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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 27, 2003
|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
     incorporation or organization) |  | (I.R.S. Employer
    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












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TABLE OF CONTENTS



|                                                                         |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|EXPLANATORY NOTE                                                        
|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                                                             
|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, and Reports on Form 8-K                    
|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                                                            



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EXPLANATORY NOTE












| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | 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






PART I







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

Overview






1



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Company Background










tm


2



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Industry Background


The Hard Disk Drive Market.






| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continued improvements in desktop and enterprise computing price
    to performance ratios;                                                                        
|
| |  | the rapid accumulation of data resulting from the digitization
    of information previously stored in paper form;                                                 
|
| |  | larger file sizes created by multimedia-intensive applications;                                                                                                    
|
| |  | the growth of non-branded desktop computers in emerging
    economies, specifically China and other parts of Asia, Russia,
    Eastern Europe, and Latin America;  
|
| |  | increased customer demand for emerging consumer electronics
    devices that include a hard disk drive, such as personal video
    recorders and set-top boxes; and
|
| |  | the need to store large amounts of data that are accessed
    infrequently, as in email archiving, medical images and video
    clips.                             

Hard Disk Drive Technology.












3



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Our Solution










Our Strategy




Maintain Significant Presence With Leading Computer
Manufacturers.


4



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Strengthen Relationships with Distributors and Retailers.


Pursue Opportunities in Growth Markets.




Effectively Integrate New Technology.




| |   |                                                                                         
| | - | ----------------------------------------------------------------------------------------
| |  | obtain early access to the latest hard disk drive component
    technology;             
|
| |  | allow for flexibility in choosing state-of-the-art
    components; and                  
|
| |  | ensure viability of new product technologies and components
    prior to product design.

5



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Improve Manufacturing Efficiencies and Optimize Supply Base
to Achieve Cost Savings.




Pursue Low-Cost Manufacturing Capacity.


Product Development/ Technology




Enabling Technology Development Phase.




| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | working closely with our product design teams and strategic
    component suppliers to create a variety of state-of-the art
    technologies to be used in our future products;
|
| |  | developing early prototypes to ascertain the stability and
    manufacturability of our planned products; and                                                                  
|
| |  | analyzing the latest head, disk, channel, motor and application
    specific integrated circuit technologies and designs to broaden
    and strengthen our technology platform.



Product Design Phase.


Products




6



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|                  |  |          |       |  |          |                   |               |            |       |  |              |  |                                             |  |                                                | 
|----------------- |  | -------- | ----- |  | -------- | ----------------- | ------------- | ---------- | ----- |  | ------------ |  | ------------------------------------------- |  | ---------------------------------------------- | 
|                  |  | 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 Plus 8 |  |          | 40    |  |          |                   | 40            |            |       |  | 7,200        |  |                                             |  | High-performance Desktop PCs & Workstations    | 
|DiamondMax Plus 9 |  |          | 60/80 |  |          | 60/80/120/160/200 |               |            | 7,200 |  |              |  | High-performance Desktop PCs & Workstations | 
|MaXLine II        |  |          | 60/80 |  |          |                   | 250/300       |            |       |  | 5,400        |  |                                             |  | Near-line & mid-line storage                   | 
|MaXLine Plus II   |  |          | 60/80 |  |          |                   | 250/300       |            |       |  | 7,200        |  |                                             |  | Near-line & mid-line storage                   | 
|Atlas 10K IV      |  |          | 36.7  |  |          |                   | 36/73/147     |            |       |  | 10,000       |  |                                             |  | Servers, Workstations & Storage Subsystems     | 
|Atlas 15K         |  |          | 18.4  |  |          |                   | 18/36/73      |            |       |  | 15,000       |  |                                             |  | Servers, Workstations & Storage Subsystems     | 






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



Manufacturing/ Quality




Manufacturing.






| |   |                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | dedicate manufacturing cells to a particular product model,
    thereby allowing us to better monitor and control process
    trends, resulting in improved product quality, faster
    time-to-volume production and improved overall customer
    satisfaction;
|
| |  | simultaneously manufacture multiple product configurations;                                                                                                                                                                                                      

7



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| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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 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




8



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Manufacturers.


Distributors.


Retailers.




Sales and Marketing






Backlog




9



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Competition










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





Intellectual Property






10



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Employees




11



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Executive Officers




|                            |  |     |    |  |                           |                                                                                       
|--------------------------- |  | --- | -- |  | ------------------------- | --------------------------------------------------------------------------------------
|Name                        |  | Age |    |  | Position with the Company
|                            |  |     |    |  |                          
|Paul J. Tufano              |  |     | 50 |  |                           | President, Chief Executive Officer                                                    
|Robert L. Edwards           |  |     | 48 |  |                           | Executive Vice President, Chief Financial Officer                                     
|Dr. Pantelis S. Alexopoulos |  |     | 54 |  |                           | Executive Vice President, Desktop Product Development and Chief
    Technology Officer
|Michael D. Cordano          |  |     | 39 |  |                           | Executive Vice President, Worldwide Sales and Marketing                               
|Phillip C. Duncan           |  |     | 53 |  |                           | Executive Vice President, Human Resources and Real Estate                             
|K. H. Teh                   |  |     | 50 |  |                           | Executive Vice President, Worldwide Manufacturing and Singapore
    Managing Director 
|Keyur Patel                 |  |     | 39 |  |                           | Executive Vice President, Business Development and Strategy                           
|Michael J. Wingert          |  |     | 43 |  |                           | Executive Vice President/General Manager, Server Products Group                       
|David L. Beaver             |  |     | 50 |  |                           | Senior Vice President, Worldwide Materials and Chief Procurement
    Officer          
|Misha Rozenberg             |  |     | 42 |  |                           | Senior Vice President, Worldwide Quality and Chief Quality
    Officer                
|Glenn H. Stevens            |  |     | 53 |  |                           | Senior Vice President, General Counsel and Secretary                                  

Paul J. Tufano


Robert L. Edwards


Dr. Pantelis S. Alexopoulos


Michael D. Cordano


12



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Phillip C. Duncan


Keyur Patel


K. H. Teh


Michael J. Wingert


David L. Beaver


Misha Rozenberg


Glenn H. Stevens


Available Information




13



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
















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



14



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15



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|        |                                                    
|------- | ---------------------------------------------------
|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 2004 First Quarter (through March 4, 2004) |  | $    | 12.40 |  |     | $ | 8.81 | 
|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 | 
|Fiscal 2002 Fourth Quarter                        |  |      | 6.16  |  |     |   | 1.77 | 
|Fiscal 2002 Third Quarter                         |  |      | 5.95  |  |     |   | 2.61 | 
|Fiscal 2002 Second Quarter                        |  |      | 7.58  |  |     |   | 3.95 | 
|Fiscal 2002 First Quarter                         |  |      | 7.90  |  |     |   | 5.75 | 



Dividend Policy




16



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



|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |            |         |       |   |            |         |       | 
|------------------------------------------------------------ | ---------------------------------------------------- | ------------------------------------------------- | ------- | ------- | ------------ | -------- | ------- | ------------ | ----- | - | ------------ | ------- | ----- | ------------ | ---------- | ------- | ----- | - | ---------- | ------- | ----- | 
|                                                             |                                                      | Fiscal Year                                       |         |         | Fiscal Year  |          |         | Fiscal Year  |       |   | Fiscal Year  |         |       | Fiscal Year  |           
|                                                             |                                                      | Ended                                             |         |         | Ended        |          |         | Ended        |       |   | Ended        |         |       | Ended        |           
|                                                             |                                                      | January 1,                                        |         |         | December 30, |          |         | December 29, |       |   | December 28, |         |       | December 27, |           
|                                                             |                                                      | 2000                                              |         |         | 2000         |          |         | 2001(1)(3)   |       |   | 2002(2)      |         |       | 2003         |           
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|                                                             |                                                      |                                                   |         |         |              | Restated |         |              |       |   |             
|                                                             |                                                      | (In millions, except share and per share amounts) |        
|Consolidated Statement of Operations Data:                   |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |            |         |       |   |            |        
|Revenue                                                      |                                                      | $                                                 | 2,485.6 |         |              | $        | 2,690.9 |              |       | $ | 3,765.5      |         |       | $            | 3,779.5    |         |       | $ | 4,086.4    |        
|Cost of revenue                                              |                                                      |                                                   | 2,286.7 |         |              |          | 2,317.7 |              |       |   | 3,403.0      |         |       |              | 3,382.1    |         |       |   | 3,385.4    |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|                                                             | Gross profit                                         |                                                   |         | 198.9   |              |          |         | 373.2        |       |   |              | 362.5   |       |              |            | 397.4   |       |   |            | 701.0   |      
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Operating expenses:                                          |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |            |         |       |   |            |        
|                                                             | Research and development                             |                                                   |         | 189.0   |              |          |         | 211.8        |       |   |              | 411.2   |       |              |            | 401.0   |       |   |            | 354.0   |      
|                                                             | Selling, general and administrative                  |                                                   |         | 90.2    |              |          |         | 99.7         |       |   |              | 232.0   |       |              |            | 148.5   |       |   |            | 131.7   |      
|                                                             | Amortization of goodwill and other intangible assets |                                                   |         |        |              |          |         |             |       |   |              | 176.3   |       |              |            | 82.2    |       |   |            | 85.3    |      
|                                                             | Purchased in-process research and development        |                                                   |         |        |              |          |         |             |       |   |              | 95.2    |       |              |            |        |       |   |            |        |      
|                                                             | Restructuring charge                                 |                                                   |         |        |              |          |         |             |       |   |              |        |       |              |            | 9.5     |       |   |            |        |      
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|                                                             |                                                      | Total operating expenses                          |         |         | 279.2        |          |         |              | 311.5 |   |              |         | 914.7 |              |            |         | 641.2 |   |            |         | 571.0 | 
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Income (loss) from operations                                |                                                      |                                                   | (80.3   | )       |              |          | 61.7    |              |       |   | (552.2       | )       |       |              | (243.8     | )       |       |   | 130.0      |        
|Interest expense                                             |                                                      |                                                   | (13.6   | )       |              |          | (13.7   | )            |       |   | (25.2        | )       |       |              | (27.0      | )       |       |   | (30.6      | )      
|Interest income                                              |                                                      |                                                   | 14.1    |         |              |          | 19.8    |              |       |   | 20.3         |         |       |              | 8.0        |         |       |   | 5.2        |        
|Other gain (loss)                                            |                                                      |                                                   | 45.6    |         |              |          | 6.3     |              |       |   | (6.2         | )       |       |              | 4.4        |         |       |   | (0.6       | )      
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Income (loss) from continuing operations before income taxes |                                                      |                                                   | (34.2   | )       |              |          | 74.1    |              |       |   | (563.3       | )       |       |              | (258.4     | )       |       |   | 104.0      |        
|Provision for income taxes                                   |                                                      |                                                   | 1.5     |         |              |          | 1.7     |              |       |   | 3.4          |         |       |              | 2.2        |         |       |   | 3.5        |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Income (loss) from continuing operations                     |                                                      |                                                   | (35.7   | )       |              |          | 72.4    |              |       |   | (566.7       | )       |       |              | (260.6     | )       |       |   | 100.5      |        
|Income (loss) from discontinued operations                   |                                                      | $                                                 | (14.4   | )       |              | $        | (40.6   | )            |       | $ | (48.2        | )       |       | $            | (73.5      | )       |       | $ | 2.2        |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Net income (loss)                                            |                                                      | $                                                 | (50.1   | )       |              | $        | 31.8    |              |       | $ | (614.9       | )       |       | $            | (334.1     | )       |       | $ | 102.7      |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Net income (loss) per share  basic                          |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |            |         |       |   |            |        
|Continuing operations                                        |                                                      | $                                                 | (0.34   | )       |              | $        | 0.64    |              |       | $ | (2.74        | )       |       | $            | (1.09      | )       |       | $ | 0.41       |        
|Discontinued operations                                      |                                                      | $                                                 | (0.14   | )       |              | $        | (0.36   | )            |       | $ | (0.23        | )       |       | $            | (0.31      | )       |       | $ | 0.01       |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Total                                                        |                                                      | $                                                 | (0.48   | )       |              | $        | 0.28    |              |       | $ | (2.97        | )       |       | $            | (1.40      | )       |       | $ | 0.42       |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Net income (loss) per share  diluted                        |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |            |         |       |   |            |        
|Continuing operations                                        |                                                      | $                                                 | (0.34   | )       |              | $        | 0.61    |              |       | $ | (2.74        | )       |       | $            | (1.09      | )       |       | $ | 0.40       |        
|Discontinued operations                                      |                                                      | $                                                 | (0.14   | )       |              | $        | (0.34   | )            |       | $ | (0.23        | )       |       | $            | (0.31      | )       |       | $ | 0.01       |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Total                                                        |                                                      | $                                                 | (0.48   | )       |              | $        | 0.27    |              |       | $ | (2.97        | )       |       | $            | (1.40      | )       |       | $ | 0.41       |        
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Shares used in per share calculation (in thousands):         |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |            |         |       |   |            |        
|                                                             | Basic                                                |                                                   |         | 105,503 |              |          |         | 113,433      |       |   |              | 206,912 |       |              |            | 239,474 |       |   |            | 243,023 |      
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|                                                             | Diluted                                              |                                                   |         | 105,503 |              |          |         | 119,116      |       |   |              | 206,912 |       |              |            | 239,474 |       |   |            | 251,136 |      
|                                                             |                                                      |                                                   |         |         |              |          |         |              |       |   |              |         |       |              |           
|Balance Sheet Data:                                          |                                                      |                                                   |         |         |              |          |         |              |       |   | Restated(3   | )       |       |              | Restated(3 | )       |       |   | Restated(3 | )      
|Total assets                                                 |                                                      | $                                                 | 906.3   |         |              | $        | 1,024.9 |              |       | $ | 2,536.7      |         |       | $            | 2,182.1    |         |       | $ | 2,543.5    |        
|Total current liabilities                                    |                                                      |                                                   | 537.2   |         |              |          | 628.9   |              |       |   | 1,169.8      |         |       |              | 1,166.6    |         |       |   | 1,263.0    |        
|Long-term debt                                               |                                                      |                                                   | 113.8   |         |              |          | 92.3    |              |       |   | 244.5        |         |       |              | 206.3      |         |       |   | 355.8      |        
|Total stockholders equity                                   |                                                      |                                                   | 255.3   |         |              |          | 303.7   |              |       |   | 931.7        |         |       |              | 623.8      |         |       |   | 752.0      |        






|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes operations of Quantum HDD since April 2, 2001 and
    of MMC since September 2, 2001. See note 13 of Notes
    to Consolidated Financial Statements.                                      
|   
|(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

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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 Notes to Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

18



---



##### 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 our expectations as to the market demand
for our products, future operating results, capital
expenditures, liquidity, completion of our manufacturing
facility in China, the effect of our planned transition of
manufacturing server products from MKE to our Singapore
facility, our indemnification obligations, the results of
litigation, amortization of other intangible assets and our
relationships with vendors. In this report, the words
anticipates, believe,
expect, intend, may,
will, should, would,
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






Background






19



---



##### Table of Contents









tm




Executive Overview










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









| |                                                             
| | ------------------------------------------------------------
| | 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;                                                                

22



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| |   |                                                                       
| | - | ----------------------------------------------------------------------
| |  | significant decline in our stock price for a sustained
    period; and
|
| |  | our market capitalization relative to net book value.                 









