                                                                                                 | Loss on program cancellation                                                        |                                   |                                                                                    |        |              |         |          |             |          |          |          | 780     |         
|                                                                                                                                 | Gain on retirement of bond                                                          |                                   |                                                                                    | (2,832  | )            |         |          | (163         | )        |          |          |        |         
|                                                                                                                                 | Loss on redemption of pro rata portion of Quantum
    Corporations bond            |                                   |                                                                                    |        |              |         |          | 951          |          |          |          |        |         
|                                                                                                                                 | Realized loss on investment                                                         |                                   |                                                                                    | (1,307  | )            |         |          |             |          |          |          |        |         
|                                                                                                                                 | Change in assets and liabilities:                                                   |                                   |                                                                                    |         |              |         |          |              |          |          |          |         |         
|                                                                                                                                 |                                                                                     | Accounts receivable               |                                                                                    |         | 19,783       |         |          |              | (216,068 | )        |          |         | 115,415  |         
|                                                                                                                                 |                                                                                     | Other receivables                 |                                                                                    |         | (2,400       | )       |          |              | 825      |          |          |         | (2,874   | )       
|                                                                                                                                 |                                                                                     | Inventories                       |                                                                                    |         | 5,587        |         |          |              | (42,466  | )        |          |         | (11,399  | )       
|                                                                                                                                 |                                                                                     | Prepaid expenses and other assets |                                                                                    |         | 10,093       |         |          |              | 11,358   |          |          |         | 11,520   |         
|                                                                                                                                 |                                                                                     | Accounts payable                  |                                                                                    |         | 45,336       |         |          |              | 89,040   |          |          |         | (54,021  | )       
|                                                                                                                                 |                                                                                     | Accrued and other liabilities     |                                                                                    |         | (68,835      | )       |          |              | (28,389  | )        |          |         | (120,810 | )       
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by (used in) operating activities from
    continuing operations |         |              | 2,788   |          |              |          | 160,065  |          |         |          | (4,396   | )
|                                                                                                                                 |                                                                                     |                                   | Net cash used in discontinued operations                                           |         |              | (31,578 | )        |              |          | (7,948   | )        |         |          | (798     | )
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by (used in) operating activities                                |         |              | (28,790 | )        |              |          | 152,117  |          |         |          | (5,194   | )
|Cash Flows from Investing Activities:                                                                                            |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |        
|Proceeds from sale of property, plant and equipment                                                                              |                                                                                     |                                   | 277                                                                                |         |              |         | 348      |              |          |          | 755      |        
|Purchase of property, plant and equipment                                                                                        |                                                                                     |                                   | (139,080                                                                           | )       |              |         | (131,876 | )            |          |          | (171,579 | )      
|Change in restricted cash and marketable securities                                                                              |                                                                                     |                                   | 41,882                                                                             |         |              |         | 19,593   |              |          |          | (8,983   | )      
|Proceeds from sale of marketable securities                                                                                      |                                                                                     |                                   | 171,447                                                                            |         |              |         | 55,953   |              |          |          | 57,969   |        
|Purchase of marketable securities                                                                                                |                                                                                     |                                   | (92,063                                                                            | )       |              |         | (56,911  | )            |          |          | (77,113  | )      
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|                                                                                                                                 |                                                                                     |                                   | Net cash used in investing activities                                              |         |              | (17,537 | )        |              |          | (112,893 | )        |         |          | (198,951 | )
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|Cash Flows from Financing Activities:                                                                                            |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |        
|Proceeds from issuance of debt, including short-term borrowings                                                                  |                                                                                     |                                   |                                                                                   |         |              |         | 259,428  |              |          |          | 54,655   |        
|Principal payments of debt including short-term borrowings                                                                       |                                                                                     |                                   | (25,595                                                                            | )       |              |         | (108,593 | )            |          |          | (8,268   | )      
|Principal payments under capital lease obligations                                                                               |                                                                                     |                                   | (24,038                                                                            | )       |              |         | (29,677  | )            |          |          | (14,126  | )      
|Purchase of treasury stock at cost                                                                                               |                                                                                     |                                   |                                                                                   |         |              |         | (44,939  | )            |          |          |         |        
|Net proceeds from receivable-backed borrowing                                                                                    |                                                                                     |                                   |                                                                                   |         |              |         | 47,823   |              |          |          | 49,748   |        
|Payment of receivable-backed borrowing                                                                                           |                                                                                     |                                   |                                                                                   |         |              |         |         |              |          |          | (50,000  | )      
|Proceeds from issuance of common stock from employee stock
    purchase plan and stock options exercised                         |                                                                                     |                                   | 22,477                                                                             |         |              |         | 61,106   |              |          |          | 19,385   |        
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by (used in) financing activities                                |         |              | (27,156 | )        |              |          | 185,148  |          |         |          | 51,394   |  
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|Net change in cash and cash equivalents                                                                                          |                                                                                     |                                   | (73,483                                                                            | )       |              |         | 224,372  |              |          |          | (152,751 | )      
|Cash and cash equivalents at beginning of year                                                                                   |                                                                                     |                                   | 379,927                                                                            |         |              |         | 306,444  |              |          |          | 530,816  |        
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|Cash and cash equivalents at end of year                                                                                         |                                                                                     | $                                 | 306,444                                                                            |         |              | $       | 530,816  |              |          | $        | 378,065  |        
|                                                                                                                                 |                                                                                     |                                   |                                                                                    |         |              |         |          |              |         
|Supplemental Disclosures of Cash Flow Information:                                                                               |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |        
|                                                                                                                                 | Cash paid during the period for:                                                    |                                   |                                                                                    |         |              |         |          |              |          |          |          |         |         
|                                                                                                                                 |                                                                                     | Interest                          |                                                                                    | $       | 21,839       |         |          | $            | 28,805   |          |          | $       | 28,154   |         
|                                                                                                                                 |                                                                                     | Income taxes                      |                                                                                    | $       | 5,840        |         |          | $            | 1,628    |          |          | $       | 3,685    |         
|Schedule of Non-Cash Investing and Financing Activities:                                                                         |                                                                                     |                                   |                                                                                    |         |              |         |          |              |          |          |          |        
|                                                                                                                                 | Purchase of property, plant and equipment financed by accounts
    payable          |                                   | $                                                                                  | 7,058   |              |         | $        | 5,868        |          |          | $        | 4,780   |         
|                                                                                                                                 | Retirement of debt in exchange for bond redemption                                  |                                   | $                                                                                  | 5,000   |              |         | $        | 5,000        |          |          | $        | 5,000   |         
|                                                                                                                                 | Change in unrealized gain (loss) on investments                                     |                                   | $                                                                                  | (1,834  | )            |         | $        | 8,427        |          |          | $        | (6,268  | )       
|                                                                                                                                 | Purchase of property, plant and equipment financed by capital
    lease obligations |                                   | $                                                                                  | 11,232  |              |         | $        | 7,373        |          |          | $        | 24      |         



64



---



##### Table of Contents



MAXTOR CORPORATION







NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                           
|-- | ------------------------------------------
|1. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation









| |         
| | --------
| | Business





| |                 
| | ----------------
| | Use of Estimates





| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                
| | ---------------
| | Restricted Cash





| |                                      
| | -------------------------------------
| | Marketable Debt and Equity Securities



65



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |         |  |  |   |        | 
|-------------------------------- |  | -------------- | ------- | ----- | ---------- | - | ------ | ---------- |  | ---------- | ---------- | ---------- |  | ---------- | ------- |  |  | - | ------ | 
|                                 |  |                |         |       |            |   |        |            |  | Restricted |           
|                                 |  |                |         | Gross |            |   | Gross  |            |  |            |            | Marketable | 
|                                 |  | Purchase       |         |       | Unrealized |   |        | Unrealized |  |            | Aggregate  |            |  | Debt       |        
|                                 |  | Amortized Cost |         |       | Gains      |   |        | Losses     |  |            | Fair Value |            |  | Securities |        
|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |        
|                                 |  | (In thousands) |        
|2004                             |  |                |         |       |            |   |        |            |  |            |            |            |  |            |         |  |  |   |        | 
|US Government debt securities    |  | $              | 72,899  |       |            | $ |       |            |  | $          | (435       | )          |  | $          | 72,464  |  |  | $ |       | 
|Asset backed securities          |  |                | 9,862   |       |            |   |       |            |  |            | (52        | )          |  |            | 9,810   |  |  |   |       | 
|Corporate debt securities        |  |                | 13,534  |       |            |   |       |            |  |            | (39        | )          |  |            | 13,495  |  |  |   |       | 
|Certificate of deposits          |  |                | 8,200   |       |            |   |       |            |  |            |           |            |  |            | 8,200   |  |  |   |       | 
|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |        
|Total marketable debt securities |  | $              | 104,495 |       |            | $ |       |            |  | $          | (526       | )          |  | $          | 103,969 |  |  | $ |       | 
|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |        
|Equity securities                |  | $              | 4,980   |       |            | $ | 5,062  |            |  | $          |            |            |  | $          | 10,042  |  |  | $ |  =    | 
|2003                             |  |                |         |       |            |   |        |            |  |            |            |            |  |            |         |  |  |   |        | 
|US Government debt securities    |  | $              | 62,864  |       |            | $ | 229    |            |  | $          |           |            |  | $          | 63,093  |  |  | $ | 31,455 | 
|Asset backed securities          |  |                | 9,678   |       |            |   | 10     |            |  |            |           |            |  |            | 9,688   |  |  |   | 4,704  | 
|Corporate debt securities        |  |                | 8,841   |       |            |   | 8      |            |  |            |           |            |  |            | 8,849   |  |  |   | 3,778  | 
|Certificate of deposits          |  |                | 5,250   |       |            |   |       |            |  |            |           |            |  |            | 5,250   |  |  |   | 2,400  | 
|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |        
|Total marketable debt securities |  | $              | 86,633  |       |            | $ | 247    |            |  | $          |           |            |  | $          | 86,880  |  |  | $ | 42,337 | 
|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |        
|Equity securities                |  | $              | 4,980   |       |            | $ | 10,556 |            |  | $          |           |            |  | $          | 15,536  |  |  | $ |       | 
|                                 |  |                |         |       |            |   |        |            |  |            |            |            |  |            |        

66



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |            
| | -----------
| | Inventories





| |                              
| | -----------------------------
| | Property, Plant and Equipment







| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets







| |                                                                              
| | -----------------------------------------------------------------------------
| | Impairment of Long-lived Assets, Including Goodwill and
    Other Intangibles