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







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





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



23



---



##### Table of Contents









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



24



---



##### Table of Contents



Results of Operations




|                                                             |                                                      |                          |         |       |              |   |         |              |       |   |         |       |       | 
|------------------------------------------------------------ | ---------------------------------------------------- | ------------------------ | ------- | ----- | ------------ | - | ------- | ------------ | ----- | - | ------- | ----- | ----- | 
|                                                             |                                                      | Years Ended              |        
|                                                             |                                                      |                          |        
|                                                             |                                                      | December 29,             |         |       | December 28, |   |         | December 27, |      
|                                                             |                                                      | 2001                     |         |       | 2002         |   |         | 2003         |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|                                                             |                                                      | Restated                 |         |       |              |   |        
|                                                             |                                                      | (In millions)            |        
|Consolidated Statement of Operations Data:                   |                                                      |                          |         |       |              |   |         |              |       |   |         |      
|Revenue                                                      |                                                      | $                        | 3,765.5 |       |              | $ | 3,779.5 |              |       | $ | 4,086.4 |      
|Cost of revenue                                              |                                                      |                          | 3,403.0 |       |              |   | 3,382.1 |              |       |   | 3,385.4 |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|                                                             | Gross profit                                         |                          |         | 362.5 |              |   |         | 397.4        |       |   |         | 701.0 |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Operating expenses:                                          |                                                      |                          |         |       |              |   |         |              |       |   |         |      
|                                                             | Research and development                             |                          |         | 411.2 |              |   |         | 401.0        |       |   |         | 354.0 |      
|                                                             | Selling, general and administrative                  |                          |         | 232.0 |              |   |         | 148.5        |       |   |         | 131.7 |      
|                                                             | Amortization of goodwill and other intangible assets |                          |         | 176.3 |              |   |         | 82.2         |       |   |         | 85.3  |      
|                                                             | Purchased in-process research and development        |                          |         | 95.2  |              |   |         |             |       |   |         |      |      
|                                                             | Restructuring charge                                 |                          |         |      |              |   |         | 9.5          |       |   |         |      |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|                                                             |                                                      | Total operating expenses |         |       | 914.7        |   |         |              | 641.2 |   |         |       | 571.0 | 
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Income (loss) from operations                                |                                                      |                          | (552.2  | )     |              |   | (243.8  | )            |       |   | 130.0   |      
|Interest expense                                             |                                                      |                          | (25.2   | )     |              |   | (27.0   | )            |       |   | (30.6   | )    
|Interest income                                              |                                                      |                          | 20.3    |       |              |   | 8.0     |              |       |   | 5.2     |      
|Other gain (loss)                                            |                                                      |                          | (6.2    | )     |              |   | 4.4     |              |       |   | (0.6    | )    
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Income (loss) from continuing operations before income taxes |                                                      |                          | (563.3  | )     |              |   | (258.4  | )            |       |   | 104.0   |      
|Provision for income taxes                                   |                                                      |                          | 3.4     |       |              |   | 2.2     |              |       |   | 3.5     |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Income (loss) from continuing operations                     |                                                      |                          | (566.7  | )     |              |   | (260.6  | )            |       |   | 100.5   |      
|Income (loss) from discontinued operations                   |                                                      |                          | (48.2   | )     |              |   | (73.5   | )            |       |   | 2.2     |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      
|Net income (loss)                                            |                                                      | $                        | (614.9  | )     |              | $ | (334.1  | )            |       | $ | 102.7   |      
|                                                             |                                                      |                          |         |       |              |   |         |              |      

25



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|                                                             |                                                      |                          |       |      |              |  |       |              |      |  |       |      |      | 
|------------------------------------------------------------ | ---------------------------------------------------- | ------------------------ | ----- | ---- | ------------ |  | ----- | ------------ | ---- |  | ----- | ---- | ---- | 
|                                                             |                                                      | December 29,             |       |      | December 28, |  |       | December 27, |     
|                                                             |                                                      | 2001                     |       |      | 2002         |  |       | 2003         |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|                                                             |                                                      | Restated                 |       |      |              |  |      
|As a Percentage of Revenue:                                  |                                                      |                          |       |      |              |  |       |              |      |  |       |     
|Revenue                                                      |                                                      |                          | 100.0 | %    |              |  | 100.0 | %            |      |  | 100.0 | %   
|Cost of revenue                                              |                                                      |                          | 90.4  |      |              |  | 89.5  |              |      |  | 82.8  |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|                                                             | Gross profit                                         |                          |       | 9.6  |              |  |       | 10.5         |      |  |       | 17.2 |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Operating expenses:                                          |                                                      |                          |       |      |              |  |       |              |      |  |       |     
|                                                             | Research and development                             |                          |       | 10.9 |              |  |       | 10.6         |      |  |       | 8.7  |     
|                                                             | Selling, general and administrative                  |                          |       | 6.2  |              |  |       | 3.9          |      |  |       | 3.2  |     
|                                                             | Amortization of goodwill and other intangible assets |                          |       | 4.7  |              |  |       | 2.2          |      |  |       | 2.1  |     
|                                                             | Purchased in-process research and development        |                          |       | 2.5  |              |  |       |             |      |  |       |     |     
|                                                             | Restructuring charge                                 |                          |       |     |              |  |       | 0.3          |      |  |       |     |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|                                                             |                                                      | Total operating expenses |       |      | 24.3         |  |       |              | 17.0 |  |       |      | 14.0 | 
|Income (loss) from operations                                |                                                      |                          | (14.7 | )    |              |  | (6.5  | )            |      |  | 3.2   |     
|Interest expense                                             |                                                      |                          | (0.6  | )    |              |  | (0.7  | )            |      |  | (0.7  | )   
|Interest income                                              |                                                      |                          | 0.5   |      |              |  | 0.2   |              |      |  | 0.1   |     
|Other gain (loss)                                            |                                                      |                          | (0.1  | )    |              |  | 0.1   |              |      |  | 0.0   |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Income (loss) from continuing operations before income taxes |                                                      |                          | (14.9 | )    |              |  | (6.8  | )            |      |  | 2.5   |     
|Provision for income taxes                                   |                                                      |                          | 0.1   |      |              |  | 0.1   |              |      |  | 0.1   |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Income (loss) from continuing operations                     |                                                      |                          | (15.0 | )    |              |  | (6.9  | )            |      |  | 2.5   |     
|Income (loss) from discontinued operations                   |                                                      |                          | (1.3  | )    |              |  | (1.9  | )            |      |  | 0.1   |     
|                                                             |                                                      |                          |       |      |              |  |       |              |     
|Net income (loss)                                            |                                                      |                          | (16.3 | )%   |              |  | (8.8  | )%           |      |  | 2.5   | %   
|                                                             |                                                      |                          |       |      |              |  |       |              |     



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

Revenues.






26



---



##### Table of Contents















Cost of Revenues; Gross Profit.


Operating Expenses


Research and Development Expense.


Selling, General and Administrative Expense.


27



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| |                     
| | --------------------
| | 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.                                                                                                                                                           





|                                       |  |               |     |  |              |   |     | 
|-------------------------------------- |  | ------------- | --- |  | ------------ | - | --- | 
|                                       |  | 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 | 
|                                       |  |               |     |  |              |  



28



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|                                                    |  |               |     |  |              |   |   | 
|--------------------------------------------------- |  | ------------- | --- |  | ------------ | - | - | 
|                                                    |  | 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.










Interest Expense.




Interest Income.


Other Gain (Loss).


29



---



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Provision for Income Taxes.






Loss from Discontinued Operations. tm


30



---



##### 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  | 





| |                                                
| | -----------------------------------------------
| | Fiscal Year 2002 Compared With Fiscal Year 2001

Revenues.










31



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##### Table of Contents







Cost of Revenues; Gross Profit.


Operating Expenses


Research and Development Expense.






|                                                                             |  |               |       |   |              |   |      |  
|---------------------------------------------------------------------------- |  | ------------- | ----- | - | ------------ | - | ---- | -
|                                                                             |  | Years Ended   |      
|                                                                             |  |               |      
|                                                                             |  | December 29,  |       |   | December 28, |  
|                                                                             |  | 2001          |       |   | 2002         |  
|                                                                             |  |               |       |   |              |  
|                                                                             |  | (In millions) |      
|Stock-based compensation expense                                             |  | $             | (2.0  | ) |              | $ | (1.8 | )
|Amortization related to DSS restricted shares                                |  | $             | (25.0 | ) |              | $ | (2.8 | )
|Costs of transitional services and non-recurring merger-related
    expenses |  | $             | (10.1 | ) |              | $ |     |  

Selling, General and Administrative Expense.


32



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|                                                                             |  |               |       |   |              |   |      |  
|---------------------------------------------------------------------------- |  | ------------- | ----- | - | ------------ | - | ---- | -
|                                                                             |  | Years Ended   |      
|                                                                             |  |               |      
|                                                                             |  | December 29,  |       |   | December 28, |  
|                                                                             |  | 2001          |       |   | 2002         |  
|                                                                             |  |               |       |   |              |  
|                                                                             |  | (In millions) |      
|Stock compensation expense                                                   |  | $             | (0.7  | ) |              | $ | (0.6 | )
|Amortization related to DSS restricted shares                                |  | $             | (8.9  | ) |              | $ | (1.0 | )
|Costs of transitional services and non-recurring merger-related
    expenses |  | $             | (69.8 | ) |              | $ |     |  



| |                     
| | --------------------
| | Restructuring Charge





| |                   
| | ------------------
| | Stock 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.                                                                                                                                                           





33



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|                                       |  |               |     |  |              |   |     | 
|-------------------------------------- |  | ------------- | --- |  | ------------ | - | --- | 
|                                       |  | Years Ended   |    
|                                       |  |               |    
|                                       |  | December 29,  |     |  | December 28, |  
|                                       |  | 2001          |     |  | 2002         |  
|                                       |  |               |     |  |              |  
|                                       |  | (In millions) |    
|Cost of revenue                        |  | $             | 0.5 |  |              | $ | 0.3 | 
|Research and development               |  |               | 2.9 |  |              |   | 2.4 | 
|Selling, general and administrative    |  |               | 2.7 |  |              |   | 1.5 | 
|                                       |  |               |     |  |              |  
|Total stock-based compensation expense |  | $             | 6.1 |  |              | $ | 4.2 | 
|                                       |  |               |     |  |              |  



|                                                    |  |               |      |  |              |   |     | 
|--------------------------------------------------- |  | ------------- | ---- |  | ------------ | - | --- | 
|                                                    |  | Years Ended   |     
|                                                    |  |               |     
|                                                    |  | December 29,  |      |  | December 28, |  
|                                                    |  | 2001          |      |  | 2002         |  
|                                                    |  |               |      |  |              |  
|                                                    |  | (In millions) |     
|Cost of revenue                                     |  | $             | 3.0  |  |              | $ | 0.3 | 
|Research and development                            |  |               | 25.0 |  |              |   | 2.8 | 
|Selling, general and administrative                 |  |               | 8.9  |  |              |   | 1.0 | 
|                                                    |  |               |      |  |              |  
|Total amortization related to DSS restricted shares |  | $             | 36.9 |  |              | $ | 4.1 | 
|                                                    |  |               |      |  |              |  

Amortization of Goodwill and Other Intangible Assets.










34



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|                                                                              |                                                                                                         |              |          |         |              |   |          |   | 
|----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------ | -------- | ------- | ------------ | - | -------- | - | 
|                                                                              |                                                                                                         | Years Ended  |         
|                                                                              |                                                                                                         |              |         
|                                                                              |                                                                                                         | December 29, |          |         | December 28, |  
|                                                                              |                                                                                                         | 2001         |          |         | 2002         |  
|                                                                              |                                                                                                         |              |          |         |              |  
|                                                                              |                                                                                                         | Restated(1)  |          |         |             
|Loss from continuing operations  as reported                                 |                                                                                                         | $            | (566,710 | )       |              | $ | (260,566 | )
|Adjustments:                                                                  |                                                                                                         |              |          |         |              |   |          |  
|                                                                              | Amortization of goodwill                                                                                |              |          | 102,573 |              |   |          |  | 
|                                                                              | Amortization of acquired workforce intangibles previously
    classified as purchased intangible assets |              |          | 12,472  |              |   |          |  | 
|                                                                              |                                                                                                         |              |          |         |              |  
|                                                                              | Net adjustments                                                                                         |              |          | 115,045 |              |   |          |  | 
|                                                                              |                                                                                                         |              |          |         |              |  
|Loss from continuing operations  adjusted                                    |                                                                                                         | $            | (451,665 | )       |              | $ | (260,566 | )
|                                                                              |                                                                                                         |              |          |         |              |  
|Basic and diluted loss per share from continuing
    operations  as reported |                                                                                                         | $            | (2.74    | )       |              | $ | (1.09    | )
|Basic and diluted loss per share from continuing
    operations  adjusted    |                                                                                                         | $            | (2.18    | )       |              | $ | (1.09    | )

|                                                   |                                                                                                         |              |          |         |              |   |          |   | 
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------ | -------- | ------- | ------------ | - | -------- | - | 
|                                                   |                                                                                                         | Years Ended  |         
|                                                   |                                                                                                         |              |         
|                                                   |                                                                                                         | December 29, |          |         | December 28, |  
|                                                   |                                                                                                         | 2001         |          |         | 2002         |  
|                                                   |                                                                                                         |              |          |         |              |  
|                                                   |                                                                                                         | Restated(1)  |          |         |             
|Net loss  as reported                             |                                                                                                         | $            | (614,929 | )       |              | $ | (334,067 | )
|Adjustments:                                       |                                                                                                         |              |          |         |              |   |          |  
|                                                   | Amortization of goodwill                                                                                |              |          | 109,310 |              |   |          |  | 
|                                                   | Amortization of acquired workforce intangibles previously
    classified as purchased intangible assets |              |          | 12,616  |              |   |          |  | 
|                                                   |                                                                                                         |              |          |         |              |  
|Net adjustments                                    |                                                                                                         |              | 121,926  |         |              |   |         |  
|                                                   |                                                                                                         |              |          |         |              |  
|Net loss  adjusted                                |                                                                                                         | $            | (493,003 | )       |              | $ | (334,067 | )
|                                                   |                                                                                                         |              |          |         |              |  
|Basic and diluted net loss per share  as reported |                                                                                                         | $            | (2.97    | )       |              | $ | (1.40    | )
|Basic and diluted net loss per share  adjusted    |                                                                                                         | $            | (2.38    | )       |              | $ | (1.40    | )






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

Purchased In-process Research and Development
(IPR&D).


Interest Expense.


35



---



##### Table of Contents





Interest Income.




Other Gain (Loss).


Provision for Income Taxes.






Loss from Discontinued Operations.