67



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                 
| | ----------------
| | Product Warranty







| |                                                                  
| | -----------------------------------------------------------------
| | Restructuring Liabilities, Litigation and Other
    Contingencies



68



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                           
| | --------------------------
| | Foreign Exchange Contracts







| |                    
| | -------------------
| | Revenue Recognition













69



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                    
| | -------------------
| | Advertising Expense





| |                            
| | ---------------------------
| | Accounting for Income Taxes



70



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Stock-Based Compensation







|                                                                                                              |                             |              |          |          |              |   |         |              |  |   |          |          |  
|------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------ | -------- | -------- | ------------ | - | ------- | ------------ |  | - | -------- | -------- | -
|                                                                                                              |                             | Years Ended  |         
|                                                                                                              |                             |              |         
|                                                                                                              |                             | December 28, |          |          | December 27, |   |         | December 25, | 
|                                                                                                              |                             | 2002         |          |          | 2003         |   |         | 2004         | 
|                                                                                                              |                             |              |          |          |              |   |         |              | 
|                                                                                                              |                             | Restated(1)  |          |          | Restated(1)  |   |         | Restated(1)  | 
|Net income (loss) applicable to common stockholders, as reported                                              |                             | $            | (335,943 | )        |              | $ | 101,112 |              |  | $ | (183,439 | )       
|Add: Stock-based employee compensation expense included in
    reported net income (loss)                     |                             |              | 5,562    |          |              |   | 923     |              |  |   | 236      |         
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards |                             |              | 40,013   |          |              |   | 27,913  |              |  |   | 22,664   |         
|                                                                                                              |                             |              |          |          |              |   |         |              | 
|                                                                                                              | Pro forma net income (loss) |              | $        | (370,394 | )            |   | $       | 74,122       |  |   | $        | (205,867 | )
|                                                                                                              |                             |              |          |          |              |   |         |              | 
|Net income (loss) per share                                                                                   |                             |              |          |          |              |   |         |              |  |   |          |         
|                                                                                                              | As reported  basic         |              | $        | (1.40    | )            |   | $       | 0.42         |  |   | $        | (0.74    | )
|                                                                                                              | Pro forma  basic           |              | $        | (1.55    | )            |   | $       | 0.31         |  |   | $        | (0.83    | )
|                                                                                                              | As reported  diluted       |              | $        | (1.40    | )            |   | $       | 0.40         |  |   | $        | (0.74    | )
|                                                                                                              | Pro forma  diluted         |              | $        | (1.55    | )            |   | $       | 0.30         |  |   | $        | (0.83    | )






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.





71



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                            
| | ---------------------------
| | Net Income (Loss) Per Share





| |                            
| | ---------------------------
| | Comprehensive Income (Loss)



|                                                                                             |  |              |          |   |              |   |         |              |  |   |          |  
|-------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | ------- | ------------ |  | - | -------- | -
|                                                                                             |  | Years Ended  |         
|                                                                                             |  |              |         
|                                                                                             |  | December 28, |          |   | December 27, |   |         | December 25, | 
|                                                                                             |  | 2002         |          |   | 2003         |   |         | 2004         | 
|                                                                                             |  |              |          |   |              |   |         |              | 
|                                                                                             |  | Restated(1)  |          |   | Restated(1)  |   |         | Restated(1)  | 
|Net income (loss)                                                                            |  | $            | (335,943 | ) |              | $ | 101,112 |              |  | $ | (183,439 | )
|                                                                                             |  |              |          |   |              |   |         |              | 
|Unrealized gain (loss) on investments in equity securities                                   |  |              | 495      |   |              |   | 8,567   |              |  |   | (6,234   | )
|Less: reclassification adjustment for realized gain (loss)
    included in net income (loss) |  |              | 2,329    |   |              |   | 140     |              |  |   | 34       |  
|                                                                                             |  |              |          |   |              |   |         |              | 
|Comprehensive income (loss)                                                                  |  | $            | (337,777 | ) |              | $ | 109,539 |              |  | $ | (189,707 | )
|                                                                                             |  |              |          |   |              |   |         |              | 






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



| |                  
| | -----------------
| | Reclassifications





| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements



72



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












73



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                    
|-- | -----------------------------------
|2. | Restatement of Financial Statements





74



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                               |  |                         |            |   |             |   |            |  
|---------------------------------------------- |  | ----------------------- | ---------- | - | ----------- | - | ---------- | -
|                                               |  | As of December 28, 2002 |           
|                                               |  |                         |           
|                                               |  | As Reported             |            |   | As Restated |  
|                                               |  |                         |            |   |             |  
|Changes to Consolidated Balance Sheet          |  |                         |            |   |             |   |            |  
|Goodwill                                       |  | $                       | 635,175    |   |             | $ | 628,463    |  
|Accrued and other liabilities                  |  |                         | 471,750    |   |             |   | 462,692    |  
|Other liabilities                              |  |                         | 185,281    |   |             |   | 191,361    |  
|Accumulated deficit                            |  | $                       | (1,709,122 | ) |             | $ | (1,712,856 | )
|Changes to Consolidated Results of Operations  |  |                         |            |   |             |   |            |  
|Research and development                       |  | $                       | 401,014    |   |             | $ | 403,209    |  
|Amortization of goodwill and intangible assets |  |                         |            |   |             |   |            |  
|Interest expense                               |  |                         | (26,945    | ) |             |   | (26,626    | )
|Net loss                                       |  | $                       | (334,067   | ) |             | $ | (335,943   | )
|Net income (loss) per share  basic            |  |                         |            |   |             |   |            |  
|Continuing operations                          |  | $                       | (1.09      | ) |             | $ | (1.10      | )
|Total                                          |  | $                       | (1.40      | ) |             | $ | (1.40      | )
|Net income (loss) per share  diluted          |  |                         |            |   |             |   |            |  
|Continuing operations                          |  | $                       | (1.09      | ) |             | $ | (1.10      | )
|Total                                          |  | $                       | (1.40      | ) |             | $ | (1.40      | )

|                                              |  |                         |            |   |                         |   |            |             |  |   |             |   |  |   |            |  
|--------------------------------------------- |  | ----------------------- | ---------- | - | ----------------------- | - | ---------- | ----------- |  | - | ----------- | - |  | - | ---------- | -
|                                              |  | As of December 27, 2003 |            |   | As of December 25, 2004 |  
|                                              |  |                         |            |   |                         |  
|                                              |  | As Reported             |            |   | As Restated             |   |            | As Reported |  |   | As Restated |  
|                                              |  |                         |            |   |                         |   |            |             |  |   |             |  
|Changes to Consolidated Balance Sheet         |  |                         |            |   |                         |   |            |             |  |   |             |   |  |   |            |  
|Goodwill                                      |  | $                       | 635,175    |   |                         | $ | 628,463    |             |  | $ | 496,194     |   |  | $ | 489,482    |  
|Accrued and other liabilities                 |  |                         | 455,875    |   |                         |   | 447,063    |             |  |   | 332,679     |   |  |   | 324,369    |  
|Other liabilities                             |  |                         | 172,695    |   |                         |   | 180,088    |             |  |   | 58,284      |   |  |   | 66,695     |  
|Accumulated deficit                           |  | $                       | (1,606,451 | ) |                         | $ | (1,611,744 | )           |  | $ | (1,788,370  | ) |  | $ | (1,795,183 | )
|Changes to Consolidated Results of Operations |  |                         |            |   |                         |   |            |             |  |   |             |   |  |   |            |  
|Research and development                      |  | $                       | 354,050    |   |                         | $ | 356,069    |             |  | $ | 323,200     |   |  | $ | 325,309    |  
|Interest expense                              |  |                         | (30,604    | ) |                         |   | (30,114    | )           |  |   | (32,371     | ) |  |   | (31,782    | )
|Net income (loss)                             |  | $                       | 102,671    |   |                         | $ | 101,112    |             |  | $ | (181,919    | ) |  | $ | (183,439   | )
|Net income (loss) per share  basic           |  |                         |            |   |                         |   |            |             |  |   |             |   |  |   |            |  
|Continuing operations                         |  | $                       | 0.41       |   |                         | $ | 0.41       |             |  | $ | (0.73       | ) |  | $ | (0.74      | )
|Total                                         |  | $                       | 0.42       |   |                         | $ | 0.42       |             |  | $ | (0.73       | ) |  | $ | (0.74      | )
|Net income (loss) per share  diluted         |  |                         |            |   |                         |   |            |             |  |   |             |   |  |   |            |  
|Continuing operations                         |  | $                       | 0.40       |   |                         | $ | 0.39       |             |  | $ | (0.73       | ) |  | $ | (0.74      | )
|Total                                         |  | $                       | 0.41       |   |                         | $ | 0.40       |             |  | $ | (0.73       | ) |  | $ | (0.74      | )

75



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                 
|-- | --------------------------------
|3. | Certain Risks and Concentrations













76



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                      
|-- | -------------------------------------
|4. | Supplemental Financial Statement Data