36



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##### Table of Contents







|                                     |  |              |       |   |              |   |       |  
|------------------------------------ |  | ------------ | ----- | - | ------------ | - | ----- | -
|                                     |  | December 29, |       |   | December 28, |  
|                                     |  | 2001         |       |   | 2002         |  
|                                     |  |              |       |   |              |  
|Revenue from discontinued operations |  | $            | 31.5  |   |              | $ | 20.4  |  
|Loss from discontinued operations    |  | $            | (48.2 | ) |              | $ | (73.5 | )



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



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











37



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Contractual Obligations




|                                                                                       |  |       |           |           |        |   |         |           |           |           |         |         |  |           |        |  |  |   |         | 
|-------------------------------------------------------------------------------------- |  | ----- | --------- | --------- | ------ | - | ------- | --------- | --------- | --------- | ------- | ------- |  | --------- | ------ |  |  | - | ------- | 
|                                                                                       |  |       |           |           |        |   |         |           |           | More than |        
|                                                                                       |  |       |           | Less than |        |   |         |           | 3-5 Years |           |         | 5 Years | 
|                                                                                       |  | Total |           |           | 1 Year |   |         | 1-3 Years |           |           | (1)(3)  |         |  | (1)(2)(3) |       
|                                                                                       |  |       |           |           |        |   |         |           |           |           |         |         |  |           |       
|Long-term Debt                                                                         |  | $     | 412,654   |           |        | $ | 62,915  |           |           | $         | 54,451  |         |  | $         | 21,561 |  |  | $ | 273,727 | 
|Capital Lease Obligations                                                              |  |       | 20,192    |           |        |   | 14,122  |           |           |           | 6,070   |         |  |           |       |  |  |   |        | 
|Operating Leases(4)                                                                    |  |       | 308,825   |           |        |   | 35,550  |           |           |           | 63,431  |         |  |           | 61,948 |  |  |   | 147,896 | 
|Purchase Obligations(5)                                                                |  |       | 723,223   |           |        |   | 699,778 |           |           |           | 11,323  |         |  |           | 12,122 |  |  |   |        | 
|Other Long-term Liabilities Reflected on the Companys
    Balance Sheet under GAAP(6) |  |       | 390       |           |        |   | 340     |           |           |           | 50      |         |  |           |       |  |  |   |        | 
|Total                                                                                  |  | $     | 1,465,284 |           |        | $ | 812,705 |           |           | $         | 135,325 |         |  | $         | 95,631 |  |  | $ | 421,623 | 
|                                                                                       |  |       |           |           |        |   |         |           |           |           |         |         |  |           |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | Includes $15 million of the $30 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 April 2013; the borrowing under
    this facility will bear interest at LIBOR plus 50 basis
    points (subject to adjustment to 60 basis points).                                                                                                                                                                                                                                                                                               
|   
|(3) | Does not include $67 million which we are obligated to
    contribute to our China subsidiary to allow drawdowns under the
    facilities described under footnotes (1) and (2).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(4) | Includes future minimum annual rental commitments, including
    amounts accrued as restructuring liabilities as of
    December 27, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(5) | 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.
|   
|(6) | Excludes operating leases accrued as restructuring liabilities
    as of December 27, 2003. We have also excluded
    $135.6 million relating to our tax sharing indemnification
    agreement with Quantum Corporation as the time period within
    which the obligations may become due and owing is not specified.                                                                                                                                                                                                                                                                                                                                                      



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









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SUPPLEMENTAL FINANCIAL INFORMATION


Unaudited Quarterly Results of Operations


|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |             |  |   |           |             |  |   |           |             | 
|--------------------------------------------------------------- | ----------------------- | ------------------ | --------- | ----------- | -------- | -------------------------------------------------- | -------- | ------------- | - | - | ------------ | ----------- | - | --------- | --------- | ----------- | -------- | - | ------- | ------------- |  | - | ------------ | ----------- |  | - | --------- | ----------- |  | - | --------- | ----------- | 
|                                                                |                         | Three Months Ended |          
|                                                                |                         |                    |          
|                                                                |                         | March 30,          |           |             | June 29, |                                                    |          | September 28, |   |   | December 28, |             |   | March 29, |           |             | June 28, |   |         | September 27, |  |   | December 27, |            
|                                                                |                         | 2002               |           |             | 2002     |                                                    |          | 2002          |   |   | 2002         |             |   | 2003      |           |             | 2003     |   |         | 2003          |  |   | 2003         |            
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|                                                                |                         |                    |           |             |          | (In thousands, except share and per share amounts) |          |               |   |   |             
|Revenue                                                         |                         | $                  | 1,036,100 |             |          | $                                                  | 885,350  |               |   | $ | 819,716      |             |   | $         | 1,038,348 |             |          | $ | 938,889 |               |  | $ | 910,903      |             |  | $ | 1,065,531 |             |  | $ | 1,171,120 |            
|Gross profit                                                    |                         |                    | 113,766   |             |          |                                                    | 59,390   |               |   |   | 57,529       |             |   |           | 166,730   |             |          |   | 171,847 |               |  |   | 149,246      |             |  |   | 182,425   |             |  |   | 197,535   |            
|Income (loss) from continuing operations                        |                         |                    | (55,377   | )           |          |                                                    | (103,303 | )             |   |   | (105,470     | )           |   |           | 3,584     |             |          |   | 27,408  |               |  |   | 6,196        |             |  |   | 29,887    |             |  |   | 36,969    |            
|Income (loss) from discontinued operations                      |                         |                    | (9,661    | )           |          |                                                    | (5,699   | )             |   |   | (58,141      | )           |   |           |          |             |          |   |        |               |  |   |             |             |  |   |          |             |  |   | 2,211     |            
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|Net income (loss)                                               |                         | $                  | (65,038   | )           |          | $                                                  | (109,002 | )             |   | $ | (163,611     | )           |   | $         | 3,584     |             |          | $ | 27,408  |               |  | $ | 6,196        |             |  | $ | 29,887    |             |  | $ | 39,180    |            
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|Net income (loss) per share  basic Continuing
    operations   |                         | $                  | (0.23     | )           |          | $                                                  | (0.43    | )             |   | $ | (0.44        | )           |   | $         | 0.01      |             |          | $ | 0.11    |               |  | $ | 0.03         |             |  | $ | 0.12      |             |  | $ | 0.15      |            
|                                                                | Discontinued operations |                    |           | (0.04       | )        |                                                    |          | (0.03         | ) |   |              | (0.24       | ) |           |           |            |          |   |         |              |  |   |              |            |  |   |           |            |  |   |           | 0.01        | 
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|                                                                | Total                   |                    | $         | (0.27       | )        |                                                    | $        | (0.46         | ) |   | $            | (0.68       | ) |           | $         | 0.01        |          |   | $       | 0.11          |  |   | $            | 0.03        |  |   | $         | 0.12        |  |   | $         | 0.16        | 
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|Net income (loss) per share  diluted Continuing
    operations |                         | $                  | (0.23     | )           |          | $                                                  | (0.43    | )             |   | $ | (0.44        | )           |   | $         | 0.01      |             |          | $ | 0.11    |               |  | $ | 0.03         |             |  | $ | 0.12      |             |  | $ | 0.14      |            
|                                                                | Discontinued operations |                    |           | (0.04       | )        |                                                    |          | (0.03         | ) |   |              | (0.24       | ) |           |           |            |          |   |         |              |  |   |              |            |  |   |           |            |  |   |           | 0.01        | 
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|                                                                | Total                   |                    | $         | (0.27       | )        |                                                    | $        | (0.46         | ) |   | $            | (0.68       | ) |           | $         | 0.01        |          |   | $       | 0.11          |  |   | $            | 0.03        |  |   | $         | 0.12        |  |   | $         | 0.15        | 
|                                                                |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |            
|Shares used in per share calculation:                           |                         |                    |           |             |          |                                                    |          |               |   |   |              |             |   |           |           |             |          |   |         |               |  |   |              |             |  |   |           |             |  |   |           |            
|                                                                | Basic                   |                    |           | 236,956,653 |          |                                                    |          | 238,803,423   |   |   |              | 240,177,574 |   |           |           | 241,344,157 |          |   |         | 243,634,139   |  |   |              | 241,120,075 |  |   |           | 241,618,320 |  |   |           | 245,439,935 | 
|                                                                | Diluted                 |                    |           | 236,956,653 |          |                                                    |          | 238,803,423   |   |   |              | 240,177,574 |   |           |           | 243,166,368 |          |   |         | 246,866,117   |  |   |              | 245,259,831 |  |   |           | 252,343,682 |  |   |           | 256,714,105 | 

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CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE




| |                                                                    
| | -------------------------------------------------------------------
| | We have a history of losses and may not maintain
    profitability.





| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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; 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.



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| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | 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;                                                                                                                              
|
| |  | the availability, and efficient use, of manufacturing capacity;                                                                                                                                                      
|
| |  | 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.                                                                                                                                   





| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



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| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not expand into new hard drive market segments,
    and maintain our presence in the hard disk drive market, our
    revenues will suffer.



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| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, or effectively integrate parts from
    different suppliers, and these component shortages or
    integration problems could result in delays of product shipments
    and damage our business and operating results.



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| |                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to acquire needed additional
    manufacturing capacity, or MKE does not meet our manufacturing
    requirements or a disaster occurs at one of our or MKEs
    plants, our growth will be adversely impacted and our business,
    financial condition and operating results could suffer.







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| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have asserted claims against Quantum, and Quantum has
    asserted claims against us, for payment under agreements entered
    into in connection with our acquisition of the Quantum HDD
    business. In the event these claims are not resolved favorably
    in the aggregate, our business, financial condition, operating
    results, cash flows and liquidity could be harmed.





| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





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



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









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| |                                                                           
| | --------------------------------------------------------------------------
| | 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;                                                                                                                                             

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| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | difficulty in obtaining export licenses and other trade barriers;            
|
| |  | seasonality;                                                                 
|
| |  | increased transportation/shipping costs; and                                 
|
| |  | credit and access to capital issues faced by our international
    customers.





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





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



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





| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 segments;
|
| |  | 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.                                                                 



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








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

Derivatives




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Investments






|                      |  |          |        |    |          |   |        |              |  |   |        |    |  |        |        |  |         |   |        |         |  |   |        |   |  |   |        |  
|--------------------- |  | -------- | ------ | -- | -------- | - | ------ | ------------ |  | - | ------ | -- |  | ------ | ------ |  | ------- | - | ------ | ------- |  | - | ------ | - |  | - | ------ | -
|                      |  |          |        |    |          |   |        | Fair Value   |  |   |        |    |  |        |       
|                      |  |          |        |    |          |   |        | as of        |  |   |        |    |  |        |       
|                      |  |          |        |    |          |   |        | December 27, |  |   |        |    |  |        |       
|                      |  |          |        |    |          |   |        | 2003         |  |   |        |    |  |        |       
|                      |  | +150 bps |        |    | +100 bps |   |        | +50 bps      |  |   | ($000) |    |  | -50bps |        |  | -100bps |   |        | -150bps | 
|                      |  |          |        |    |          |   |        |              |  |   |        |    |  |        |        |  |         |   |        |         | 
|Financial Instruments |  | $        | 85,760 |    |          | $ | 86,129 |              |  | $ | 86,494 |    |  | $      | 86,880 |  |         | $ | 87,261 |         |  | $ | 87,644 |   |  | $ | 87,945 |  
|% Change              |  |          | (1.29  | )% |          |   | (0.86  | )%           |  |   | (0.44  | )% |  |        |        |  |         |   | 0.44   | %       |  |   | 0.88   | % |  |   | 1.23   | %



|                             |  |                                |       |              |  |                               |        |    |  |   |        |    |  |   |        |  |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------- |  | ------------------------------ | ----- | ------------ |  | ----------------------------- | ------ | -- |  | - | ------ | -- |  | - | ------ |  |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                             |  | Valuation of Security Given X% |       |              |  |                               |        |    |  |   |       
|                             |  | Decrease in the Security Price |       |              |  |                               |        |    |  |   |       
|                             |  |                                |       |              |  |                               |        |    |  |   |       
|                             |  |                                |       | Fair Value00 |  |                               | 0)     |    |  |   |        |   
|                             |  |                                |       | as of        |  |                               |        |    |  |   |       
|                             |  |                                |       | December     |  |                               |        |    |  |   |       
|                             |  |                                |       | 27,          |  |                               |        |    |  |   |       
|                             |  |                                |       | 2003         |  |                               |        |    |  |   |       
|                             |  |                                |       | ($           |  |                               |        |    |  |   |       
|                             |  |                                |       |              |  |                               |        |    |  |   |       
|                             |  |                                |       |              |  | % Increase in the Security    |       
|                             |  |                                |       |              |  | ValuationPofrSecurityiGivence |       
|                             |  |                                |       |              |  | X                             |       
|Corporate equity investments |  | $                              | 7,768 |              |  | $                             | 11,652 |    |  | $ | 13,206 |    |  | $ | 15,536 |  |  | $ | 17,866 |   |  | $ | 19,420 |   |  | $ | 23,304 |  
|% Change                     |  |                                | (50   | )%           |  |                               | (25    | )% |  |   | (15    | )% |  |   |        |  |  |   | 15     | % |  |   | 25     | % |  |   | 50     | %

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




INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                                                                                                                               |  |      |     | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | --- | 
|                                                                                                                                                                                                                               |  | Page |    
|                                                                                                                                                                                                                               |  |      |    
|Consolidated Financial Statements of Maxtor Corporation
    (Restated)                                                                                                                                                         |  |      |     | 
|Consolidated Balance Sheets  December 28, 2002
    and December 27, 2003                                                                                                                                                      |  |      | 54  | 
|Consolidated Statements of Operations  Fiscal years
    ended December 29, 2001, December 28, 2002 and
    December  27, 2003                                                                                                 |  |      | 55  | 
|Consolidated Statements of Stockholders Equity 
    Fiscal years ended December 29, 2001, December 28,
    2002 and December 27, 2003                                                                                        |  |      | 56  | 
|Consolidated Statements of Cash Flows  Fiscal years
    ended December 29, 2001, December 28, 2002 and
    December  27, 2003                                                                                                 |  |      | 57  | 
|Notes to Consolidated Financial Statements                                                                                                                                                                                     |  |      | 58  | 
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                        |  |      | 99  | 
|Financial Statement Schedules:                                                                                                                                                                                                 |  |      |     | 
|The following consolidated financial statement schedule of
    Maxtor Corporation is filed as part of this Report and should be
    read in conjunction with the Consolidated Financial Statements
    of Maxtor Corporation:  |  |      |     | 
|Schedule II Valuation and Qualifying Accounts                                                                                                                                                                                  |  |      | 103 | 
|Schedules not listed above have been omitted since they are not
    applicable or are not required or the information required to be
    set therein is included in the Consolidated Financial Statements
    or notes thereto |  |      |     | 

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MAXTOR CORPORATION







CONSOLIDATED BALANCE SHEETS


|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |         |           | 
|------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ------- | ------------ |  | ---------- | ------- | --------- | 
|                                                                                            |                                                                                                                                                                                                                                                       | December 28,                               |            |         | December 27, | 
|                                                                                            |                                                                                                                                                                                                                                                       | 2002                                       |            |         | 2003         | 
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Restated                                   |            |         | Restated     | 
|                                                                                            |                                                                                                                                                                                                                                                       | (In thousands, except share and            |           
|                                                                                            |                                                                                                                                                                                                                                                       | per share amounts)                         |           
|ASSETS                                                                                     
|Current assets:                                                                             |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |        
|                                                                                            | Cash and cash equivalents                                                                                                                                                                                                                             |                                            | $          | 306,444 |              |  | $          | 530,816 |          
|                                                                                            | Restricted cash                                                                                                                                                                                                                                       |                                            |            | 56,747  |              |  |            | 37,154  |          
|                                                                                            | Marketable securities                                                                                                                                                                                                                                 |                                            |            | 87,507  |              |  |            | 44,543  |          
|                                                                                            | Restricted marketable securities                                                                                                                                                                                                                      |                                            |            |        |              |  |            | 42,337  |          
|                                                                                            | Accounts receivable, net of allowance of doubtful accounts of
    $18,320 at December 28, 2002 and $11,220 at
    December 27, 2003                                                                                                                   |                                            |            | 324,875 |              |  |            | 540,943 |          
|                                                                                            | Other receivables                                                                                                                                                                                                                                     |                                            |            | 38,789  |              |  |            | 37,964  |          
|                                                                                            | Inventories                                                                                                                                                                                                                                           |                                            |            | 175,545 |              |  |            | 218,011 |          
|                                                                                            | Prepaid expenses and other                                                                                                                                                                                                                            |                                            |            | 33,438  |              |  |            | 38,301  |          
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Total current assets                       |            |         | 1,023,345    |  |            |         | 1,490,069 | 
|Property, plant and equipment, net                                                          |                                                                                                                                                                                                                                                       |                                            | 364,842    |         |              |  | 342,679    |        
|Goodwill                                                                                    |                                                                                                                                                                                                                                                       |                                            | 635,175    |         |              |  | 635,175    |        
|Other intangible assets, net                                                                |                                                                                                                                                                                                                                                       |                                            | 146,898    |         |              |  | 61,619     |        
|Other assets                                                                                |                                                                                                                                                                                                                                                       |                                            | 11,798     |         |              |  | 13,908     |        
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Total assets                               |            | $       | 2,182,058    |  |            | $       | 2,543,450 | 
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                       
|Current liabilities:                                                                        |                                                                                                                                                                                                                                                       |                                            |            |         |              |  |            |        
|                                                                                            | Short-term borrowings, including current portion of long-term
    debt                                                                                                                                                                                |                                            | $          | 41,042  |              |  | $          | 77,037  |          
|                                                                                            | Accounts payable                                                                                                                                                                                                                                      |                                            |            | 642,206 |              |  |            | 730,056 |          
|                                                                                            | Accrued and other liabilities                                                                                                                                                                                                                         |                                            |            | 471,750 |              |  |            | 454,388 |          
|                                                                                            | Liabilities of discontinued operations                                                                                                                                                                                                                |                                            |            | 11,646  |              |  |            | 1,487   |          
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Total current liabilities                  |            |         | 1,166,644    |  |            |         | 1,262,968 | 
|Long-term debt, net of current portion                                                      |                                                                                                                                                                                                                                                       |                                            | 206,343    |         |              |  | 355,809    |        
|Other liabilities                                                                           |                                                                                                                                                                                                                                                       |                                            | 185,281    |         |              |  | 172,695    |        
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Total liabilities                          |            |         | 1,558,268    |  |            |         | 1,791,472 | 
|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; 247,507,244 shares issued and
    242,507,244 shares outstanding at December 28, 2002
    and 259,246,819 shares issued and 246,001,081 shares
    outstanding at December 27, 2003 |                                            |            | 2,475   |              |  |            | 2,592   |          
|Additional paid-in capital                                                                  |                                                                                                                                                                                                                                                       |                                            | 2,349,253  |         |              |  | 2,410,082  |        
|Deferred stock-based compensation                                                           |                                                                                                                                                                                                                                                       |                                            | (1,193     | )       |              |  | (110       | )      
|Accumulated deficit                                                                         |                                                                                                                                                                                                                                                       |                                            | (1,709,122 | )       |              |  | (1,606,451 | )      
|Cumulative other comprehensive income                                                       |                                                                                                                                                                                                                                                       |                                            | 2,377      |         |              |  | 10,804     |        
|Treasury stock (5,000,000 and 13,245,738 shares in 2002 and
    2003, respectively) at cost |                                                                                                                                                                                                                                                       |                                            | (20,000    | )       |              |  | (64,939    | )      
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Total stockholders equity                 |            |         | 623,790      |  |            |         | 751,978   | 
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 
|                                                                                            |                                                                                                                                                                                                                                                       | Total liabilities and stockholders equity |            | $       | 2,182,058    |  |            | $       | 2,543,450 | 
|                                                                                            |                                                                                                                                                                                                                                                       |                                            |            |         |              | 



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MAXTOR CORPORATION







CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                             |                                                      |                                                    |           |         |              |   |           |              |             |   |           |         |             | 
|------------------------------------------------------------ | ---------------------------------------------------- | -------------------------------------------------- | --------- | ------- | ------------ | - | --------- | ------------ | ----------- | - | --------- | ------- | ----------- | 
|                                                             |                                                      | Years Ended                                        |          
|                                                             |                                                      |                                                    |          
|                                                             |                                                      | December 29,                                       |           |         | December 28, |   |           | December 27, |            
|                                                             |                                                      | 2001                                               |           |         | 2002         |   |           | 2003         |            
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|                                                             |                                                      | Restated                                           |           |         |              |   |          
|                                                             |                                                      | (In thousands, except share and per share amounts) |          
|Net revenues                                                 |                                                      | $                                                  | 3,765,559 |         |              | $ | 3,779,514 |              |             | $ | 4,086,443 |        
|Cost of revenues                                             |                                                      |                                                    | 3,403,051 |         |              |   | 3,382,099 |              |             |   | 3,385,390 |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|                                                             | Gross profit                                         |                                                    |           | 362,508 |              |   |           | 397,415      |             |   |           | 701,053 |            
|Operating expenses:                                          |                                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|                                                             | Research and development                             |                                                    |           | 411,189 |              |   |           | 401,014      |             |   |           | 354,050 |            
|                                                             | Selling, general and administrative                  |                                                    |           | 232,028 |              |   |           | 148,486      |             |   |           | 131,703 |            
|                                                             | Amortization of goodwill and other intangible assets |                                                    |           | 176,358 |              |   |           | 82,248       |             |   |           | 85,279  |            
|                                                             | Purchased in-process research and development        |                                                    |           | 95,190  |              |   |           |             |             |   |           |        |            
|                                                             | Restructuring charge                                 |                                                    |           |        |              |   |           | 9,495        |             |   |           |        |            
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|                                                             |                                                      | Total operating expenses                           |           |         | 914,765      |   |           |              | 641,243     |   |           |         | 571,032     | 
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Income (loss) from operations                                |                                                      |                                                    | (552,257  | )       |              |   | (243,828  | )            |             |   | 130,021   |        
|Interest expense                                             |                                                      |                                                    | (25,190   | )       |              |   | (26,945   | )            |             |   | (30,604   | )      
|Interest income                                              |                                                      |                                                    | 20,306    |         |              |   | 8,012     |              |             |   | 5,160     |        
|Other gain (loss)                                            |                                                      |                                                    | (6,187    | )       |              |   | 4,370     |              |             |   | (613      | )      
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Income (loss) from continuing operations before income taxes |                                                      |                                                    | (563,328  | )       |              |   | (258,391  | )            |             |   | 103,964   |        
|Provision for income taxes                                   |                                                      |                                                    | 3,382     |         |              |   | 2,175     |              |             |   | 3,504     |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Income (loss) from continuing operations                     |                                                      |                                                    | (566,710  | )       |              |   | (260,566  | )            |             |   | 100,460   |        
|Income (loss) from discontinued operations                   |                                                      |                                                    | (48,219   | )       |              |   | (73,501   | )            |             |   | 2,211     |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Net income (loss)                                            |                                                      | $                                                  | (614,929  | )       |              | $ | (334,067  | )            |             | $ | 102,671   |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Net income (loss) per share  basic                          |                                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|Continuing operations                                        |                                                      | $                                                  | (2.74     | )       |              | $ | (1.09     | )            |             | $ | 0.41      |        
|Discontinued operations                                      |                                                      | $                                                  | (0.23     | )       |              | $ | (0.31     | )            |             | $ | 0.01      |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Total                                                        |                                                      | $                                                  | (2.97     | )       |              | $ | (1.40     | )            |             | $ | 0.42      |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Net income (loss) per share  diluted                        |                                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|Continuing operations                                        |                                                      | $                                                  | (2.74     | )       |              | $ | (1.09     | )            |             | $ | 0.40      |        
|Discontinued operations                                      |                                                      | $                                                  | (0.23     | )       |              | $ | (0.31     | )            |             | $ | 0.01      |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Total                                                        |                                                      | $                                                  | (2.97     | )       |              | $ | (1.40     | )            |             | $ | 0.41      |        
|                                                             |                                                      |                                                    |           |         |              |   |           |              |            
|Shares used in per share calculation                         |                                                      |                                                    |           |         |              |   |           |              |             |   |           |        
|                                                             |                                                      |  basic                                            |           |         | 206,911,952  |   |           |              | 239,474,179 |   |           |         | 243,022,694 | 
|                                                             |                                                      |  diluted                                          |           |         | 206,911,952  |   |           |              | 239,474,179 |   |           |         | 251,135,683 | 



55



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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 30, 2000                                              |                                                     |                                      | 116,205,270 |   |            | $ | 1,162 |             |  | $          | 1,059,899    |   |       | $             |       |   |          | $     | (760,126   | )             |               | $ | 2,803  |        |   | $      |        |   |  | $ | 303,738   |          |   |  |   |         
|                                                                        | Net loss                                            |                                      |             |  |            |   |       |            |  |            |              |  |       |               |        |  |          |       |            | (614,929      | )             |   |        |       |   |        |         |  |  |   |           | (614,929 | ) |  | $ | (614,929 | )       
|                                                                        | Unrealized gain on investments in equity securities |                                      |             |  |            |   |       |            |  |            |              |  |       |               |        |  |          |       |            |              |               |   |        | 1,408  |   |        |         |  |  |   |           | 1,408    |   |  |   | 1,408    |         
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|                                                                        |                                                     | Comprehensive loss                   |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |         |   |  |   |           |          |   |  |   | $        | (613,521 | )
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|Issuance of stock under stock option plan and related benefit
    plans |                                                     |                                      | 4,742,053   |   |            |   | 47    |             |  |            | 21,510       |   |       |               |       |   |          |       |           |               |               |   |       |        |   |        |        |   |  |   | 21,557    |          |   |  |   |         
|Issuance of stock relating to Quantum HDD acquisition                   |                                                     |                                      | 121,030,472 |   |            |   | 1,211 |             |  |            | 1,232,601    |   |       |               |       |   |          |       |           |               |               |   |       |        |   |        |        |   |  |   | 1,233,812 |          |   |  |   |         
|Deferred compensation relating to Quantum HDD acquisition               |                                                     |                                      |            |   |            |   |      |             |  |            | 6,785        |   |       |               | (6,785 | ) |          |       |           |               |               |   |       |        |   |        |        |   |  |   |          |          |   |  |   |         
|Stock-based compensation                                                |                                                     |                                      |            |   |            |   |      |             |  |            | 3,090        |   |       |               | 2,976  |   |          |       |           |               |               |   |       |        |   |        |        |   |  |   | 6,066     |          |   |  |   |         
|Treasury shares repurchased at cost                                     |                                                     |                                      |            |   |            |   |      |             |  |            |             |   |       |               |       |   |          |       |           |               |               |   |       |        |   |        | (20,000 | ) |  |   | (20,000   | )        |   |  |   |         
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|Balance, December 29, 2001                                              |                                                     |                                      | 241,977,795 |   |            |   | 2,420 |             |  |            | 2,323,885    |   |       |               | (3,809 | ) |          |       | (1,375,055 | )             |               |   | 4,211  |        |   |        | (20,000 | ) |  |   | 931,652   |          |   |  |   |         
|                                                                        | Net loss                                            |                                      |             |  |            |   |       |            |  |            |              |  |       |               |        |  |          |       |            | (334,067      | )             |   |        |       |   |        |         |  |  |   |           | (334,067 | ) |  | $ | (334,067 | )       
|                                                                        | Unrealized loss on investments in equity securities |                                      |             |  |            |   |       |            |  |            |              |  |       |               |        |  |          |       |            |              |               |   |        | (1,834 | ) |        |         |  |  |   |           | (1,834   | ) |  |   | (1,834   | )       
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|                                                                        |                                                     | Comprehensive loss                   |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |         |   |  |   |           |          |   |  |   | $        | (335,901 | )
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|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 | ) |          |       | (1,709,122 | )             |               |   | 2,377  |        |   |        | (20,000 | ) |  |   | 623,790   |          |   |  |   |         
|                                                                        | Net income                                          |                                      |             |  |            |   |       |            |  |            |              |  |       |               |        |  |          |       |            | 102,671       |               |   |        |       |   |        |         |  |  |   |           | 102,671  |   |  | $ | 102,671  |         
|                                                                        | Unrealized gain on investments in equity securities |                                      |             |  |            |   |       |            |  |            |              |  |       |               |        |  |          |       |            |              |               |   |        | 8,427  |   |        |         |  |  |   |           | 8,427    |   |  |   | 8,427    |         
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|                                                                        |                                                     | Comprehensive income                 |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |         |   |  |   |           |          |   |  |   | $        | 111,098  |  
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        
|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   | ) |          | $     | (1,606,451 | )             |               | $ | 10,804 |        |   | $      | (64,939 | ) |  | $ | 751,978   |          |   |  |   |         
|                                                                        |                                                     |                                      |             |   |            |   |       |             |  |            |              |   |       |               |        |   |          |       |            |               |               |   |        |        |   |        |        