|                                               |                                                 |                |          |         |              |   |           |         | 
|---------------------------------------------- | ----------------------------------------------- | -------------- | -------- | ------- | ------------ | - | --------- | ------- | 
|                                               |                                                 | December 27,   |          |         | December 25, |  
|                                               |                                                 | 2003           |          |         | 2004         |  
|                                               |                                                 |                |          |         |              |  
|                                               |                                                 | (In thousands) |         
|Inventories:                                   |                                                 |                |          |         |              |   |           |        
|                                               | Raw materials                                   |                | $        | 56,132  |              |   | $         | 79,904  | 
|                                               | Work-in-process                                 |                |          | 44,650  |              |   |           | 57,800  | 
|                                               | Finished goods                                  |                |          | 117,229 |              |   |           | 91,706  | 
|                                               |                                                 |                |          |         |              |  
|                                               |                                                 | $              | 218,011  |         |              | $ | 229,410   |        
|                                               |                                                 |                |          |         |              |  
|Prepaid expenses and other:                    |                                                 |                |          |         |              |   |           |        
|                                               | Investments in equity securities, at fair value |                | $        | 15,536  |              |   | $         | 10,042  | 
|                                               | Asset held for sale                             |                |          |        |              |   |           | 8,200   | 
|                                               | Prepaid expenses and other                      |                |          | 22,765  |              |   |           | 18,094  | 
|                                               |                                                 |                |          |         |              |  
|                                               |                                                 | $              | 38,301   |         |              | $ | 36,336    |        
|                                               |                                                 |                |          |         |              |  
|Property, plant and equipment, at cost:        |                                                 |                |          |         |              |   |           |        
|                                               | Buildings                                       |                | $        | 152,381 |              |   | $         | 155,172 | 
|                                               | Machinery and equipment                         |                |          | 608,735 |              |   |           | 659,324 | 
|                                               | Software                                        |                |          | 79,682  |              |   |           | 86,014  | 
|                                               | Furniture and fixtures                          |                |          | 26,583  |              |   |           | 27,604  | 
|                                               | Leasehold improvements                          |                |          | 86,430  |              |   |           | 91,571  | 
|                                               |                                                 |                |          |         |              |  
|                                               |                                                 | $              | 953,811  |         |              | $ | 1,019,685 |        
|Less accumulated depreciation and amortization |                                                 |                | (611,132 | )       |              |   | (671,751  | )      
|                                               |                                                 |                |          |         |              |  
|Net property, plant and equipment              |                                                 | $              | 342,679  |         |              | $ | 347,934   |        
|                                               |                                                 |                |          |         |              |  
|Accrued and other liabilities:                 |                                                 |                |          |         |              |   |           |        
|                                               | Income taxes payable                            |                | $        | 23,763  |              |   | $         | 7,605   | 
|                                               | Accrued payroll and payroll-related expenses    |                |          | 132,967 |              |   |           | 59,524  | 
|                                               | Accrued warranty                                |                |          | 209,426 |              |   |           | 185,940 | 
|                                               | Restructuring liabilities, short-term           |                |          | 9,096   |              |   |           | 9,707   | 
|                                               | Accrued expenses (Restated)(1)                  |                |          | 71,811  |              |   |           | 61,593  | 
|                                               |                                                 |                |          |         |              |  
|                                               |                                                 | $              | 447,063  |         |              | $ | 324,369   |        
|                                               |                                                 |                |          |         |              |  
|Other liabilities:                             |                                                 |                |          |         |              |   |           |        
|                                               | Tax indemnification liability                   |                | $        | 135,559 |              |   | $         | 8,760   | 
|                                               | Restructuring liabilities, long-term            |                |          | 29,727  |              |   |           | 43,911  | 
|                                               | Other (Restated)(1)                             |                |          | 14,802  |              |   |           | 14,024  | 
|                                               |                                                 |                |          |         |              |  
|                                               |                                                 | $              | 180,088  |         |              | $ | 66,695    |        
|                                               |                                                 |                |          |         |              |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



77



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                              
|-- | -----------------------------
|5. | Sales of Accounts Receivables







|   |                                     
|-- | ------------------------------------
|6. | Goodwill and Other Intangible Assets







78



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                       |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |          |   |   |   |         |   |   |         |       | 
|---------------------- | -------------------- | ------- | - | ----------------- | -------- | - | ----------------- | ------------ | ----- | - | ------ | -------- | -------- | ------ | ------- | ----------- | ------------ | - | ------- | ---------- |  | - | ------ | -------- | - | - | - | ------- | - | - | ------- | ----- | 
|                       |                      |         |   | December 27, 2003 |          |   | December 25, 2004 |             
|                       |                      |         |   |                   |          |   |                   |             
|                       |                      |         |   | Gross             |          |   |                   |              | Gross |   |        |         
|                       |                      | Useful  |   |                   | Carrying |   |                   | Accumulated  |       |   |        |          | Carrying |        |         | Accumulated |              |   | Asset   |            |  |  
|                       |                      | Life    |   |                   | Amount   |   |                   | Amortization |       |   | Net    |          |          | Amount |         |             | Amortization |   |         | Impairment |  |   | Net    |         
|                       |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |         
|                       |                      | (Years) |   |                   |          |   |                  
|                       |                      |         |   | (In thousands)    |          |   | (In thousands)    |             
|Goodwill (Restated)(1) |                      |         |   |                   |          | $ | 628,463           |              |       | $ |       |          |          | $      | 628,463 |             |              | $ | 489,482 |            |  | $ |       |          |   | $ |  |         |   | $ | 489,482 |      
|                       |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |         
|Quantum HDD            |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |          |   |   |   |         |   |   |         |      
|Existing technology    |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |          |   |   |   |         |   |   |         |      
|                       | Core technology      |         |   | 5                 |          |   | $                 | 96,700       |       |   | $      | (53,185  | )        |        | $       | 43,515      |              |   | $       | 96,700     |  |   | $      | (72,525  | ) |   | $ | (24,175 | ) |   | $       |      | 
|                       | Consumer electronics |         |   | 3                 |          |   |                   | 8,900        |       |   |        | (8,158   | )        |        |         | 742         |              |   |         | 8,900      |  |   |        | (8,900   | ) |   |   |        |   |   |         |      | 
|                       | High-end             |         |   | 3                 |          |   |                   | 75,500       |       |   |        | (69,208  | )        |        |         | 6,292       |              |   |         | 75,500     |  |   |        | (75,500  | ) |   |   |        |   |   |         |      | 
|                       | Desktop              |         |   | 3                 |          |   |                   | 105,000      |       |   |        | (96,250  | )        |        |         | 8,750       |              |   |         | 105,000    |  |   |        | (105,000 | ) |   |   |        |   |   |         |      | 
|MMC Technology         |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |          |   |   |   |         |   |   |         |      
|Existing technology    |                      |         | 5 |                   |          |   | 4,350             |              |       |   | (2,030 | )        |          |        | 2,320   |             |              |   | 4,350   |            |  |   | (2,900 | )        |   |   |  |         |   |   | 1,450   |      
|                       |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |         
|Total other            |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |          |   |   |   |         |   |   |         |      
|                       | intangible assets    |         |   |                   |          |   | $                 | 290,450      |       |   | $      | (228,831 | )        |        | $       | 61,619      |              |   | $       | 290,450    |  |   | $      | (264,825 | ) |   | $ | (24,175 | ) |   | $       | 1,450 | 
|                       |                      |         |   |                   |          |   |                   |              |       |   |        |          |          |        |         |             |              |   |         |            |  |   |        |         






|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(1) | For additional information on the restatement, see Note 2
    of the Notes to Consolidated Financial Statements.





79



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |                                         
|-- | ----------------------------------------
|7. | Short-term Borrowings and Long-term Debt



|                                                 |  |              |         |   |              |   |         |  
|------------------------------------------------ |  | ------------ | ------- | - | ------------ | - | ------- | -
|                                                 |  | December 27, |         |   | December 25, |  
|                                                 |  | 2003         |         |   | 2004         |  
|                                                 |  |              |         |   |              |  
|6.8% Convertible Senior Notes due April 30, 2010 |  | $            | 230,000 |   |              | $ | 230,000 |  
|5.75% Subordinated Debentures due March 1, 2012  |  |              | 59,352  |   |              |   | 59,311  |  
|Economic Development Board of Singapore Loans    |  |              | 24,138  |   |              |   | 27,148  |  
|Manufacturing facility Loan, Suzhou China        |  |              | 15,000  |   |              |   | 60,000  |  
|Mortgages                                        |  |              | 34,164  |   |              |   | 32,582  |  
|Equipment Loans and Capital Leases               |  |              | 20,192  |   |              |   | 6,090   |  
|Receivables-backed Borrowings                    |  |              | 50,000  |   |              |   | 50,000  |  
|                                                 |  |              |         |   |              |  
|                                                 |  |              | 432,846 |   |              |   | 465,131 |  
|Less amounts due within one year                 |  |              | (77,037 | ) |              |   | (82,561 | )
|                                                 |  |              |         |   |              |  
|                                                 |  | $            | 355,809 |   |              | $ | 382,570 |  
|                                                 |  |              |         |   |              |  



|                   |  |                |         | 
|------------------ |  | -------------- | ------- | 
|Fiscal Year Ending |  |               
|                   |  | (In thousands) |        
|2005               |  | $              | 82,561  | 
|2006               |  |                | 34,196  | 
|2007               |  |                | 14,055  | 
|2008               |  |                | 20,005  | 
|2009               |  |                | 50,003  | 
|Thereafter         |  |                | 264,311 | 
|                   |  |                |        
|Total              |  | $              | 465,131 | 
|                   |  |                |        



|                                                  |  |              |        |  
|------------------------------------------------- |  | ------------ | ------ | -
|                                                  |  | December 25, |       
|Fiscal Year Ending                                |  | 2004         |       
|                                                  |  |              |       
|2005                                              |  | $            | 5,421  |  
|2006                                              |  |              | 880    |  
|Thereafter                                        |  |              | 15     |  
|                                                  |  |              |       
|Total minimum lease payments & estimated residual |  | $            | 6,316  |  
|Imputed interest                                  |  |              | (226   | )
|                                                  |  |              |       
|Present value of minimum of lease payments        |  |              | 6,090  |  
|Current portion                                   |  |              | (5,209 | )
|                                                  |  |              |       
|Long-term capitalized lease obligations           |  | $            | 881    |  
|                                                  |  |              |       

80



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










81



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














82



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                      
|-- | ---------------------
|8. | Financial Instruments



| |                       
| | ----------------------
| | Fair Value Disclosures





|                                             |  |                   |         |  |                   |   |         |          |  |   |            |  |  |   |         | 
|-------------------------------------------- |  | ----------------- | ------- |  | ----------------- | - | ------- | -------- |  | - | ---------- |  |  | - | ------- | 
|                                             |  | December 27, 2003 |         |  | December 25, 2004 |  
|                                             |  |                   |         |  |                   |  
|                                             |  | Carrying          |         |  | Estimated         |   |         | Carrying |  |   | Estimated  | 
|                                             |  | Amount            |         |  | Fair Value        |   |         | Amount   |  |   | Fair Value | 
|                                             |  |                   |         |  |                   |   |         |          |  |   |            | 
|6.8% Convertible Senior Notes                |  | $                 | 230,000 |  |                   | $ | 319,413 |          |  | $ | 230,000    |  |  | $ | 232,587 | 
|Manufacturing Facility Loan  Suzhou, China  |  |                   | 15,000  |  |                   |   | 15,000  |          |  |   | 60,000     |  |  |   | 60,000  | 
|5.75% Subordinated Debentures                |  |                   | 59,352  |  |                   |   | 50,449  |          |  |   | 59,311     |  |  |   | 51,007  | 
|Mortgages                                    |  |                   | 34,164  |  |                   |   | 33,990  |          |  |   | 32,582     |  |  |   | 32,391  | 
|Economic Development Board of Singapore Loan |  |                   | 24,138  |  |                   |   | 24,138  |          |  |   | 27,148     |  |  |   | 27,148  | 
|Receivable-backed Borrowing                  |  |                   | 50,000  |  |                   |   | 50,000  |          |  |   | 50,000     |  |  |   | 50,000  | 



|   |           
|-- | ----------
|9. | Guarantees



| |                                                  
| | -------------------------------------------------
| | Intellectual Property Indemnification Obligations



83



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                 
| | ----------------
| | Accrued Warranty



|                               |  |              |          |      |              |   |          |     
|------------------------------ |  | ------------ | -------- | ---- | ------------ | - | -------- | ----
|                               |  | Years Ended  |         
|                               |  |              |         
|                               |  | December 27, |          |      | December 25, |  
|                               |  | 2003         |          |      | 2004         |  
|                               |  |              |          |      |              |  
|Balance at beginning of period |  | $            | 278,713  |      |              | $ | 209,426  |     
|Charges to operations          |  |              | 162,335  |      |              |   | 180,032  |     
|Settlements                    |  |              | (191,733 | )    |              |   | (190,208 | )   
|Changes in estimates           |  |              | (39,889  | )(1) |              |   | (13,310  | )(2)
|                               |  |              |          |      |              |  
|Balance at end of period       |  | $            | 209,426  |      |              | $ | 185,940  |     






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Primarily related to product expirations.                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(2) | The decrease in the warranty liability is primarily attributed
    to a change in estimate of $13.3 million comprised of
    $8.0 million reduction in the estimated cost of future
    repair, $4.7 million reduction due to product expirations
    and $0.6 million due to changes in the expected future
    return rate. In addition there was a $10.1 million impact
    due to net ship versus return dynamics on the overall installed
    base.