56



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MAXTOR CORPORATION







CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |         |          |          |  
|-------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------ | --------- | ------------ | ------- | -------- | ------------ | ------- | ------- | -------- | ------- | -------- | -------- | -
|                                                                                                                                 |                                                                                     | Years Ended                       |                                                                         
|                                                                                                                                 |                                                                                     |                                   |                                                                         
|                                                                                                                                 |                                                                                     | December 29,                      |                                                                          |           | December 28, |         |          | December 27, |        
|                                                                                                                                 |                                                                                     | 2001                              |                                                                          |           | 2002         |         |          | 2003         |        
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|                                                                                                                                 |                                                                                     | Restated                          |                                                                          |           |              |         |         
|Cash Flows from Operating Activities:                                                                                            |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |        
|Net income (loss) from continuing operations                                                                                     |                                                                                     | $                                 | (566,710                                                                 | )         |              | $       | (260,566 | )            |         | $       | 100,460  |        
|Adjustments to reconcile net income (loss) from continuing
    operations to net cash provided by (used in) operating activities |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |        
|                                                                                                                                 | Depreciation and amortization                                                       |                                   |                                                                          | 125,610   |              |         |          | 155,829      |         |         |          | 156,639 |         
|                                                                                                                                 | Amortization of goodwill and other intangible assets                                |                                   |                                                                          | 176,358   |              |         |          | 82,248       |         |         |          | 85,279  |         
|                                                                                                                                 | Amortization of deferred compensation related to Quantum DSS
    restricted shares  |                                   |                                                                          | 36,901    |              |         |          | 4,103        |         |         |          |        |         
|                                                                                                                                 | Purchased in-process research and development                                       |                                   |                                                                          | 95,190    |              |         |          |             |         |         |          |        |         
|                                                                                                                                 | Stock-based compensation expense                                                    |                                   |                                                                          | 6,066     |              |         |          | 5,562        |         |         |          | 923     |         
|                                                                                                                                 | Restructuring charge                                                                |                                   |                                                                          |          |              |         |          | 9,495        |         |         |          |        |         
|                                                                                                                                 | Loss on sale of property, plant and equipment and other assets                      |                                   |                                                                          | 2,478     |              |         |          | 2,568        |         |         |          | 3,235   |         
|                                                                                                                                 | Gain on retirement of bond                                                          |                                   |                                                                          | (1,280    | )            |         |          | (2,832       | )       |         |          | (163    | )       
|                                                                                                                                 | Loss on redemption of pro rata portion of Quantum
    Corporations bond            |                                   |                                                                          |          |              |         |          |             |         |         |          | 951     |         
|                                                                                                                                 | Realized loss (gain) on investment                                                  |                                   |                                                                          | 6,667     |              |         |          | (1,307       | )       |         |          |        |         
|                                                                                                                                 | Change in assets and liabilities:                                                   |                                   |                                                                          |           |              |         |          |              |         |         |          |         |         
|                                                                                                                                 |                                                                                     | Accounts receivable               |                                                                          |           | 176,366      |         |          |              | 19,783  |         |          |         | (216,068 | )       
|                                                                                                                                 |                                                                                     | Other receivables                 |                                                                          |           | (22,439      | )       |          |              | (2,400  | )       |          |         | 825      |         
|                                                                                                                                 |                                                                                     | Inventories                       |                                                                          |           | 121,281      |         |          |              | 5,587   |         |          |         | (42,466  | )       
|                                                                                                                                 |                                                                                     | Prepaid expenses and other assets |                                                                          |           | 76,626       |         |          |              | 10,093  |         |          |         | 11,358   |         
|                                                                                                                                 |                                                                                     | Accounts payable                  |                                                                          |           | (94,046      | )       |          |              | 45,336  |         |          |         | 89,040   |         
|                                                                                                                                 |                                                                                     | Accrued and other liabilities     |                                                                          |           | (60,745      | )       |          |              | (70,711 | )       |          |         | (29,948  | )       
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by operating activities from continuing
    operations |           |              | 78,323  |          |              |         | 2,788   |          |         |          | 160,065  |  
|                                                                                                                                 |                                                                                     |                                   | Net cash used in discontinued operations                                 |           |              | (42,679 | )        |              |         | (31,578 | )        |         |          | (7,948   | )
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by (used in) operating activities                      |           |              | 35,644  |          |              |         | (28,790 | )        |         |          | 152,117  |  
|Cash Flows from Investing Activities:                                                                                            |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |        
|Proceeds from sale of property, plant and equipment                                                                              |                                                                                     |                                   | 289                                                                      |           |              |         | 277      |              |         |         | 348      |        
|Purchase of property, plant and equipment                                                                                        |                                                                                     |                                   | (115,067                                                                 | )         |              |         | (139,080 | )            |         |         | (131,876 | )      
|Cash acquired from acquisition, net of merger related expenses                                                                   |                                                                                     |                                   | 374,692                                                                  |           |              |         |         |              |         |         |         |        
|Restricted cash acquired from acquisition                                                                                        |                                                                                     |                                   | (98,629                                                                  | )         |              |         |         |              |         |         |         |        
|Change in restricted cash and marketable securities                                                                              |                                                                                     |                                   |                                                                         |           |              |         | 41,882   |              |         |         | 19,593   |        
|Proceeds from sale of marketable securities                                                                                      |                                                                                     |                                   | 175,401                                                                  |           |              |         | 171,447  |              |         |         | 55,953   |        
|Purchase of marketable securities                                                                                                |                                                                                     |                                   | (156,265                                                                 | )         |              |         | (92,063  | )            |         |         | (56,911  | )      
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by (used in) investing activities                      |           |              | 180,421 |          |              |         | (17,537 | )        |         |          | (112,893 | )
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|Cash Flows from Financing Activities:                                                                                            |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |        
|Proceeds from issuance of debt, including short-term borrowings                                                                  |                                                                                     |                                   |                                                                         |           |              |         |         |              |         |         | 259,428  |        
|Principal payments of debt including short-term borrowings                                                                       |                                                                                     |                                   | (17,765                                                                  | )         |              |         | (25,595  | )            |         |         | (108,593 | )      
|Principal payments under capital lease obligations                                                                               |                                                                                     |                                   | (5,927                                                                   | )         |              |         | (24,038  | )            |         |         | (29,677  | )      
|Purchase of treasury stock at cost                                                                                               |                                                                                     |                                   | (20,000                                                                  | )         |              |         |         |              |         |         | (44,939  | )      
|Net proceeds from receivable-backed borrowing                                                                                    |                                                                                     |                                   |                                                                         |           |              |         |         |              |         |         | 47,823   |        
|Proceeds from issuance of common stock from employee stock
    purchase plan and stock options exercised                         |                                                                                     |                                   | 14,326                                                                   |           |              |         | 22,477   |              |         |         | 61,106   |        
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|                                                                                                                                 |                                                                                     |                                   | Net cash provided by (used in) financing activities                      |           |              | (29,366 | )        |              |         | (27,156 | )        |         |          | 185,148  |  
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|Net change in cash and cash equivalents                                                                                          |                                                                                     |                                   | 186,699                                                                  |           |              |         | (73,483  | )            |         |         | 224,372  |        
|Cash and cash equivalents at beginning of year                                                                                   |                                                                                     |                                   | 193,228                                                                  |           |              |         | 379,927  |              |         |         | 306,444  |        
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|Cash and cash equivalents at end of year                                                                                         |                                                                                     | $                                 | 379,927                                                                  |           |              | $       | 306,444  |              |         | $       | 530,816  |        
|                                                                                                                                 |                                                                                     |                                   |                                                                          |           |              |         |          |              |        
|Supplemental Disclosures of Cash Flow Information:                                                                               |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |        
|                                                                                                                                 | Cash paid during the period for:                                                    |                                   |                                                                          |           |              |         |          |              |         |         |          |         |         
|                                                                                                                                 |                                                                                     | Interest                          |                                                                          | $         | 21,525       |         |          | $            | 21,839  |         |          | $       | 28,805   |         
|                                                                                                                                 |                                                                                     | Income taxes                      |                                                                          | $         | 936          |         |          | $            | 5,840   |         |          | $       | 1,628    |         
|Schedule of Non-Cash Investing and Financing Activities:                                                                         |                                                                                     |                                   |                                                                          |           |              |         |          |              |         |         |          |        
|                                                                                                                                 | Purchase of property, plant and equipment financed by accounts
    payable          |                                   | $                                                                        | 21,525    |              |         | $        | 7,058        |         |         | $        | 5,868   |         
|                                                                                                                                 | Retirement of debt in exchange for bond redemption                                  |                                   | $                                                                        | 5,000     |              |         | $        | 5,000        |         |         | $        | 5,000   |         
|                                                                                                                                 | Change in unrealized gain (loss) on investments                                     |                                   | $                                                                        | 1,408     |              |         | $        | (1,834       | )       |         | $        | 8,427   |         
|                                                                                                                                 | Purchase of property, plant and equipment financed by capital
    lease obligations |                                   | $                                                                        |          |              |         | $        | 11,232       |         |         | $        | 7,373   |         
|                                                                                                                                 | Value of shares issued in Quantum HDD acquisition                                   |                                   | $                                                                        | 1,240,597 |              |         | $        |             |         |         | $        |        |         
|                                                                                                                                 | Net receivables forgiven for MMC Technology Inc. acquisition                        |                                   | $                                                                        | 16,001    |              |         | $        |             |         |         | $        |        |         



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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 and Marketable Securities





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



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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) |       
|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 |  |  | $ |       | 
|                                 |  |                |        |       |            |   |        |            |  |            |            |            |  |            |       
|2002                             |  |                |        |       |            |   |        |            |  |            |            |            |  |            |        |  |  |   |        | 
|US Government debt securities    |  | $              | 56,050 |       |            | $ | 618    |            |  | $          |           |            |  | $          | 56,668 |  |  |   |       | 
|Asset backed securities          |  |                | 10,182 |       |            |   | 54     |            |  |            |           |            |  |            | 10,236 |  |  |   |       | 
|Corporate debt securities        |  |                | 12,308 |       |            |   | 96     |            |  |            |           |            |  |            | 12,404 |  |  |   |       | 
|Certificate of deposits          |  |                | 8,199  |       |            |   |       |            |  |            |           |            |  |            | 8,199  |  |  |   |       | 
|                                 |  |                |        |       |            |   |        |            |  |            |            |            |  |            |       
|Total marketable debt securities |  | $              | 86,739 |       |            | $ | 768    |            |  | $          |           |            |  | $          | 87,507 |  |  | $ |       | 
|                                 |  |                |        |       |            |   |        |            |  |            |            |            |  |            |       
|Equity securities                |  | $              | 4,980  |       |            | $ | 1,783  |            |  | $          | (174       | )          |  | $          | 6,589  |  |  | $ |       | 
|                                 |  |                |        |       |            |   |        |            |  |            |            |            |  |            |       

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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





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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





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





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





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



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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

















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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





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





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





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                              |                             |              |          |          |              |   |          |              |   |   |         |        | 
|------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------ | -------- | -------- | ------------ | - | -------- | ------------ | - | - | ------- | ------ | 
|                                                                                                              |                             | Years Ended  |         
|                                                                                                              |                             |              |         
|                                                                                                              |                             | December 29, |          |          | December 28, |   |          | December 27, |  
|                                                                                                              |                             | 2001         |          |          | 2002         |   |          | 2003         |  
|                                                                                                              |                             |              |          |          |              |   |          |              |  
|                                                                                                              |                             | Restated     |          |          |              |   |         
|Net income (loss) applicable to common stockholders, as reported                                              |                             | $            | (614,929 | )        |              | $ | (334,067 | )            |   | $ | 102,671 |       
|Add: Stock-based employee compensation expense included in
    reported net income (loss)                     |                             |              | 6,066    |          |              |   | 5,562    |              |   |   | 923     |       
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards |                             |              | 38,251   |          |              |   | 40,013   |              |   |   | 27,913  |       
|                                                                                                              |                             |              |          |          |              |   |          |              |  
|                                                                                                              | Pro forma net income (loss) |              | $        | (647,114 | )            |   | $        | (368,518     | ) |   | $       | 75,681 | 
|                                                                                                              |                             |              |          |          |              |   |          |              |  
|Net income (loss) per share As reported  basic                                                               |                             | $            | (2.97    | )        |              | $ | (1.40    | )            |   | $ | 0.42    |       
|                                                                                                              | Pro forma  basic           |              | $        | (3.13    | )            |   | $        | (1.54        | ) |   | $       | 0.31   | 
|                                                                                                              | As reported  diluted       |              | $        | (2.97    | )            |   | $        | (1.40        | ) |   | $       | 0.41   | 
|                                                                                                              | Pro forma  diluted         |              | $        | (3.13    | )            |   | $        | (1.54        | ) |   | $       | 0.30   | 







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



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                                                                             |  |              |          |   |              |   |          |              |  |   |         | 
|-------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ------------ | - | -------- | ------------ |  | - | ------- | 
|                                                                                             |  | Years Ended  |         
|                                                                                             |  |              |         
|                                                                                             |  | December 29, |          |   | December 28, |   |          | December 27, | 
|                                                                                             |  | 2001         |          |   | 2002         |   |          | 2003         | 
|                                                                                             |  |              |          |   |              |   |          |              | 
|                                                                                             |  | Restated     |          |   |              |   |         
|Net income (loss)                                                                            |  | $            | (614,929 | ) |              | $ | (334,067 | )            |  | $ | 102,671 | 
|Unrealized gain (loss) on investments in equity securities                                   |  |              | (5,945   | ) |              |   | 495      |              |  |   | 8,567   | 
|Less: reclassification adjustment for realized gain (loss)
    included in net income (loss) |  |              | (7,353   | ) |              |   | 2,329    |              |  |   | 140     | 
|                                                                                             |  |              |          |   |              |   |          |              | 
|Comprehensive income (loss)                                                                  |  | $            | (613,521 | ) |              | $ | (335,901 | )            |  | $ | 111,098 | 
|                                                                                             |  |              |          |   |              |   |          |              | 



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





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







65



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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





|                        |  |                         |            |   |                         |   |            |                         |  |   |             |   |  |             |            |   |             |   |            |   |  |   |            |  
|----------------------- |  | ----------------------- | ---------- | - | ----------------------- | - | ---------- | ----------------------- |  | - | ----------- | - |  | ----------- | ---------- | - | ----------- | - | ---------- | - |  | - | ---------- | -
|                        |  | As of December 29, 2001 |            |   | As of December 28, 2002 |   |            | As of December 27, 2003 | 
|Changes to Consolidated |  |                         |            |   |                         |   |            |                         | 
|Balance Sheet           |  | As Reported             |            |   | As Restated             |   |            | As Reported             |  |   | As Restated |   |  | As Reported |            |   | As Restated |  
|                        |  |                         |            |   |                         |   |            |                         |  |   |             |   |  |             |            |   |             |  
|Goodwill                |  | $                       | 814,863    |   |                         | $ | 636,087    |                         |  | $ | 813,951     |   |  | $           | 635,175    |   |             | $ | 813,951    |   |  | $ | 635,175    |  
|Deferred taxes          |  |                         | 196,455    |   |                         |   |           |                         |  |   | 196,455     |   |  |             |           |   |             |   | 196,455    |   |  |   |           |  
|Other liabilities       |  |                         | 204,587    |   |                         |   | 190,797    |                         |  |   | 199,071     |   |  |             | 185,281    |   |             |   | 186,485    |   |  |   | 172,695    |  
|Accumulated deficit     |  | $                       | (1,406,524 | ) |                         | $ | (1,375,055 | )                       |  | $ | (1,740,591  | ) |  | $           | (1,709,122 | ) |             | $ | (1,637,920 | ) |  | $ | (1,606,451 | )

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                     |                                 |                            |         |          |             |   |         |          |       |  
|---------------------------------------------------- | ------------------------------- | -------------------------- | ------- | -------- | ----------- | - | ------- | -------- | ----- | -
|                                                     |                                 | Year Ended                 |        
|                                                     |                                 | December 29, 2001          |        
|                                                     |                                 |                            |        
|Changes to Consolidated Income Statement             |                                 | As Reported                |         |          | As Restated |  
|                                                     |                                 |                            |         |          |             |  
|Amortization of goodwill and other intangible assets |                                 | $                          | 207,827 |          |             | $ | 176,358 |         
|                                                     | Loss from continuing operations |                            | $       | (598,179 | )           |   | $       | (566,710 | )    
|                                                     | Net loss                        |                            | $       | (646,398 | )           |   | $       | (614,929 | )    
|                                                     |                                 | Net loss per share  basic |         |          |             |   |         |          |       |  
|                                                     |                                 | Continuing operations      |         | $        | (2.89       | ) |         | $        | (2.74 | )
|                                                     |                                 | Total                      |         | $        | (3.12       | ) |         | $        | (2.97 | )
|                                                     | Net loss per share  diluted    |                            |         |          |             |   |         |          |      
|                                                     |                                 | Continuing operations      |         | $        | (2.89       | ) |         | $        | (2.74 | )
|                                                     |                                 | Total                      |         | $        | (3.12       | ) |         | $        | (2.97 | )