84



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|10. | Income Taxes



|         |         |                |   |       |              |  |   |              |       |  |   |        |      |  
|-------- | ------- | -------------- | - | ----- | ------------ |  | - | ------------ | ----- |  | - | ------ | ---- | -
|         |         | Years Ended    |  
|         |         |                |  
|         |         | December 28,   |   |       | December 27, |  |   | December 25, |      
|         |         | 2002           |   |       | 2003         |  |   | 2004         |      
|         |         |                |   |       |              |  |   |              |      
|         |         | (In thousands) |  
|Current: |         |                |   |       |              |  |   |              |       |  |   |       
|         | U.S.    |                | $ | 700   |              |  | $ | 2,477        |       |  | $ | (1,152 | )   
|         | Foreign |                |   | 1,475 |              |  |   | 1,027        |       |  |   | 891    |     
|         |         |                |   |       |              |  |   |              |      
|         |         | Total          |   | $     | 2,175        |  |   | $            | 3,504 |  |   | $      | (261 | )
|         |         |                |   |       |              |  |   |              |      



|        |       |                |          |          |              |   |         |              |  |   |          |          |  
|------- | ----- | -------------- | -------- | -------- | ------------ | - | ------- | ------------ |  | - | -------- | -------- | -
|        |       | Years Ended    |         
|        |       |                |         
|        |       | December 28,   |          |          | December 27, |   |         | December 25, | 
|        |       | 2002           |          |          | 2003         |   |         | 2004         | 
|        |       |                |          |          |              |   |         |              | 
|        |       | Restated(1)    |          |          | Restated(1)  |   |         | Restated(1)  | 
|        |       | (In thousands) |         
|U.S.    |       | $              | (322,651 | )        |              | $ | (56,895 | )            |  | $ | (221,641 | )       
|Foreign |       |                | (11,716  | )        |              |   | 160,998 |              |  |   | 37,716   |         
|        |       |                |          |          |              |   |         |              | 
|        | Total |                | $        | (334,367 | )            |   | $       | 104,103      |  |   | $        | (183,925 | )
|        |       |                |          |          |              |   |         |              | 





85



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                    |       |                |          |       |              |   |         |              |  |   |         |      |  
|--------------------------------------------------- | ----- | -------------- | -------- | ----- | ------------ | - | ------- | ------------ |  | - | ------- | ---- | -
|                                                    |       | Years Ended    |         
|                                                    |       |                |         
|                                                    |       | December 28,   |          |       | December 27, |   |         | December 25, | 
|                                                    |       | 2002           |          |       | 2003         |   |         | 2004         | 
|                                                    |       |                |          |       |              |   |         |              | 
|                                                    |       | Restated(1)    |          |       | Restated(1)  |   |         | Restated(1)  | 
|                                                    |       | (In thousands) |         
|Income tax expense (benefit) at U.S. statutory rate |       | $              | (117,028 | )     |              | $ | 36,436  |              |  | $ | (64,374 | )   
|State tax                                           |       |                |         |       |              |   | 1,212   |              |  |   | 491     |     
|Losses not providing current tax benefit            |       |                | 117,723  |       |              |   |        |              |  |   | 63,043  |     
|Utilization of NOL carryforward                     |       |                |         |       |              |   | (35,370 | )            |  |   |        |     
|Other                                               |       |                | 1,480    |       |              |   | 1,226   |              |  |   | 579     |     
|                                                    |       |                |          |       |              |   |         |              | 
|                                                    | Total |                | $        | 2,175 |              |   | $       | 3,504        |  |   | $       | (261 | )
|                                                    |       |                |          |       |              |   |         |              | 



|                                                          |                                                            |                                |          |         |              |   |          |         |         | 
|--------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------ | -------- | ------- | ------------ | - | -------- | ------- | ------- | 
|                                                          |                                                            | December 27,                   |          |         | December 25, |  
|                                                          |                                                            | 2003                           |          |         | 2004         |  
|                                                          |                                                            |                                |          |         |              |  
|Deferred tax assets:                                      |                                                            |                                |          |         |              |   |          |        
|                                                          | Inventory reserves and accruals                            |                                | $        | 5,650   |              |   | $        | 2,601   |        
|                                                          | Depreciation                                               |                                |          | 30,982  |              |   |          | 34,795  |        
|                                                          | Sales related reserves                                     |                                |          | 33,688  |              |   |          | 35,970  |        
|                                                          | Net operating loss carry-forwards                          |                                |          | 306,078 |              |   |          | 422,088 |        
|                                                          | Tax credit carry-forwards                                  |                                |          | 29,284  |              |   |          | 59,032  |        
|                                                          | Capitalized research and development                       |                                |          | 34,876  |              |   |          | 22,671  |        
|                                                          | Other (Restated)(1)                                        |                                |          | 39,197  |              |   |          | 49,938  |        
|                                                          |                                                            |                                |          |         |              |  
|                                                          |                                                            | Total deferred tax assets      |          |         | 479,755      |   |          |         | 627,095 | 
|Valuation allowance for deferred tax assets (Restated)(1) |                                                            |                                | (181,177 | )       |              |   | (315,864 | )      
|                                                          |                                                            |                                |          |         |              |  
|Net deferred tax assets                                   |                                                            | $                              | 298,578  |         |              | $ | 311,231  |        
|                                                          |                                                            |                                |          |         |              |  
|Deferred tax liabilities:                                 |                                                            |                                |          |         |              |   |          |        
|                                                          | Unremitted earnings of certain foreign entities            |                                |          | 294,409 |              |   |          | 309,481 |        
|                                                          | Unrealized gain (loss) on investments in equity securities |                                |          | 4,169   |              |   |          | 1,750   |        
|                                                          |                                                            |                                |          |         |              |  
|                                                          |                                                            | Total deferred tax liabilities |          |         | 298,578      |   |          |         | 311,231 | 
|                                                          |                                                            |                                |          |         |              |  
|Net deferred tax liabilities                              |                                                            | $                              |         |         |              | $ |         |        
|                                                          |                                                            |                                |          |         |              |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    Note 2 of the Notes to Consolidated Financial Statements.



86



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










87



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|11. | Commitments and Contingencies



| |       
| | ------
| | Leases



|                   |  |                |         | 
|------------------ |  | -------------- | ------- | 
|Fiscal Year Ending |  |               
|                   |  | (In thousands) |        
|2005               |  | $              | 34,241  | 
|2006               |  |                | 32,547  | 
|2007               |  |                | 32,206  | 
|2008               |  |                | 30,646  | 
|2009               |  |                | 31,192  | 
|Thereafter         |  |                | 117,409 | 
|                   |  |                |        
|Total              |  | $              | 278,241 | 
|                   |  |                |        





| |                   
| | ------------------
| | Third Party Vendor





| |                  
| | -----------------
| | Legal Proceedings







88



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










89



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                      
| | ---------------------
| | Investment Commitment





|    |                     
|--- | --------------------
|12. | Stockholders Equity



| |             
| | ------------
| | Common Stock











| |                      
| | ---------------------
| | Restricted Stock Plan







90



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                             
| | ----------------------------
| | Employee Stock Purchase Plan





| |                  
| | -----------------
| | Stock Option Plan











91



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






92



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                |                                            |               |           |                     |        |  |                |            |   |   |      |      | 
|------------------------------- | ------------------------------------------ | ------------- | --------- | ------------------- | ------ |  | -------------- | ---------- | - | - | ---- | ---- | 
|                                |                                            |               |           | Options Outstanding |       
|                                |                                            |               |           |                     |       
|                                |                                            | Shares        |           |                     |        |  | Wtd Average    |           
|                                |                                            | Available for |           |                     |        |  | Exercise Price |           
|                                |                                            | Grant         |           |                     | Shares |  |                | per Share  |  
|                                |                                            |               |           |                     |        |  |                |            |  
|Balance as of December 29, 2001 |                                            |               | 9,846,443 |                     |        |  | 34,531,082     |            |   | $ | 6.41 |     
|                                | Options granted                            |               |           | (4,089,058          | )      |  |                | 4,089,058  |   |   |      | 4.98 | 
|                                | Restricted stock granted                   |               |           | (30,000             | )      |  |                |           |   |   |      |     | 
|                                | Options exercised                          |               |           |                    |        |  |                | (1,987,555 | ) |   |      | 4.13 | 
|                                | Options canceled  1996 stock option plan  |               |           | 3,759,844           |        |  |                | (3,759,844 | ) |   |      | 7.00 | 
|                                | Options canceled  Quantum assumed options |               |           |                    |        |  |                | (1,297,687 | ) |   |      | 6.25 | 
|                                |                                            |               |           |                     |        |  |                |            |  
|Balance as of December 28, 2002 |                                            |               | 9,487,229 |                     |        |  | 31,575,054     |            |   |   | 6.35 |     
|                                | Options granted                            |               |           | (7,064,793          | )      |  |                | 7,064,793  |   |   |      | 5.81 | 
|                                | Options exercised                          |               |           |                    |        |  |                | (8,430,526 | ) |   |      | 5.59 | 
|                                | Options canceled  1996 stock option plan  |               |           | 3,081,477           |        |  |                | (3,081,477 | ) |   |      | 6.19 | 
|                                | Options canceled  Quantum assumed options |               |           |                    |        |  |                | (304,383   | ) |   |      | 6.85 | 
|                                | Restricted stock canceled                  |               |           | 20,000              |        |  |                |           |   |   |      |     | 
|                                |                                            |               |           |                     |        |  |                |            |  
|Balance as of December 27, 2003 |                                            |               | 5,523,913 |                     |        |  | 26,823,461     |            |   |   | 6.46 |     
|                                | Options granted                            |               |           | (4,832,200          | )      |  |                | 4,832,200  |   |   |      | 5.83 | 
|                                | Restricted stock granted                   |               |           | (29,669             | )      |  |                |           |   |   |      |     | 
|                                | Options exercised                          |               |           |                     |        |  |                | (960,821   | ) |   |      | 4.57 | 
|                                | Options canceled  1996 stock option plan  |               |           | 4,342,079           |        |  |                | (4,342,079 | ) |   |      | 6.66 | 
|                                | Options canceled  Quantum assumed options |               |           |                     |        |  |                | (130,107   | ) |   |      | 6.45 | 
|                                | Restricted stock canceled                  |               |           |                    |        |  |                |           |   |   |      |     | 
|Balance as of December 25, 2004 |                                            |               | 5,004,123 |                     |        |  | 26,222,654     |            |   | $ | 6.36 |     
|                                |                                            |               |           |                     |        |  |                |            |  





|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |            |  |  |   |       | 
|----------------------- |  | ------------------- | ---------- | --------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | ---------- |  |  | - | ----- | 
|                        |  | Options Outstanding |            |           | Options Exercisable | 
|                        |  |                     |            |           |                     | 
|                        |  |                     |            | Weighted  |                     |  |          |          | 
|                        |  |                     |            | Average   |                     |  | Weighted |          |  |   |             | Weighted | 
|                        |  |                     |            | Remaining |                     |  | Average  |          |  |   |             | Average  | 
|                        |  | Number              |            |           | Contractual         |  |          | Exercise |  |   | Number      |          |  | Exercise |           
|Range of Exercise Price |  | Outstanding         |            |           | Life                |  |          | Price    |  |   | Outstanding |          |  | Price    |           
|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |           
|$  1.305 - $  5.875     |  |                     | 13,370,158 |           |                     |  | 7.69     |          |  | $ | 4.42        |          |  |          | 6,472,617  |  |  | $ | 4.43  | 
|$   5.89 - $   7.75     |  |                     | 6,446,772  |           |                     |  | 5.49     |          |  |   | 6.67        |          |  |          | 5,740,026  |  |  |   | 6.68  | 
|$ 7.8125 - $ 13.125     |  |                     | 4,338,969  |           |                     |  | 6.42     |          |  |   | 8.62        |          |  |          | 3,048,580  |  |  |   | 8.30  | 
|$13.1875 - $19.3113     |  |                     | 2,066,755  |           |                     |  | 4.09     |          |  |   | 13.28       |          |  |          | 2,004,280  |  |  |   | 13.26 | 
|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |           
|                        |  |                     | 26,222,654 |           |                     |  |          |          |  | $ | 6.37        |          |  |          | 17,265,503 |  |  | $ | 6.89  | 
|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |           



93



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |              |           |   |              |  |           |              |  |  |           |  
|------------------------------ |  | ------------ | --------- | - | ------------ |  | --------- | ------------ |  |  | --------- | -
|                               |  | Years Ended  |          
|                               |  |              |          
|                               |  | December 28, |           |   | December 27, |  |           | December 25, | 
|                               |  | 2002         |           |   | 2003         |  |           | 2004         | 
|                               |  |              |           |   |              |  |           |              | 
|Risk-free interest rate        |  |              | 4.26      | % |              |  | 3.17      | %            |  |  | 3.28      | %
|Weighted average expected life |  |              | 4.5 years |   |              |  | 4.5 years |              |  |  | 4.5 years |  
|Volatility                     |  |              | 90        | % |              |  | 73        | %            |  |  | 75        | %
|Dividend yield                 |  |              |          |   |              |  |          |              |  |  |          |  



|                               |  |              |           |   |              |  |           |              |  |  |           |  
|------------------------------ |  | ------------ | --------- | - | ------------ |  | --------- | ------------ |  |  | --------- | -
|                               |  | Years Ended  |          
|                               |  |              |          
|                               |  | December 28, |           |   | December 27, |  |           | December 25, | 
|                               |  | 2002         |           |   | 2003         |  |           | 2004         | 
|                               |  |              |           |   |              |  |           |              | 
|Risk-free interest rate        |  |              | 1.73      | % |              |  | 1.08      | %            |  |  | 2.06      | %
|Weighted average expected life |  |              | 0.5 years |   |              |  | 0.5 years |              |  |  | 0.5 years |  
|Volatility                     |  |              | 90        | % |              |  | 73        | %            |  |  | 75        | %
|Dividend yield                 |  |              |          |   |              |  |          |              |  |  |          |  







|    |                        
|--- | -----------------------
|13. | Discontinued Operations

TM




|                                           |  |              |       |   |              |   |     |              |  |   |   | 
|------------------------------------------ |  | ------------ | ----- | - | ------------ | - | --- | ------------ |  | - | - | 
|                                           |  | Years Ended 
|                                           |  |             
|                                           |  | December 28, |       |   | December 27, |   |     | December 25,
|                                           |  | 2002         |       |   | 2003         |   |     | 2004        
|                                           |  |              |       |   |              |   |     |             
|Revenue from discontinued operations       |  | $            | 20.4  |   |              | $ |    |              |  | $ |  | 
|Income (loss) from discontinued operations |  | $            | (73.5 | ) |              | $ | 2.2 |              |  | $ |  | 

94



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                          |  |   |      | 
|----------------------------------------- |  | - | ---- | 
|Personnel related                         |  | $ | 13.0 | 
|Goodwill and other intangibles write-offs |  |   | 32.5 | 
|Non-cancelable purchase commitments       |  |   | 4.2  | 





|    |              
|--- | -------------
|14. | Restructuring











95



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |                |      |   |               |   |      |               |  |   |           |   |  |       |       |   |  |   |       |  
|---------------------------- |  | -------------- | ---- | - | ------------- | - | ---- | ------------- |  | - | --------- | - |  | ----- | ----- | - |  | - | ----- | -
|                             |  |                |      |   |               |   |      | 2004          |  |   |          
|                             |  | 2001           |      |   | 2002          |   |      | 2004          |  |   | Severance |   |  |      
|                             |  | Merger-Related |      |   | Restructuring |   |      | Restructuring |  |   | and       |   |  |      
|                             |  | Restructuring  |      |   | Charge        |   |      | Charge        |  |   | Benefits  |   |  | Total |      
|                             |  |                |      |   |               |   |      |               |  |   |           |   |  |       |      
|                             |  | (In millions)  |     
|Provision at April 1, 2001   |  | $              | 45.3 |   |               | $ |     |               |  | $ |          |   |  | $     |      |   |  | $ | 45.3  |  
|Amounts paid                 |  |                | (0.9 | ) |               |   |     |               |  |   |          |   |  |       |      |   |  |   | (0.9  | )
|Balance at December 29, 2001 |  |                | 44.4 |   |               |   |     |               |  |   |          |   |  |       |      |   |  |   | 44.4  |  
|Amounts paid                 |  |                | (4.5 | ) |               |   |     |               |  |   |          |   |  |       |      |   |  |   | (4.5  | )
|2002 accrual                 |  |                |     |   |               |   | 8.9  |               |  |   |          |   |  |       |      |   |  |   | 8.9   |  
|                             |  |                |      |   |               |   |      |               |  |   |           |   |  |       |      
|Balance at December 28, 2002 |  |                | 39.9 |   |               |   | 8.9  |               |  |   |          |   |  |       |      |   |  |   | 48.8  |  
|Amounts paid                 |  |                | (8.5 | ) |               |   | (1.5 | )             |  |   |          |   |  |       |      |   |  |   | (10.0 | )
|                             |  |                |      |   |               |   |      |               |  |   |           |   |  |       |      
|Balance at December 27, 2003 |  |                | 31.4 |   |               |   | 7.4  |               |  |   |          |   |  |       |      |   |  |   | 38.8  |  
|Amounts paid                 |  |                | (6.3 | ) |               |   | (1.4 | )             |  |   | (0.1      | ) |  |       | (10.7 | ) |  |   | (18.5 | )
|2004 accrual                 |  |                | 16.4 |   |               |   | 3.3  |               |  |   | 0.6       |   |  |       | 12.9  |   |  |   | 33.2  |  
|                             |  |                |      |   |               |   |      |               |  |   |           |   |  |       |      
|Balance at December 25, 2004 |  | $              | 41.5 |   |               | $ | 9.3  |               |  | $ | 0.5       |   |  | $     | 2.2   |   |  | $ | 53.5  |  
|                             |  |                |      |   |               |   |      |               |  |   |           |   |  |       |      



|    |                    
|--- | -------------------
|15. | Asset Held for Sale





|    |                  
|--- | -----------------
|16. | Other Gain (Loss)