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









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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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

|                                               |                                                    |                |          |         |              |   |          |         | 
|---------------------------------------------- | -------------------------------------------------- | -------------- | -------- | ------- | ------------ | - | -------- | ------- | 
|                                               |                                                    | December 28,   |          |         | December 27, |  
|                                               |                                                    | 2002           |          |         | 2003         |  
|                                               |                                                    |                |          |         |              |  
|                                               |                                                    | (In thousands) |         
|Inventories:                                   |                                                    |                |          |         |              |   |          |        
|                                               | Raw materials                                      |                | $        | 40,209  |              |   | $        | 56,132  | 
|                                               | Work-in-process                                    |                |          | 25,523  |              |   |          | 44,650  | 
|                                               | Finished goods                                     |                |          | 109,813 |              |   |          | 117,229 | 
|                                               |                                                    |                |          |         |              |  
|                                               |                                                    | $              | 175,545  |         |              | $ | 218,011  |        
|                                               |                                                    |                |          |         |              |  
|Prepaid expenses and other:                    |                                                    |                |          |         |              |   |          |        
|                                               | Investments in equity securities, at fair value    |                | $        | 6,589   |              |   | $        | 15,536  | 
|                                               | Prepaid expenses and other                         |                |          | 26,849  |              |   |          | 22,765  | 
|                                               |                                                    |                |          |         |              |  
|                                               |                                                    | $              | 33,438   |         |              | $ | 38,301   |        
|                                               |                                                    |                |          |         |              |  
|Property, plant and equipment, at cost:        |                                                    |                |          |         |              |   |          |        
|                                               | Buildings                                          |                | $        | 137,467 |              |   | $        | 152,381 | 
|                                               | Machinery and equipment                            |                |          | 548,149 |              |   |          | 608,735 | 
|                                               | Software                                           |                |          | 75,284  |              |   |          | 79,682  | 
|                                               | Furniture and fixtures                             |                |          | 23,962  |              |   |          | 26,583  | 
|                                               | Leasehold improvements                             |                |          | 77,925  |              |   |          | 86,430  | 
|                                               |                                                    |                |          |         |              |  
|                                               |                                                    | $              | 862,787  |         |              | $ | 953,811  |        
|Less accumulated depreciation and amortization |                                                    |                | (497,945 | )       |              |   | (611,132 | )      
|                                               |                                                    |                |          |         |              |  
|Net property, plant and equipment              |                                                    | $              | 364,842  |         |              | $ | 342,679  |        
|                                               |                                                    |                |          |         |              |  
|Accrued and other liabilities:                 |                                                    |                |          |         |              |   |          |        
|                                               | Income taxes payable                               |                | $        | 22,183  |              |   | $        | 23,763  | 
|                                               | Accrued payroll and payroll-related expenses       |                |          | 76,876  |              |   |          | 132,967 | 
|                                               | Accrued warranty                                   |                |          | 278,713 |              |   |          | 209,426 | 
|                                               | Restructuring liabilities, short-term              |                |          | 11,589  |              |   |          | 9,096   | 
|                                               | Accrued expenses                                   |                |          | 82,389  |              |   |          | 79,136  | 
|                                               |                                                    |                |          |         |              |  
|                                               |                                                    | $              | 471,750  |         |              | $ | 454,388  |        
|                                               |                                                    |                |          |         |              |  
|Other liabilities:                             |                                                    |                |          |         |              |   |          |        
|                                               | Tax indemnification liability                      |                | $        | 138,567 |              |   | $        | 135,559 | 
|                                               | Restructuring liabilities, long-term (Restated)(1) |                |          | 37,131  |              |   |          | 29,727  | 
|                                               | Other                                              |                |          | 9,583   |              |   |          | 7,409   | 
|                                               |                                                    |                |          |         |              |  
|                                               |                                                    | $              | 185,281  |         |              | $ | 172,695  |        
|                                               |                                                    |                |          |         |              |  






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



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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







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





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                    |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         |  |   |          |         |   |   |         |       | 
|----------------------------------- | -------------------- | ------- | - | ----------------- | -------- | - | ----------------- | ------------ | -------------- | - | -------- | ------- | -------- | ------ | ------- | ----------- | ------------ | - | ------- | ------- |  | - | -------- | ------- | - | - | ------- | ----- | 
|                                    |                      |         |   | December 28, 2002 |          |   | December 27, 2003 |             
|                                    |                      |         |   |                   |          |   |                   |             
|                                    |                      |         |   | Gross             |          |   |                   |              | Gross          |   |          |        
|                                    |                      | Useful  |   |                   | Carrying |   |                   | Accumulated  |                |   |          |         | Carrying |        |         | Accumulated |              |   |        
|                                    |                      | Life    |   |                   | Amount   |   |                   | Amortization |                |   | Net      |         |          | Amount |         |             | Amortization |   |         | Net     | 
|                                    |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         | 
|                                    |                      | (Years) |   |                   |          |   |                   |              |                |   |         
|                                    |                      |         |   | (In thousands)    |          |   |                   |              | (In thousands) |   |          |        
|Goodwill (Restated)(1)              |                      |         |   |                   |          | $ | 635,175           |              |                | $ |         |         |          | $      | 635,175 |             |              | $ | 635,175 |         |  | $ |         |         |   | $ | 635,175 |      
|                                    |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         | 
|Quantum HDD                         |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         |  |   |          |         |   |   |         |      
|Existing technology Core technology |                      |         | 5 |                   |          | $ | 96,700            |              |                | $ | (36,750  | )       |          | $      | 59,950  |             |              | $ | 96,700  |         |  | $ | (53,185  | )       |   | $ | 43,515  |      
|                                    | Consumer electronics |         |   | 3                 |          |   |                   | 8,900        |                |   |          | (5,192  | )        |        |         | 3,708       |              |   |         | 8,900   |  |   |          | (8,158  | ) |   |         | 742   | 
|                                    | High-end             |         |   | 3                 |          |   |                   | 75,500       |                |   |          | (44,042 | )        |        |         | 31,458      |              |   |         | 75,500  |  |   |          | (69,208 | ) |   |         | 6,292 | 
|                                    | Desktop              |         |   | 3                 |          |   |                   | 105,000      |                |   |          | (56,408 | )        |        |         | 48,592      |              |   |         | 105,000 |  |   |          | (96,250 | ) |   |         | 8,750 | 
|MMC Technology                      |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         |  |   |          |         |   |   |         |      
|Existing technology                 |                      |         | 5 |                   |          |   | 4,350             |              |                |   | (1,160   | )       |          |        | 3,190   |             |              |   | 4,350   |         |  |   | (2,030   | )       |   |   | 2,320   |      
|                                    |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         | 
|Total other intangible assets       |                      |         |   |                   |          | $ | 290,450           |              |                | $ | (143,552 | )       |          | $      | 146,898 |             |              | $ | 290,450 |         |  | $ | (228,831 | )       |   | $ | 61,619  |      
|                                    |                      |         |   |                   |          |   |                   |              |                |   |          |         |          |        |         |             |              |   |         |         | 






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



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |       |       |         |   |      |      | 
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | -------------------------------------------------------------------- | ------- | ------------ | ----- | -------- | ------------ | ----- | ----- | ------- | - | ---- | ---- | 
|                                                                     |                                                                                                         | Years Ended                                                          |                                                                     
|                                                                     |                                                                                                         |                                                                      |                                                                     
|                                                                     |                                                                                                         | December 29,                                                         |                                                                      |         | December 28, |       |          | December 27, |      
|                                                                     |                                                                                                         | 2001                                                                 |                                                                      |         | 2002         |       |          | 2003         |      
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      
|                                                                     |                                                                                                         | Restated(1)                                                          |                                                                      |         |              |       |         
|Income (loss) from continuing operations  as reported               |                                                                                                         | $                                                                    | (566,710                                                             | )       |              | $     | (260,566 | )            |       | $     | 100,460 |  
|Adjustments:                                                         |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |       |       |         |  
|                                                                     | Amortization of goodwill                                                                                |                                                                      |                                                                      | 102,573 |              |       |          |             |       |       |         |  |     
|                                                                     | Amortization of acquired workforce intangibles previously
    classified as purchased intangible assets |                                                                      |                                                                      | 12,472  |              |       |          |             |       |       |         |  |     
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      
|                                                                     | Net adjustments                                                                                         |                                                                      |                                                                      | 115,045 |              |       |          |             |       |       |         |  |     
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      
|Income (loss) from continuing operations  adjusted                  |                                                                                                         | $                                                                    | (451,665                                                             | )       |              | $     | (260,566 | )            |       | $     | 100,460 |  
|Basic earnings per share from continuing operations:                 |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |       |       |         |  
|                                                                     |                                                                                                         | Income (loss) per share from continuing operations 
    as reported |                                                                      | $       | (2.74        | )     |          | $            | (1.09 | )     |         | $ | 0.41 |     
|                                                                     |                                                                                                         |                                                                      | Amortization of goodwill                                             |         |              | 0.50  |          |              |       |      |         |   |      |     | 
|                                                                     |                                                                                                         |                                                                      | Amortization of workforce                                            |         |              | 0.06  |          |              |       |      |         |   |      |     | 
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      
|                                                                     |                                                                                                         |                                                                      | Basic earnings per share from continuing operations 
    adjusted   |         | $            | (2.18 | )        |              | $     | (1.09 | )       |   | $    | 0.41 | 
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      
|Diluted earnings per share from continuing operations:               |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |       |       |         |  
|Income (loss) per share from continuing operations 
    as reported |                                                                                                         | $                                                                    | (2.74                                                                | )       |              | $     | (1.09    | )            |       | $     | 0.40    |  
|                                                                     |                                                                                                         |                                                                      | Amortization of goodwill                                             |         |              | 0.50  |          |              |       |      |         |   |      |     | 
|                                                                     |                                                                                                         |                                                                      | Amortization of workforce                                            |         |              | 0.06  |          |              |       |      |         |   |      |     | 
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      
|                                                                     |                                                                                                         |                                                                      | Diluted earnings per share from continuing
    operations  adjusted |         | $            | (2.18 | )        |              | $     | (1.09 | )       |   | $    | 0.40 | 
|                                                                     |                                                                                                         |                                                                      |                                                                      |         |              |       |          |              |      

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                          |                                                                                                         |              |          |         |              |   |          |              |   |   |         |      | 
|----------------------------------------- | ------------------------------------------------------------------------------------------------------- | ------------ | -------- | ------- | ------------ | - | -------- | ------------ | - | - | ------- | ---- | 
|                                          |                                                                                                         | Years Ended  |         
|                                          |                                                                                                         |              |         
|                                          |                                                                                                         | December 29, |          |         | December 28, |   |          | December 27, |  
|                                          |                                                                                                         | 2001         |          |         | 2002         |   |          | 2003         |  
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|                                          |                                                                                                         | Restated(1)  |          |         |              |   |         
|Net income (loss)  as reported           |                                                                                                         | $            | (614,929 | )       |              | $ | (334,067 | )            |   | $ | 102,671 |     
|Adjustments:                              |                                                                                                         |              |          |         |              |   |          |              |   |   |         |     
|                                          | Amortization of goodwill                                                                                |              |          | 109,310 |              |   |          |             |   |   |         |     | 
|                                          | Amortization of acquired workforce intangibles previously
    classified as purchased intangible assets |              |          | 12,616  |              |   |          |             |   |   |         |     | 
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|Net adjustments                           |                                                                                                         |              | 121,926  |         |              |   |         |              |   |   |        |     
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|Net income (loss)  adjusted              |                                                                                                         | $            | (493,003 | )       |              | $ | (334,067 | )            |   | $ | 102,671 |     
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|Basic earnings per share:                 |                                                                                                         |              |          |         |              |   |          |              |   |   |         |     
|Net income (loss) per share  as reported |                                                                                                         | $            | (2.97    | )       |              | $ | (1.40    | )            |   | $ | 0.42    |     
|                                          | Amortization of goodwill                                                                                |              |          | 0.53    |              |   |          |             |   |   |         |     | 
|                                          | Amortization of workforce                                                                               |              |          | 0.06    |              |   |          |             |   |   |         |     | 
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|                                          | Basic earnings per share  adjusted                                                                     |              | $        | (2.38   | )            |   | $        | (1.40        | ) |   | $       | 0.42 | 
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|Diluted earnings per share:               |                                                                                                         |              |          |         |              |   |          |              |   |   |         |     
|Net income (loss) per share  as reported |                                                                                                         | $            | (2.97    | )       |              | $ | (1.40    | )            |   | $ | 0.41    |     
|                                          | Amortization of goodwill                                                                                |              |          | 0.53    |              |   |          |             |   |   |         |     | 
|                                          | Amortization of workforce                                                                               |              |          | 0.06    |              |   |          |             |   |   |         |     | 
|                                          |                                                                                                         |              |          |         |              |   |          |              |  
|                                          | Diluted earnings per share  adjusted                                                                   |              | $        | (2.38   | )            |   | $        | (1.40        | ) |   | $       | 0.41 | 
|                                          |                                                                                                         |              |          |         |              |   |          |              |  






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



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



|                                                                                                   |  |              |         |   |              |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | -
|                                                                                                   |  | December 28, |         |   | December 27, |  
|                                                                                                   |  | 2002         |         |   | 2003         |  
|                                                                                                   |  |              |         |   |              |  
|5.75% Subordinated Debentures due March 1, 2012                                                    |  | $            | 60,427  |   |              | $ | 59,352  |  
|6.8% Convertible Senior Notes due April 30, 2010                                                   |  |              |        |   |              |   | 230,000 |  
|Economic Development Board of Singapore Loans                                                      |  |              | 9,909   |   |              |   | 24,138  |  
|Manufacturing facility Loan, Suzhou China                                                          |  |              |        |   |              |   | 15,000  |  
|Pro rata portion of Quantum Corporations
    7% Subordinated Convertible Notes due August 1, 2004 |  |              | 95,833  |   |              |   |        |  
|Mortgages                                                                                          |  |              | 35,609  |   |              |   | 34,164  |  
|Equipment Loans and Capital Leases                                                                 |  |              | 45,607  |   |              |   | 20,192  |  
|Receivables-backed Borrowings                                                                      |  |              |        |   |              |   | 50,000  |  
|                                                                                                   |  |              |         |   |              |  
|                                                                                                   |  |              | 247,385 |   |              |   | 432,846 |  
|Less amounts due within one year                                                                   |  |              | (41,042 | ) |              |   | (77,037 | )
|                                                                                                   |  |              |         |   |              |  
|                                                                                                   |  | $            | 206,343 |   |              | $ | 355,809 |  
|                                                                                                   |  |              |         |   |              |  