96



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                            
|--- | ---------------------------
|17. | Net Income (Loss) Per Share



|                                                   |                                         |              |             |    |              |   |             |              |  |   |             |   | 
|-------------------------------------------------- | --------------------------------------- | ------------ | ----------- | -- | ------------ | - | ----------- | ------------ |  | - | ----------- | - | 
|                                                   |                                         | Years Ended  |            
|                                                   |                                         |              |            
|                                                   |                                         | December 28, |             |    | December 27, |   |             | December 25, | 
|                                                   |                                         | 2002         |             |    | 2003         |   |             | 2004         | 
|                                                   |                                         |              |             |    |              |   |             |              | 
|                                                   |                                         | Restated(1)  |             |    | Restated(1)  |   |             | Restated(1)  | 
|Numerator  Basic and Diluted                      |                                         |              |             |    |              |   |             |              |  |   |             |  
|Income (loss) from continuing operations           |                                         | $            | (262,442    | )  |              | $ | 98,901      |              |  | $ | (183,439    | )
|Income (loss) from discontinued operations         |                                         | $            | (73,501     | )  |              | $ | 2,211       |              |  | $ |            |  
|                                                   |                                         |              |             |    |              |   |             |              | 
|Net income (loss)                                  |                                         | $            | (335,943    | )  |              | $ | 101,112     |              |  | $ | (183,439    | )
|                                                   |                                         |              |             |    |              |   |             |              | 
|Net income (loss) available to common stockholders |                                         | $            | (335,963    | )  |              | $ | 101,112     |              |  | $ | (183,439    | )
|                                                   |                                         |              |             |    |              |   |             |              | 
|Denominator                                        |                                         |              |             |    |              |   |             |              |  |   |             |  
|Basic weighted average common shares outstanding   |                                         |              | 239,474,179 |    |              |   | 243,022,694 |              |  |   | 247,671,870 |  
|Effect of dilutive securities:                     |                                         |              |             |    |              |   |             |              |  |   |             |  
|                                                   | Common stock options                    |              |             |   |              |   |             | 8,044,949    |  |   |             |  | 
|                                                   | Restricted shares subject to repurchase |              |             |   |              |   |             | 68,040       |  |   |             |  | 
|                                                   |                                         |              |             |    |              |   |             |              | 
|Diluted weighted average common shares             |                                         |              | 239,474,179 |    |              |   | 251,135,683 |              |  |   | 247,671,870 |  
|                                                   |                                         |              |             |    |              |   |             |              | 
|Net income (loss) per share  basic                |                                         |              |             |    |              |   |             |              |  |   |             |  
|Continuing operations                              |                                         | $            | (1.10       | )  |              | $ | 0.41        |              |  | $ | (0.74       | )
|Discontinued operations                            |                                         | $            | (0.31       | )  |              | $ | 0.01        |              |  | $ |            |  
|                                                   |                                         |              |             |    |              |   |             |              | 
|Total                                              |                                         | $            | (1.40       | )* |              | $ | 0.42        |              |  | $ | (0.74       | )
|                                                   |                                         |              |             |    |              |   |             |              | 
|Net income (loss) per share  diluted              |                                         |              |             |    |              |   |             |              |  |   |             |  
|Continuing operations                              |                                         | $            | (1.10       | )  |              | $ | 0.39        |              |  | $ | (0.74       | )
|Discontinued operations                            |                                         | $            | (0.31       | )  |              | $ | 0.01        |              |  | $ |            |  
|                                                   |                                         |              |             |    |              |   |             |              | 
|Total                                              |                                         | $            | (1.40       | )* |              | $ | 0.40        |              |  | $ | (0.74       | )
|                                                   |                                         |              |             |    |              |   |             |              | 






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



| |   |                              
| | - | -----------------------------
| | * | Does not add due to rounding.

97



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                        |                                                         |              |            |   |              |  |           |              |  |  |            |            | 
|--------------------------------------- | ------------------------------------------------------- | ------------ | ---------- | - | ------------ |  | --------- | ------------ |  |  | ---------- | ---------- | 
|                                        |                                                         | Years Ended  |           
|                                        |                                                         |              |           
|                                        |                                                         | December 28, |            |   | December 27, |  |           | December 25, | 
|                                        |                                                         | 2002         |            |   | 2003         |  |           | 2004         | 
|                                        |                                                         |              |            |   |              |  |           |              | 
|Common stock options                    |                                                         |              | 31,575,054 |   |              |  | 3,114,254 |              |  |  | 26,222,654 |           
|Restricted shares subject to repurchase |                                                         |              | 1,012,752  |   |              |  |          |              |  |  | 30,000     |           
|As-if converted shares related to 6.8%  |                                                         |              |            |   |              |  |           |              |  |  |            |           
|                                        | Convertible Senior Notes due 2010 issued on May 7, 2003 |              |            |  |              |  |           | 18,756,362   |  |  |            | 18,756,362 | 



|    |                                        
|--- | ---------------------------------------
|18. | Segment and Major Customers Information







|                               |  |                   |           |             |                   |   |           |                   |             |   |           |  |  |             |           |  |        |   |           |  |  |   |         | 
|------------------------------ |  | ----------------- | --------- | ----------- | ----------------- | - | --------- | ----------------- | ----------- | - | --------- |  |  | ----------- | --------- |  | ------ | - | --------- |  |  | - | ------- | 
|                               |  | Year Ended        |           |             | Year Ended        |   |           | Year Ended        |            
|                               |  | December 28, 2002 |           |             | December 27, 2003 |   |           | December 25, 2004 |            
|                               |  |                   |           |             |                   |   |           |                   |            
|                               |  |                   |           | Long-Lived  |                   |   |           |                   | Long-Lived  |   |           |  |  | Long-Lived  |          
|                               |  | Revenue           |           |             | Assets            |   |           | Revenue           |             |   | Assets    |  |  | Revenue     |           |  | Assets |  
|                               |  |                   |           |             |                   |   |           |                   |             |   |           |  |  |             |           |  |        |  
|                               |  |                   |           | Restated(1) |                   |   |           |                   | Restated(1) |   |           |  |  | Restated(1) |          
|                               |  | (In thousands)    |          
|United States                  |  | $                 | 1,295,527 |             |                   | $ | 1,021,966 |                   |             | $ | 1,375,663 |  |  | $           | 916,401   |  |        | $ | 1,205,724 |  |  | $ | 696,317 | 
|Asia Pacific and Japan         |  |                   | 1,147,745 |             |                   |   | 128,860   |                   |             |   | 1,259,801 |  |  |             | 129,380   |  |        |   | 1,136,769 |  |  |   | 172,002 | 
|Europe, Middle East and Africa |  |                   | 1,231,794 |             |                   |   | 891       |                   |             |   | 1,354,421 |  |  |             | 731       |  |        |   | 1,373,806 |  |  |   | 444     | 
|Latin America and other        |  |                   | 104,448   |             |                   |   | 284       |                   |             |   | 96,558    |  |  |             | 157       |  |        |   | 80,029    |  |  |   | 271     | 
|                               |  |                   |           |             |                   |   |           |                   |             |   |           |  |  |             |           |  |        |  
|Total                          |  | $                 | 3,779,514 |             |                   | $ | 1,152,001 |                   |             | $ | 4,086,443 |  |  | $           | 1,046,669 |  |        | $ | 3,796,328 |  |  | $ | 869,034 | 
|                               |  |                   |           |             |                   |   |           |                   |             |   |           |  |  |             |           |  |        |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    Note 2 of the Notes to Consolidated Financial Statements.

98



---



##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                      
|--- | ---------------------
|19. | Employee Benefit Plan



| |            
| | -----------
| | 401(k) Plan





|    |                      
|--- | ---------------------
|20. | Litigation Settlement





|    |                           
|--- | --------------------------
|21. | Related Party Transactions





|    |                 
|--- | ----------------
|22. | Subsequent Event



99



---



##### Table of Contents









REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Consolidated financial statements and financial statement
schedule






Internal control over financial reporting


Internal
Control  Integrated Framework






100



---



##### Table of Contents













Report on Assessment of Internal Control
Over Financial Reporting.




101



---



##### Table of Contents







Internal Control  Integrated Framework










102



---



##### Table of Contents








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes In and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Managements Report on Assessment of Internal Control
Over Financial Reporting


Internal Control  Integrated Framework








Report on Assessment of Internal Control
Over Financial Reporting.


103



---



##### Table of Contents





Internal Control  Integrated
Framework






Changes in Internal Control Over Financial Reporting






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Hiring additional accounting personnel and engaging
    outside contractors with technical accounting expertise, as
    needed, and reorganizing the accounting and finance department
    to ensure that accounting personnel with adequate experience,
    skills and knowledge relating to complex, non-routine
    transactions are directly involved in the review and accounting
    evaluation of our complex, non-routine transactions;
|
| | (2) Involving both internal accounting personnel and
    outside contractors with technical accounting expertise, as
    needed, early in the evaluation of a complex, non-routine
    transaction to obtain additional guidance as to the application
    of generally accepted accounting principles to such a proposed
    transaction;                                                                                                         
|
| | (3) Documenting to standards established by senior
    accounting personnel and the principal accounting officer the
    review, analysis and related conclusions with respect to
    complex, non-routine transactions; and                                                                                                                                                                                                                       
|
| | (4) Requiring senior accounting personnel and the principal
    accounting officer to review complex, non-routine transactions
    to evaluate and approve the accounting treatment for such
    transactions.                                                                                                                                                                                                                                     



104



---



##### Table of Contents













Evaluation of Effectiveness of Disclosure Controls and
Procedures




105



---



##### Table of Contents



Managements Consideration of the Restatement


Materiality, Interim Financial
Reporting, Accounting Changes Not
Retroactively Applied Due to Immateriality,







|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management



106



---



##### Table of Contents








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accounting Fees and Services






PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)-(2) Financial Statements and Financial Statement
    Schedules  See Index to Consolidated Financial
    Statements under Item 8 on page 60 of this report.
|
| | (3) Exhibits. See Index to Exhibits on
    pages 110 to 113 hereof.                                                                                            

107



---



##### Table of Contents






SIGNATURES






| |                   
| | ------------------
| | MAXTOR CORPORATION
| | (Registrant)      



| |     |                       
| | --- | ----------------------
| | By: | /s/ Duston M. Williams

| |                                    
| | -----------------------------------
| |                                    
| | Duston M. Williams                 
| | Executive Vice President,          
| | Finance and Chief Financial Officer

108



---



##### Table of Contents



MAXTOR CORPORATION








SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                  |                                                           |                |   |            |           |  |   |            |   |  |       |            |     |        |   |   |  |  |   |         | 
|----------------- | --------------------------------------------------------- | -------------- | - | ---------- | --------- |  | - | ---------- | - |  | ----- | ---------- | --- | ------ | - | - |  |  | - | ------- | 
|                  |                                                           |                |   | Additions  |           |  |   |            |   |  |      
|                  |                                                           |                |   | Charged to |           |  |   |            |   |  |      
|                  |                                                           |                |   | Cost,      |           |  |   |            |   |  |      
|                  |                                                           | Balance at     |   |            | Expenses  |  |   |            |   |  |       | Balance at |    
|                  |                                                           | Beginning      |   |            | and Other |  |   |            |   |  |       | End of     |    
|Fiscal Year Ended |                                                           | of Period      |   |            | Accounts  |  |   | Deductions |   |  | Other |            |     | Period |  
|                  |                                                           |                |   |            |           |  |   |            |   |  |       |            |     |        |  
|                  |                                                           | (In thousands) |  
|2004              |                                                           |                |   |            |           |  |   |            |   |  |       |            |     |        |   |   |  |  |   |        
|                  | Allowance for doubtful accounts                           |                | $ | 11,220     |           |  | $ | (433       | ) |  | $     | 2,559      |     |        | $ |  |  |  | $ | 8,228   | 
|                  | Revenue reserves                                          |                | $ | 82,809     |           |  | $ | 398,486    |   |  | $     | 395,980    |     |        | $ |  |  |  | $ | 85,315  | 
|                  | Valuation allowance for deferred tax assets (Restated)(3) |                | $ | 181,177    |           |  | $ | 134,687    |   |  | $     |           |     |        | $ |  |  |  | $ | 315,864 | 
|2003              |                                                           |                |   |            |           |  |   |            |   |  |       |            |     |        |   |   |  |  |   |        
|                  | Allowance for doubtful accounts                           |                | $ | 18,320     |           |  | $ | (2,000     | ) |  | $     | 5,100      | (1) |        | $ |  |  |  | $ | 11,220  | 
|                  | Revenue reserves                                          |                | $ | 82,878     |           |  | $ | 525,329    |   |  | $     | 525,398    | (2) |        | $ |  |  |  | $ | 82,809  | 
|                  | Valuation allowance for deferred tax assets (Restated)(3) |                | $ | 186,980    |           |  | $ | (5,803     | ) |  | $     |           |     |        | $ |  |  |  | $ | 181,177 | 
|2002              |                                                           |                |   |            |           |  |   |            |   |  |       |            |     |        |   |   |  |  |   |        
|                  | Allowance for doubtful accounts                           |                | $ | 21,638     |           |  | $ | (1,000     | ) |  | $     | 2,318      | (1) |        | $ |  |  |  | $ | 18,320  | 
|                  | Revenue reserves                                          |                | $ | 102,332    |           |  | $ | 339,266    |   |  | $     | 358,720    | (2) |        | $ |  |  |  | $ | 82,878  | 
|                  | Valuation allowance for deferred tax assets Restated(3)   |                | $ | 173,735    |           |  | $ | 13,245     |   |  | $     |           |     |        | $ |  |  |  | $ | 186,980 | 






|    |                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Deductions represent recoveries of previously reserved balances
    and write-offs of fully reserved balances for which collection
    efforts have been exhausted.

Allowance for Doubtful Accounts.




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Revenue Reserves. The provision for sales returns and
    allowances consists of the Companys estimates of potential
    future product returns related to current period product
    revenue, and specific provisions for original equipment
    manufacturer, distributor and retailer sales incentives
    (allowances) that are reductions in the revenue to
    be realized. The Company analyzes historical returns, current
    economic trends, and changes in customer demand and acceptance
    of its products when evaluating the adequacy of the sales
    returns and allowances. Significant management judgments and
    estimates must be made and used in connection with establishing
    the sales returns and allowances in any accounting period.
    Material differences may result in the amount and timing of our
    revenue for any period if management made different judgments or
    utilized different estimates.



|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(2) | Represents actual returns and allowances.                                                                              
|   
|(3) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.

109



---



##### Table of Contents






INDEX TO EXHIBITS


|        |    |             |  |                                                                                                                                                                                                                                                                                                                        
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1(4)       |  | Restated Certificate of Incorporation of Registrant.                                                                                                                                                                                                                                                                   
|       
|        | 3  | .2(6)       |  | Certificate of Correction to the Restated Certificate of
    Incorporation of Registrant.                                                                                                                                                                                                                              
|       
|        | 3  | .3(7)       |  | Amended and Restated Bylaws of Registrant, dated
    February 18, 2005.                                                                                                                                                                                                                                                
|       
|        | 3  | .4(8)       |  | Certificate of Merger as filed with the Secretary of State of
    State of Delaware on April 2, 2001.                                                                                                                                                                                                                  
|       
|        | 4  | .1(15)      |  | Indenture between Registrant and U.S. Bank National
    Association, dated as of May 7, 2003.                                                                                                                                                                                                                          
|       
|        | 4  | .2(15)      |  | Resale Registration Rights Agreement between Registrant, Banc of
    America Securities LLC and Merrill Lynch, Pierce,
    Fenner & Smith Incorporated, dated as of May 7,
    2003.                                                                                                                                   
|       
|        | 10 | .1(1)       |  | Form of Indemnification Agreement between Registrant and
    Registrants directors and officers.**                                                                                                                                                                                                                    
|       
|        | 10 | .2(1)       |  | Indenture dated as of March 1, 1987 between Registrant and
    Security Pacific National Bank, as Trustee.                                                                                                                                                                                                             
|       
|        | 10 | .3(1)       |  | Employment Agreement between Mr. K.H. Teh and Registrant,
    dated March 23, 1997.**                                                                                                                                                                                                                                  
|       
|        | 10 | .4(1)       |  | Land Lease between Housing Development Board and Maxtor
    Singapore Limited dated as of March 8, 1991.                                                                                                                                                                                                               
|       
|        | 10 | .5(2)       |  | 1998 Restricted Stock Plan.**                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .6(2)       |  | Form of Restricted Stock Grant Agreement.**                                                                                                                                                                                                                                                                            
|       
|        | 10 | .7(3)       |  | Lease Agreement for Premises Located at 2452 Clover Basin Drive,
    Longmont, Colorado, between Registrant, as Tenant, and Pratt
    Land Limited Liability Company, as Landlord, dated
    October 28, 1999.                                                                                                         
|       
|        | 10 | .8(7)       |  | 1998 Employee Stock Purchase Plan.**                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .9(5)       |  | Form of Tax Opinion Insurance Policy.                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .10(9)      |  | Form of Tax Opinion Insurance Policy Rider.                                                                                                                                                                                                                                                                            
|       
|        | 10 | .11(8)      |  | Separation and Redemption Agreement dated as of April 2,
    2001 among Quantum Corporation, Insula Corporation and
    Registrant.                                                                                                                                                                                    
|       
|        | 10 | .12(8)      |  | Tax Sharing and Indemnity Agreement dated as of April 2,
    2001 among Quantum Corporation, Insula Corporation and
    Registrant.                                                                                                                                                                                    
|       
|        | 10 | .13(8)      |  | Intellectual Property Agreement dated as of April 2, 2001
    by and between Quantum Corporation and Insula Corporation.                                                                                                                                                                                               
|       
|        | 10 | .14(8)      |  | Indemnification Agreement dated as of April 2, 2001 among
    Quantum Corporation, Insula Corporation and Registrant.                                                                                                                                                                                                  
|       
|        | 10 | .15(8)      |  | Real Estate Matters Agreement dated as of April 2, 2001
    among Quantum Corporation, Insula Corporation and Registrant.                                                                                                                                                                                              
|       
|        | 10 | .16(8)      |  | General Assignment and Assumption Agreement dated as of
    April 2, 2001 among Quantum Corporation, Insula Corporation
    and Registrant.                                                                                                                                                                            
|       
|        | 10 | .17(10)     |  | Lease Amendment and Novation Agreement made as of
    August 31, 2001, by and between FortuneFirst, LLC, Hynix
    Semiconductor America Inc., and MMC Technology, Inc.                                                                                                                                                
|       
|        | 10 | .18(11)     |  | Maxtor Corporation Amended and Restated Executive Deferred
    Compensation Plan effective April 2, 2001.**                                                                                                                                                                                                            
|       
|        | 10 | .19(12)     |  | Maxtor Corporation Amended and Restated 1996 Stock Option Plan.**                                                                                                                                                                                                                                                      
|       
|        | 10 | .20(12)     |  | Standard Volume Purchase Agreement between Registrant, Agere
    Systems, Inc., and Agere Systems Singapore Pte. Ltd., effective
    as of January 1, 2002.*                                                                                                                                                           
|       
|        | 10 | .21(13)     |  | Employment Offer Letter from Registrant to Mr. Paul J.
    Tufano, dated February 24, 2003.**                                                                                                                                                                                                                          
|       
|        | 10 | .22(13)     |  | Master Financing Agreement between Maxtor Technology (Suzhou)
    Co., Ltd., Bank of China Suzhou Branch and Bank of China Suzhou
    Industrial Park Sub-branch, dated as of April 15, 2003.                                                                                                                          
|       
|        | 10 | .23(13)     |  | Contract for Transfer of the Right to the Use of Land in Respect
    to 222,700.82 Square Meters of Land Located at Su Hong Dong
    Road, Suzhou Industrial Park between China-Singapore Suzhou
    Industrial Park Development Co., Ltd. and Maxtor Technology
    (Suzhou) Co., Ltd., dated as of February 12, 2003.

110



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|       
|        | 10 | .24(14)     |  | U.S. $100,000,000 Receivables Loan and Security Agreement
    among Maxtor Funding LLC, Registrant, Merrill Lynch Commercial
    Finance Corp., Radian Reinsurance Inc., and U.S. Bank
    National Association, dated as of May 9, 2003.                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .25(14)     |  | Purchase and Contribution Agreement between Registrant and
    Maxtor Funding Corporation LLC, dated as of May 9, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .26(16)     |  | Employment Offer Letter from Registrant to Mr. Keyur A.
    Patel, dated June 16, 2003.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .27(15)     |  | First Amendment to U.S. $100,000,000 Receivables Loan and
    Security Agreement among Maxtor Funding LLC, Registrant, Merrill
    Lynch Commercial Finance Corp., Merrill Lynch Commercial Finance
    Corp., Radian Reinsurance Inc., and U.S. Bank National
    Association, dated as of July 21, 2003.                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .28(16)     |  | Employment Offer Letter and related documentation from
    Registrant to Mr. Robert L. Edwards, dated July 23,
    2003.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .29(16)     |  | Letter of Guarantee from Oversea-Chinese Banking Corporation
    Limited to Maxtor Peripherals (S) Pte Ltd, dated July 29,
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10 | .30(15)     |  | Second Amendment to U.S. $100,000,000 Receivables Loan and
    Security Agreement among Maxtor Funding LLC, Registrant, Merrill
    Lynch Commercial Finance Corp., Merrill Lynch Commercial Finance
    Corp., Radian Reinsurance Inc., and U.S. Bank National
    Association, dated as of August 7, 2003.                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .31(15)     |  | First Amendment to Purchase and Contribution Agreement between
    Registrant and Maxtor Funding LLC, dated as of August 7,
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .32(16)     |  | Form of Amendment of Restricted Stock Unit Award Agreement
    between Registrant and Pantelis S. Alexopoulos (70,000
    Restricted Stock Units), David L. Beaver (50,000 Restricted
    Stock Units), Michael Cordano (70,000 Restricted Stock Units),
    Phillip C. Duncan (50,000 Restricted Stock Units), Misha
    Rozenberg (50,000 Restricted Stock Units), Glenn H. Stevens
    (50,000 Restricted Stock Units), and K.H. Teh (70,000 Restricted
    Stock Units), and Paul J. Tufano (100,000 Restricted Stock
    Units; 140,000 Restricted Stock Units), each dated as of
    September 2, 2003.**
|       
|        | 10 | .33(16)     |  | Loan Agreement between Maxtor Peripherals (S) Pte Ltd and the
    Singapore Economic Development Board, dated September 3,
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10 | .34(17)     |  | Maxtor Corporation Executive Retention and Severance Plan.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .35(17)     |  | Maxtor Corporation Restricted Stock Unit Plan (as amended and
    restated).**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .36(17)     |  | Forbearance Agreement dated as of March 10, 2004 by and
    among Radian Reinsurance Inc., Maxtor Funding LLC, Registrant,
    Merrill Lynch Commercial Finance Corp. and U.S. Bank
    National Association.                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .37(18)     |  | Supplementary Agreement on Amendment of Foreign Exchange
    Loan Contract between Maxtor Technology (Suzhou) Co., Ltd.
    and Bank of China SIP Sub-branch, dated March 24, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10 | .38(18)     |  | Letter of Direction from Radian Reinsurance Inc., Merrill Lynch
    Commercial Financial Corp., Maxtor Funding LLC and Maxtor
    Corporation to U.S. Bank National Association, dated
    April 2, 2004.                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .39(19)     |  | U.S. $100,000,000 Receivables Loan and Security Agreement
    dated as of June 24, 2004 among Maxtor Receivables LLC,
    Maxtor Corporation, Merrill Lynch Commercial Finance Corp. and
    U.S. Bank National Association.                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .40(19)     |  | Purchase and Contribution Agreement dated as of June 24,
    2004 between Maxtor Corporation and Maxtor Receivables LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 10 | .41(28)     |  | First Amendment Agreement to the Receivables Loan and Security
    Agreement dated December 22, 2004 among Maxtor Receivables
    LLC, Maxtor Corporation, Merrill Lynch Commercial Finance Corp.
    and U.S. Bank National Association.                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .42(28)     |  | Second Amendment Agreement to the Receivables Loan and Security
    Agreement dated March 4, 2005 among Maxtor Receivables LLC,
    Maxtor Corporation, Merrill Lynch Commercial Finance Corp. and
    U.S. Bank National Association.                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 10 | .43(19)     |  | Amendment No. 1 to Maxtor Standard Volume Purchase
    Agreement dated as of July 1, 2004 between Maxtor
    Corporation and Agere Systems Inc.*                                                                                                                                                                                                                                                                                                                                                                                                                                                               