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                   |  |                |         | 
|------------------ |  | -------------- | ------- | 
|Fiscal Year Ending |  |               
|                   |  |               
|                   |  | (In thousands) |        
|2004               |  | $              | 77,037  | 
|2005               |  |                | 17,880  | 
|2006               |  |                | 42,641  | 
|2007               |  |                | 12,811  | 
|2008               |  |                | 8,750   | 
|Thereafter         |  |                | 273,727 | 
|                   |  |                |        
|Total              |  | $              | 432,846 | 
|                   |  |                |        



|                                                  |  |              |         |  
|------------------------------------------------- |  | ------------ | ------- | -
|                                                  |  | December 27, |        
|Fiscal Year Ending                                |  | 2003         |        
|                                                  |  |              |        
|2004                                              |  | $            | 15,124  |  
|2005                                              |  |              | 5,422   |  
|2006                                              |  |              | 875     |  
|Thereafter                                        |  |              |        |  
|                                                  |  |              |        
|Total minimum lease payments & estimated residual |  | $            | 21,421  |  
|Imputed interest                                  |  |              | (1,229  | )
|                                                  |  |              |        
|Present value of minimum of lease payments        |  |              | 20,192  |  
|Current portion                                   |  |              | (14,117 | )
|                                                  |  |              |        
|Long-term capitalized lease obligations           |  | $            | 6,075   |  
|                                                  |  |              |        







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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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



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





|                                                                                |  |                   |        |  |                   |   |        |          |  |   |            |  |  |   |         | 
|------------------------------------------------------------------------------- |  | ----------------- | ------ |  | ----------------- | - | ------ | -------- |  | - | ---------- |  |  | - | ------- | 
|                                                                                |  | December 28, 2002 |        |  | December 27, 2003 |  
|                                                                                |  |                   |        |  |                   |  
|                                                                                |  | Carrying          |        |  | Estimated         |   |        | Carrying |  |   | Estimated  | 
|                                                                                |  | Amount            |        |  | Fair Value        |   |        | Amount   |  |   | Fair Value | 
|                                                                                |  |                   |        |  |                   |   |        |          |  |   |            | 
|6.8% Convertible Senior Notes                                                   |  | $                 |       |  |                   | $ |       |          |  | $ | 230,000    |  |  | $ | 319,413 | 
|Manufacturing Facility Loan  Suzhou, China                                     |  |                   |       |  |                   |   |       |          |  |   | 15,000     |  |  |   | 15,000  | 
|Pro rata portion of Quantum Corporations
    7% Subordinated Convertible Notes |  |                   | 95,833 |  |                   |   | 95,833 |          |  |   |           |  |  |   |        | 
|5.75% Subordinated Debentures                                                   |  |                   | 60,427 |  |                   |   | 49,550 |          |  |   | 59,352     |  |  |   | 50,449  | 
|Mortgages                                                                       |  |                   | 35,609 |  |                   |   | 35,657 |          |  |   | 34,164     |  |  |   | 33,990  | 
|Economic Development Board of Singapore Loan                                    |  |                   | 9,909  |  |                   |   | 9,909  |          |  |   | 24,138     |  |  |   | 24,138  | 
|Receivable-backed Borrowing                                                     |  | $                 |       |  |                   | $ |       |          |  | $ | 50,000     |  |  | $ | 50,000  | 

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



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



Accrued Warranty




|                                            |  |              |          |   |              |   |          |  
|------------------------------------------- |  | ------------ | -------- | - | ------------ | - | -------- | -
|                                            |  | Years Ended  |         
|                                            |  |              |         
|                                            |  | December 28, |          |   | December 27, |  
|                                            |  | 2002         |          |   | 2003         |  
|                                            |  |              |          |   |              |  
|Balance at beginning of period              |  | $            | 313,894  |   |              | $ | 278,713  |  
|Charges to operations                       |  |              | 207,896  |   |              |   | 162,335  |  
|Settlements                                 |  |              | (242,305 | ) |              |   | (191,733 | )
|Changes in estimates, primarily expirations |  |              | (772     | ) |              |   | (39,889  | )
|                                            |  |              |          |   |              |  
|Balance at end of period                    |  | $            | 278,713  |   |              | $ | 209,426  |  



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



|         |         |                |   |       |              |  |   |              |       |  |   |       |       | 
|-------- | ------- | -------------- | - | ----- | ------------ |  | - | ------------ | ----- |  | - | ----- | ----- | 
|         |         | Years Ended    |  
|         |         |                |  
|         |         | December 29,   |   |       | December 28, |  |   | December 27, |      
|         |         | 2001           |   |       | 2002         |  |   | 2003         |      
|         |         |                |   |       |              |  |   |              |      
|         |         | (In thousands) |  
|Current: |         |                |   |       |              |  |   |              |       |  |   |      
|         | U.S.    |                | $ | 76    |              |  | $ | 700          |       |  | $ | 2,477 |      
|         | Foreign |                |   | 3,306 |              |  |   | 1,475        |       |  |   | 1,027 |      
|         |         |                |   |       |              |  |   |              |      
|         |         | Total          |   | $     | 3,382        |  |   | $            | 2,175 |  |   | $     | 3,504 | 
|         |         |                |   |       |              |  |   |              |      

77



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|        |       |                |          |          |              |   |          |              |   |   |         |         | 
|------- | ----- | -------------- | -------- | -------- | ------------ | - | -------- | ------------ | - | - | ------- | ------- | 
|        |       | Years Ended    |         
|        |       |                |         
|        |       | December 29,   |          |          | December 28, |   |          | December 27, |  
|        |       | 2001           |          |          | 2002         |   |          | 2003         |  
|        |       |                |          |          |              |   |          |              |  
|        |       | Restated(1)    |          |          |              |   |         
|        |       | (In thousands) |         
|U.S.    |       | $              | (561,071 | )        |              | $ | (320,176 | )            |   | $ | (54,823 | )      
|Foreign |       |                | (50,476  | )        |              |   | (11,716  | )            |   |   | 160,998 |        
|        |       |                |          |          |              |   |          |              |  
|        | Total |                | $        | (611,547 | )            |   | $        | (331,892     | ) |   | $       | 106,175 | 
|        |       |                |          |          |              |   |          |              |  






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





|                                                    |       |                |          |       |              |   |          |              |  |   |         |       | 
|--------------------------------------------------- | ----- | -------------- | -------- | ----- | ------------ | - | -------- | ------------ |  | - | ------- | ----- | 
|                                                    |       | Years Ended    |         
|                                                    |       |                |         
|                                                    |       | December 29,   |          |       | December 28, |   |          | December 27, | 
|                                                    |       | 2001           |          |       | 2002         |   |          | 2003         | 
|                                                    |       |                |          |       |              |   |          |              | 
|                                                    |       | Restated(1)    |          |       |              |   |         
|                                                    |       | (In thousands) |         
|Income tax expense (benefit) at U.S. statutory rate |       | $              | (214,041 | )     |              | $ | (116,162 | )            |  | $ | 37,161  |      
|State tax                                           |       |                |         |       |              |   |         |              |  |   | 1,212   |      
|Losses not providing current tax benefit            |       |                | 217,098  |       |              |   | 116,857  |              |  |   |        |      
|Utilization of NOL carryforward                     |       |                |         |       |              |   |         |              |  |   | (36,095 | )    
|Other                                               |       |                | 325      |       |              |   | 1,480    |              |  |   | 1,226   |      
|                                                    |       |                |          |       |              |   |          |              | 
|                                                    | Total |                | $        | 3,382 |              |   | $        | 2,175        |  |   | $       | 3,504 | 
|                                                    |       |                |          |       |              |   |          |              | 






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

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |                                                            |                                |          |         |              |   |          |         |         | 
|------------------------------------------- | ---------------------------------------------------------- | ------------------------------ | -------- | ------- | ------------ | - | -------- | ------- | ------- | 
|                                            |                                                            | As of                          |         
|                                            |                                                            |                                |         
|                                            |                                                            | December 28,                   |          |         | December 27, |  
|                                            |                                                            | 2002                           |          |         | 2003         |  
|                                            |                                                            |                                |          |         |              |  
|                                            |                                                            | Restated                       |          |         | Restated     |  
|Deferred tax assets:                        |                                                            |                                |          |         |              |   |          |        
|                                            | Inventory reserves and accruals                            |                                | $        | 6,298   |              |   | $        | 5,650   |        
|                                            | Depreciation                                               |                                |          | 24,388  |              |   |          | 30,982  |        
|                                            | Sales related reserves                                     |                                |          | 30,729  |              |   |          | 33,688  |        
|                                            | Net operating loss carry-forwards                          |                                |          | 301,559 |              |   |          | 306,078 |        
|                                            | Tax credit carry-forwards                                  |                                |          | 27,550  |              |   |          | 29,284  |        
|                                            | Capitalized research and development                       |                                |          | 41,086  |              |   |          | 34,876  |        
|                                            | Other                                                      |                                |          | 26,391  |              |   |          | 39,315  |        
|                                            |                                                            |                                |          |         |              |  
|                                            |                                                            | Total deferred tax assets      |          |         | 458,001      |   |          |         | 479,873 | 
|Valuation allowance for deferred tax assets |                                                            |                                | (187,898 | )       |              |   | (181,295 | )      
|                                            |                                                            |                                |          |         |              |  
|Net deferred tax assets                     |                                                            | $                              | 270,103  |         |              | $ | 298,578  |        
|                                            |                                                            |                                |          |         |              |  
|Deferred tax liabilities:                   |                                                            |                                |          |         |              |   |          |        
|                                            | Unremitted earnings of certain foreign entities            |                                |          | 269,271 |              |   |          | 294,409 |        
|                                            | Unrealized gain (loss) on investments in equity securities |                                |          | 832     |              |   |          | 4,169   |        
|                                            |                                                            |                                |          |         |              |  
|                                            |                                                            | Total deferred tax liabilities |          |         | 270,103      |   |          |         | 298,578 | 
|                                            |                                                            |                                |          |         |              |  
|Net deferred tax liabilities                |                                                            | $                              |         |         |              | $ |         |        
|                                            |                                                            |                                |          |         |              |  







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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








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



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



|                   |  |                |         | 
|------------------ |  | -------------- | ------- | 
|Fiscal Year Ending |  |               
|                   |  | (In thousands) |        
|2004               |  | $              | 35,550  | 
|2005               |  |                | 32,520  | 
|2006               |  |                | 30,911  | 
|2007               |  |                | 31,382  | 
|2008               |  |                | 30,566  | 
|Thereafter         |  |                | 147,896 | 
|                   |  |                |        
|Total              |  | $              | 308,825 | 
|                   |  |                |        





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



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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











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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










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



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









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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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









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





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





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












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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 30, 2000 |                                            |               | 5,478,076 |                     |        |  | 14,789,006     |            |   | $ | 7.96 |     
|                                | Shares reserved  1996 stock option plan   |               |           | 17,000,000          |        |  |                |           |   |   |      |     | 
|                                | Shares reserved  Quantum assumed options  |               |           | 12,785,328          |        |  |                |           |   |   |      |     | 
|                                | Options assumed from acquisition           |               |           | (12,306,201         | )      |  |                | 12,306,201 |   |   |      | 5.05 | 
|                                | RSP Options assumed from acquisition       |               |           | (479,127            | )      |  |                |           |   |   |      |     | 
|                                | Options granted                            |               |           | (13,329,365         | )      |  |                | 13,329,365 |   |   |      | 5.36 | 
|                                | Restricted stock granted                   |               |           | (140,000            | )      |  |                |           |   |   |      |     | 
|                                | Options exercised                          |               |           |                    |        |  |                | (2,938,608 | ) |   |      | 3.95 | 
|                                | Options canceled  1996 stock option plan  |               |           | 788,732             |        |  |                | (788,732   | ) |   |      | 6.51 | 
|                                | Options canceled  Quantum assumed options |               |           |                    |        |  |                | (2,166,150 | ) |   |      |     | 
|                                | Restricted stock canceled                  |               |           | 49,000              |        |  |                |           |   |   |      |     | 
|                                |                                            |               |           |                     |        |  |                |            |  
|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 |     
|                                |                                            |               |           |                     |        |  |                |            |  



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |            |  |  |   |       | 
|----------------------- |  | ------------------- | ---------- | --------- | ------------------- |  | -------- | -------- |  | - | ----------- | -------- |  | -------- | ---------- |  |  | - | ----- | 
|                        |  | 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    |           
|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |           
|$  0.575  $  5.875     |  |                     | 13,222,607 |           |                     |  | 8.08     |          |  | $ | 4.50        |          |  |          | 3,636,160  |  |  | $ | 4.18  | 
|$ 5.9375  $   7.75     |  |                     | 7,170,794  |           |                     |  | 6.43     |          |  |   | 6.68        |          |  |          | 4,791,263  |  |  |   | 6.67  | 
|$ 7.8125  $ 13.125     |  |                     | 4,107,930  |           |                     |  | 6.93     |          |  |   | 8.50        |          |  |          | 2,887,178  |  |  |   | 8.20  | 
|$13.1875  $19.3113     |  |                     | 2,322,130  |           |                     |  | 5.19     |          |  |   | 13.30       |          |  |          | 2,181,557  |  |  |   | 13.25 | 
|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |           
|                        |  |                     | 26,823,461 |           |                     |  |          |          |  | $ | 6.46        |          |  |          | 13,496,158 |  |  | $ | 7.39  | 
|                        |  |                     |            |           |                     |  |          |          |  |   |             |          |  |          |           







|                               |  |              |           |   |              |  |           |              |  |  |           |  
|------------------------------ |  | ------------ | --------- | - | ------------ |  | --------- | ------------ |  |  | --------- | -
|                               |  | Years Ended  |          
|                               |  |              |          
|                               |  | December 29, |           |   | December 28, |  |           | December 27, | 
|                               |  | 2001         |           |   | 2002         |  |           | 2003         | 
|                               |  |              |           |   |              |  |           |              | 
|Risk-free interest rate        |  |              | 4.37      | % |              |  | 4.26      | %            |  |  | 3.17      | %
|Weighted average expected life |  |              | 4.5 years |   |              |  | 4.5 years |              |  |  | 4.5 years |  
|Volatility                     |  |              | 81        | % |              |  | 90        | %            |  |  | 73        | %
|Dividend yield                 |  |              |          |   |              |  |          |              |  |  |          |  



|                               |  |              |           |   |              |  |           |              |  |  |           |  
|------------------------------ |  | ------------ | --------- | - | ------------ |  | --------- | ------------ |  |  | --------- | -
|                               |  | Years Ended  |          
|                               |  |              |          
|                               |  | December 29, |           |   | December 28, |  |           | December 27, | 
|                               |  | 2001         |           |   | 2002         |  |           | 2003         | 
|                               |  |              |           |   |              |  |           |              | 
|Risk-free interest rate        |  |              | 3.34      | % |              |  | 1.73      | %            |  |  | 1.08      | %
|Weighted average expected life |  |              | 0.5 years |   |              |  | 0.5 years |              |  |  | 0.5 years |  
|Volatility                     |  |              | 81        | % |              |  | 90        | %            |  |  | 73        | %
|Dividend yield                 |  |              |          |   |              |  |          |              |  |  |          |  