111



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                                           
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|       
|        | 10 | .44(19)     |  | Agreement dated as of July 19, 2004 between Maxtor
    Corporation and Mr. Phillip C. Duncan.**                                                                                                                                                                           
|       
|        | 10 | .45(19)     |  | Employment Offer Letter dated as of July 19, 2004 from
    Maxtor Corporation to Mr. John Viera.**                                                                                                                                                                        
|       
|        | 10 | .46(20)     |  | Employment Offer Letter dated as of August 23, 2004 from
    Maxtor Corporation to Mr. Michael A. Bless.**                                                                                                                                                                
|       
|        | 10 | .47(21)     |  | Employment Offer Letter dated as of September 30, 2004 from
    Maxtor Corporation to Ms. Fariba Danesh.**                                                                                                                                                                
|       
|        | 10 | .48(22)     |  | Foreign Exchange Loan Agreement No. YZDZ (2003) NO. 197 between
    Maxtor Technology (Suzhou) Co., Ltd. and Bank of China Suzhou
    Industrial Park Sub-branch, dated October 10, 2003.                                                                                 
|       
|        | 10 | .49(22)     |  | Letter of Guarantee by Maxtor International S.à r.l. to and
    for the benefit of Bank of China Suzhou Branch regarding Foreign
    Exchange Loan Agreement No. YZDZ (2003) NO. 197 made as of
    August 16, 2004.                                                      
|       
|        | 10 | .50(22)     |  | Foreign Exchange Loan Agreement No. YZDZ (2004) NO. 089 between
    Maxtor Technology (Suzhou) Co., Ltd. and Bank of China Suzhou
    Industrial Park Sub-branch, dated August 16, 2004.                                                                                  
|       
|        | 10 | .51(22)     |  | Letter of Guarantee by Maxtor International S.à r.l. to and
    for the benefit of Bank of China Suzhou Branch regarding Foreign
    Exchange Loan Agreement No. YZDZ (2004) NO. 089 made as of
    August 16, 2004.                                                      
|       
|        | 10 | .52(23)     |  | Employment Offer Letter dated as of November 12, 2004 from
    Maxtor Corporation to Dr. C.S. Park.**                                                                                                                                                                     
|       
|        | 10 | .53(24)     |  | Employment Offer Letter dated as of November 17, 2004 from
    Maxtor Corporation to Mr. Michael J. Wingert.**                                                                                                                                                            
|       
|        | 10 | .54(25)     |  | Employment Offer Letter dated as of December 3, 2004 from
    Maxtor Corporation to Mr. Duston M. Williams.**                                                                                                                                                             
|       
|        | 10 | .55(26)     |  | Amendment to the Employment Offer Letter dated as of
    February 7, 2004 from Maxtor Corporation to Dr. C.S.
    Park.**                                                                                                                                                 
|       
|        | 10 | .56(27)     |  | Amendment to the Employment Offer Letter dated as of
    February 7, 2004 from Maxtor Corporation to
    Mr. Michael J. Wingert.**                                                                                                                                        
|       
|        | 10 | .57(27)     |  | Employment Offer Letter dated as of February 18, 2005 from
    Maxtor Corporation to Mr. Kurt Richarz.**                                                                                                                                                                  
|       
|        | 10 | .58(28)     |  | Mutual General Release and Global Settlement Agreement between
    Registrants and Quantum Corporation dated as of
    December 23, 2004.                                                                                                                                 
|       
|        | 10 | .59(28)     |  | Forbearance Agreement by and among Maxtor Receivables LLC,
    Maxtor Corporation and Merrill Lynch Commercial Finance
    Corporation, dated as of February 11, 2005.                                                                                                    
|       
|        | 12 | .1(28)      |  | Statement regarding Computation of Ratio.                                                                                                                                                                                                                                 
|       
|        | 21 | .1(28)      |  | List of Subsidiaries.                                                                                                                                                                                                                                                     
|       
|        | 23 | .1          |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                    
|       
|        | 31 | .1          |  | Certification of Dr. C.S. Park, Chairman and Chief
    Executive Officer of Registrant pursuant to Rule 13a-14
    adopted under the Securities Exchange Act of 1934, as amended,
    and Section 302 of the Sarbanes-Oxley Act of 2002.                                  
|       
|        | 31 | .2          |  | Certification of Duston M. Williams, Executive Vice President,
    Finance and Chief Financial Officer of Registrant pursuant to
    Rule 13a-14 adopted under the Securities Exchange Act of
    1934, as amended, and Section 302 of the Sarbanes-Oxley Act
    of 2002.
|       
|        | 32 | .1          |  | Certification of Dr. C.S. Park, Chairman and Chief
    Executive Officer of Registrant furnished pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                              

112



---



##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                           
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|       
|        | 32 | .2          |  | Certification of Duston M. Williams, Executive Vice President,
    Finance and Chief Financial Officer of Registrant furnished
    pursuant to 18 U.S.C. § 1350, as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.






| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | This exhibit (or portions thereof) has been filed
    separately with the Commission pursuant to an application for
    confidential treatment. The confidential portions of this
    Exhibit have been omitted and are marked by an asterisk.



| |    |                                                          
| | -- | ---------------------------------------------------------
| | ** | Management contract, or compensatory plan or arrangement.



|    |                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to exhibits to registration statement
    on Form S-1, SEC file No. 333-56099, filed on
    June 5, 1998.    
|   
|(2) | Incorporated by reference to exhibits to registration statement
    on Form S-1/ A, SEC file No. 333-56099, filed on
    June 29, 1998.
|   
|(3) | Incorporated by reference to exhibits of Form 10-K filed
    March 29, 2000.                                                           
|   
|(4) | Incorporated by reference to exhibits of registration statement
    on Form S-4, File No. 333-51592, filed
    December 11, 2000.      
|   
|(5) | Incorporated by reference to exhibits of registration statement
    on Form S-4/ A filed January 23, 2001.                             
|   
|(6) | Incorporated by reference to exhibit of Form 8-K filed
    March 2, 2001.                                                              
|   
|(7) | Incorporated by reference to exhibits of Form 8-K filed
    February 25, 2005.                                                         
|   
|(8) | Incorporated by reference to exhibits of Form 8-K filed
    April 17, 2001.                                                            
|   
|(9) | Incorporated by reference to exhibits to registration statement
    on Form S-3, File No. 333-61770, filed May 29,
    2001.           



|     |                                                                                
|---- | -------------------------------------------------------------------------------
|(10) | Incorporated by reference to exhibits of Form 10-Q filed
    November 13, 2001.
|    
|(11) | Incorporated by reference to exhibits of Form 10-Q filed
    November 12, 2002.
|    
|(12) | Incorporated by reference to exhibits of Form 10-K filed
    March 28, 2003.   
|    
|(13) | Incorporated by reference to exhibits of Form 10-Q filed
    May 13, 2003.     
|    
|(14) | Incorporated by reference to exhibits of Form S-3 filed
    June 24, 2003.     
|    
|(15) | Incorporated by reference to exhibits of Form 10-Q filed
    August 12, 2003.  
|    
|(16) | Incorporated by reference to exhibits of Form 10-Q filed
    November 12, 2003.
|    
|(17) | Incorporated by reference to exhibits of Form 10-K filed
    March 11, 2004.   
|    
|(18) | Incorporated by reference to exhibits of Form 10-Q filed
    May 5, 2004.      
|    
|(19) | Incorporated by reference to exhibits of Form 10-Q filed
    August 2, 2004.   
|    
|(20) | Incorporated by reference to exhibits of Form 8-K filed
    August 24, 2004.   
|    
|(21) | Incorporated by reference to exhibits of Form 8-K filed
    October 4, 2004.   
|    
|(22) | Incorporated by reference to exhibits of Form 10-Q filed
    November 4, 2004. 
|    
|(23) | Incorporated by reference to exhibits of Form 8-K filed
    November 18, 2004. 
|    
|(24) | Incorporated by reference to exhibits of Form 8-K filed
    November 23, 2004. 
|    
|(25) | Incorporated by reference to exhibits of Form 8-K filed
    December 9, 2004.  
|    
|(26) | Incorporated by reference to exhibits of Form 8-K filed
    February 11, 2005. 
|    
|(27) | Incorporated by reference to exhibits of Form 8-K filed
    February 25, 2005. 
|    
|(28) | Incorporated by reference to exhibits of Form 10-K filed
    March 10, 2005.   

113