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |             
|--- | ------------
|13. | Acquisitions



| |               
| | --------------
| | a. Quantum HDD





|                                                              |                      |   |         |         | 
|------------------------------------------------------------- | -------------------- | - | ------- | ------- | 
|Value of securities issued                                    |                      | $ | 1,133.5 |        
|Assumption of Quantum HDD options, including restricted stock |                      |   | 107.1   |        
|                                                              |                      |   |        
|                                                              |                      |   | 1,240.6 |        
|Transaction costs                                             |                      |   | 28.8    |        
|                                                              |                      |   |        
|                                                              | Total purchase price |   | $       | 1,269.4 | 
|                                                              |                      |   |        

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                 |                                                      |                                         |       |        |   |  |       |       |         |  
|------------------------------------------------ | ---------------------------------------------------- | --------------------------------------- | ----- | ------ | - |  | ----- | ----- | ------- | -
|Tangible assets:                                 |                                                      |                                         |       |        |   |  |       |      
|                                                 | Cash and cash equivalents                            |                                         | $     | 315.3  |   |  |       |       |        
|                                                 | Restricted cash                                      |                                         |       | 93.9   |   |  |       |       |        
|                                                 | Accounts receivable                                  |                                         |       | 249.1  |   |  |       |       |        
|                                                 | Inventories                                          |                                         |       | 181.7  |   |  |       |       |        
|                                                 | Prepaid expenses and other current assets            |                                         |       | 120.9  |   |  |       |       |        
|                                                 | Property, plant and equipment                        |                                         |       | 126.4  |   |  |       |       |        
|                                                 | Other noncurrent assets                              |                                         |       | 21.1   |   |  |       |       |        
|                                                 |                                                      |                                         |       |        |   | 
|                                                 |                                                      | Total tangible assets                   |       |        |   |  |       | $     | 1,108.4 |  
|                                                 |                                                      |                                         |       |        |   | 
|Intangible assets acquired:                      |                                                      |                                         |       |        |   |  |       |      
|                                                 | Core and other existing technology                   |                                         |       |        |   |  |       | 286.1 |        
|                                                 | Assembled workforce                                  |                                         |       |        |   |  |       | 43.0  |        
|Deferred stock-based compensation                |                                                      |                                         |       |        |   |  | 6.8   |      
|Goodwill (Restated)(1)                           |                                                      |                                         |       |        |   |  | 686.3 |      
|In-process research and development              |                                                      |                                         |       |        |   |  | 94.7  |      
|Liabilities assumed:                             |                                                      |                                         |       |        |   |  |       |      
|                                                 | Accounts payable                                     |                                         |       | 230.0  |   |  |       |       |        
|                                                 | Accruals and other liabilities                       |                                         |       | 364.3  |   |  |       |       |        
|                                                 | Valuation allowance for deferred taxes (Restated)(1) |                                         |       | (196.5 | ) |  |       |       |        
|                                                 | Deferred tax liability (Restated)(1)                 |                                         |       | 196.5  |   |  |       |       |        
|Long-term debt                                   |                                                      |                                         | 132.4 |        |   |  |       |      
|Other long-term liabilities                      |                                                      |                                         | 142.0 |        |   |  |       |      
|Merger-related restructuring costs (Restated)(1) |                                                      |                                         | 87.2  |        |   |  |       |      
|                                                 |                                                      |                                         |       |        |   | 
|                                                 |                                                      | Total liabilities assumed (Restated)(1) |       |        |   |  |       |       | (955.9  | )
|                                                 |                                                      |                                         |       |        |   | 
|                                                 |                                                      | Total purchase price                    |       |        |   |  |       | $     | 1,269.4 |  
|                                                 |                                                      |                                         |       |        |   | 






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







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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|                             |  |             |      |           |          |   |       |       |             |   |       |   |  |   |       |  
|---------------------------- |  | ----------- | ---- | --------- | -------- | - | ----- | ----- | ----------- | - | ----- | - |  | - | ----- | -
|                             |  |             |      | Severance |          |   |       |       |            
|                             |  | Facility    |      |           | and      |   |       | Other |             |   |      
|                             |  | Costs       |      |           | Benefits |   |       | Costs |             |   | Total |  
|                             |  |             |      |           |          |   |       |       |             |   |       |  
|                             |  | Restated(1) |      |           |          |   |       |       | Restated(1) |  
|Provision at April 2, 2001   |  | $           | 45.3 |           |          | $ | 29.2  |       |             | $ | 12.7  |   |  | $ | 87.2  |  
|Amounts paid                 |  |             | (0.9 | )         |          |   | (15.5 | )     |             |   | (12.7 | ) |  |   | (29.1 | )
|                             |  |             |      |           |          |   |       |       |             |   |       |  
|Balance at December 29, 2001 |  |             | 44.4 |           |          |   | 13.7  |       |             |   |      |   |  |   | 58.1  |  
|Amounts paid                 |  |             | (4.5 | )         |          |   | (13.7 | )     |             |   |      |   |  |   | (18.2 | )
|                             |  |             |      |           |          |   |       |       |             |   |       |  
|Balance at December 28, 2002 |  |             | 39.9 |           |          |   |      |       |             |   |      |   |  |   | 39.9  |  
|Amounts paid                 |  |             | (8.5 | )         |          |   |      |       |             |   |      |   |  |   | (8.5  | )
|                             |  |             |      |           |          |   |       |       |             |   |       |  
|Balance at December 27, 2003 |  | $           | 31.4 |           |          | $ |      |       |             | $ |      |   |  | $ | 31.4  |  
|                             |  |             |      |           |          |   |       |       |             |   |       |  






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





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Self-Servo Writer Technology:


High End:


Core Technology:


Desktop:




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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |  |           |       |   |                 |  |         | 
|------------------------- |  | --------- | ----- | - | --------------- |  | ------- | 
|                          |  | Percent   |       |   | Expected        | 
|                          |  | Completed |       |   | Technology Life | 
|                          |  |           |       |   |                 | 
|Self-servo Writer         |  |           | 85    | % |                 |  | 3 years | 
|High-end                  |  |           | 40    | % |                 |  | 4 years | 
|Core Technology           |  |           | 44    | % |                 |  | 6 years | 
|Desktop                   |  |           | 75    | % |                 |  | 4 years | 
|Other identified projects |  |           | 55-80 | % |                 |  | 4 years | 



|                          |  |   |      | 
|------------------------- |  | - | ---- | 
|Self-servo Writer         |  | $ | 47.7 | 
|High-end                  |  |   | 18.2 | 
|Core Technology           |  |   | 16.0 | 
|Desktop                   |  |   | 8.9  | 
|Other identified projects |  |   | 3.9  | 
|                          |  |   |     
|                          |  | $ | 94.7 | 
|                          |  |   |     









| |                        
| | -----------------------
| | b. MMC Technology, Inc.



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                  |                      |   |      |      | 
|--------------------------------- | -------------------- | - | ---- | ---- | 
|Cash paid                         |                      | $ | 1.0  |     
|Forgiveness of loan consideration |                      |   | 16.0 |     
|                                  |                      |   |     
|                                  |                      |   | 17.0 |     
|Transaction costs                 |                      |   | 0.9  |     
|                                  |                      |   |     
|                                  | Total purchase price |   | $    | 17.9 | 
|                                  |                      |   |     



|                                    |                                    |                           |  |      |  |   |      |   |        |  
|----------------------------------- | ---------------------------------- | ------------------------- |  | ---- |  | - | ---- | - | ------ | -
|Total tangible assets               |                                    |                           |  |      |  | $ | 97.7 |  
|Existing technology                 |                                    |                           |  |      |  |   | 4.4  |  
|Goodwill                            |                                    |                           |  |      |  |   | 21.1 |  
|In-process research and development |                                    |                           |  |      |  |   | 0.5  |  
|Liabilities assumed:                |                                    |                           |  |      |  |   |      |  
|                                    | Accruals and other liabilities     |                           |  | 30.6 |  |   |      |   |       
|                                    | Capital lease obligations and debt |                           |  | 75.1 |  |   |      |   |       
|                                    |                                    |                           |  |      |  |  
|                                    |                                    | Total liabilities assumed |  |      |  |   |      |   | (105.7 | )
|                                    |                                    |                           |  |      |  |  
|                                    |                                    | Total purchase price      |  |      |  |   |      | $ | 17.9   |  
|                                    |                                    |                           |  |      |  |  





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|              |  |           |    |   |                 |  |         | 
|------------- |  | --------- | -- | - | --------------- |  | ------- | 
|              |  | Percent   |    |   | Expected        | 
|              |  | Completed |    |   | Technology Life | 
|              |  |           |    |   |                 | 
|80GB Program  |  |           | 30 | % |                 |  | 5 years | 
|120GB Program |  |           | 5  | % |                 |  | 5 years | 





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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                        
| | -----------------------
| | c. Pro Forma Disclosure



|                                       |                       |                   |         |             |  
|-------------------------------------- | --------------------- | ----------------- | ------- | ----------- | -
|                                       |                       | Year Ended        |        
|                                       |                       | December 29, 2001 |        
|                                       |                       |                   |        
|                                       |                       | (In millions,     |        
|                                       |                       | except share and  |        
|                                       |                       | per share data)   |        
|                                       |                       | (Unaudited)       |        
|                                       |                       | Restated          |        
|Revenue from continuing operations     |                       | $                 | 4,418.6 |            
|Loss from continued operations         |                       | $                 | (583.2  | )          
|Loss per share  basic and diluted     |                       |                   |         |            
|                                       | Continuing operations |                   | $       | (2.46       | )
|Shares used in per share calculations: |                       |                   |         |            
|                                       | Basic                 |                   |         | 237,097,087 |  
|                                       | Diluted               |                   |         | 237,097,087 |  



|    |                        
|--- | -----------------------
|14. | Discontinued Operations

tm




|                                           |  |              |       |   |              |   |       |              |  |   |     | 
|------------------------------------------ |  | ------------ | ----- | - | ------------ | - | ----- | ------------ |  | - | --- | 
|                                           |  | Years Ended  |      
|                                           |  |              |      
|                                           |  | December 29, |       |   | December 28, |   |       | December 27, | 
|                                           |  | 2001         |       |   | 2002         |   |       | 2003         | 
|                                           |  |              |       |   |              |   |       |              | 
|Revenue from discontinued operations       |  | $            | 31.5  |   |              | $ | 20.4  |              |  | $ |    | 
|Income (loss) from discontinued operations |  | $            | (48.2 | ) |              | $ | (73.5 | )            |  | $ | 2.2 | 



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



94



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |              
|--- | -------------
|15. | Restructuring





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



95



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                                   |                                         |              |             |   |              |   |             |              |  |   |             |           | 
|-------------------------------------------------- | --------------------------------------- | ------------ | ----------- | - | ------------ | - | ----------- | ------------ |  | - | ----------- | --------- | 
|                                                   |                                         | Years Ended  |            
|                                                   |                                         |              |            
|                                                   |                                         | December 29, |             |   | December 28, |   |             | December 27, | 
|                                                   |                                         | 2001         |             |   | 2002         |   |             | 2003         | 
|                                                   |                                         |              |             |   |              |   |             |              | 
|                                                   |                                         | Restated(1)  |             |   |              |   |            
|Numerator  Basic and Diluted                      |                                         |              |             |   |              |   |             |              |  |   |             |          
|Income (loss) from continuing operations           |                                         | $            | (566,710    | ) |              | $ | (260,566    | )            |  | $ | 100,460     |          
|Income (loss) from discontinued operations         |                                         | $            | (48,219     | ) |              | $ | (73,501     | )            |  | $ | 2,211       |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Net income (loss)                                  |                                         | $            | (614,929    | ) |              | $ | (334,067    | )            |  | $ | 102,671     |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Net income (loss) available to common stockholders |                                         | $            | (614,929    | ) |              | $ | (334,067    | )            |  | $ | 102,671     |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Denominator                                        |                                         |              |             |   |              |   |             |              |  |   |             |          
|Basic weighted average common shares outstanding   |                                         |              | 206,911,952 |   |              |   | 239,474,179 |              |  |   | 243,022,694 |          
|Effect of dilutive securities:                     |                                         |              |             |   |              |   |             |              |  |   |             |          
|                                                   | Common stock options                    |              |             |  |              |   |             |             |  |   |             | 8,044,949 | 
|                                                   | Restricted shares subject to repurchase |              |             |  |              |   |             |             |  |   |             | 68,040    | 
|                                                   |                                         |              |             |   |              |   |             |              | 
|Diluted weighted average common shares             |                                         |              | 206,911,952 |   |              |   | 239,474,179 |              |  |   | 251,135,683 |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Net income (loss) per share  basic                |                                         |              |             |   |              |   |             |              |  |   |             |          
|Continuing operations                              |                                         | $            | (2.74       | ) |              | $ | (1.09       | )            |  | $ | 0.41        |          
|Discontinued operations                            |                                         | $            | (0.23       | ) |              | $ | (0.31       | )            |  | $ | 0.01        |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Total                                              |                                         | $            | (2.97       | ) |              | $ | (1.40       | )            |  | $ | 0.42        |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Net income (loss) per share  diluted              |                                         |              |             |   |              |   |             |              |  |   |             |          
|Continuing operations                              |                                         | $            | (2.74       | ) |              | $ | (1.09       | )            |  | $ | 0.40        |          
|Discontinued operations                            |                                         | $            | (0.23       | ) |              | $ | (0.31       | )            |  | $ | 0.01        |          
|                                                   |                                         |              |             |   |              |   |             |              | 
|Total                                              |                                         | $            | (2.97       | ) |              | $ | (1.40       | )            |  | $ | 0.41        |          
|                                                   |                                         |              |             |   |              |   |             |              | 






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



|                                        |                                   |              |            |   |              |  |            |              |  |  |           |            | 
|--------------------------------------- | --------------------------------- | ------------ | ---------- | - | ------------ |  | ---------- | ------------ |  |  | --------- | ---------- | 
|                                        |                                   | Years Ended  |           
|                                        |                                   |              |           
|                                        |                                   | December 29, |            |   | December 28, |  |            | December 27, | 
|                                        |                                   | 2001         |            |   | 2002         |  |            | 2003         | 
|                                        |                                   |              |            |   |              |  |            |              | 
|Common stock options                    |                                   |              | 34,531,082 |   |              |  | 31,575,054 |              |  |  | 3,114,254 |           
|Restricted shares subject to repurchase |                                   |              | 1,505,891  |   |              |  | 1,012,752  |              |  |  |          |           
|As-if converted shares related to 6.8%  |                                   |              |            |   |              |  |            |              |  |  |           |           
|                                        | Convertible Senior Notes due 2010 |              |            |  |              |  |            |             |  |  |           | 18,756,362 | 

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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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







|                               |  |                   |           |            |                   |   |           |                   |            |   |           |  |  |            |           |  |        |   |           |  |  |   |           | 
|------------------------------ |  | ----------------- | --------- | ---------- | ----------------- | - | --------- | ----------------- | ---------- | - | --------- |  |  | ---------- | --------- |  | ------ | - | --------- |  |  | - | --------- | 
|                               |  | Year Ended        |           |            | Year Ended        |   |           | Year Ended        |           
|                               |  | December 29, 2001 |           |            | December 28, 2002 |   |           | December 27, 2003 |           
|                               |  |                   |           |            |                   |   |           |                   |           
|                               |  |                   |           | Long-lived |                   |   |           |                   | Long-lived |   |           |  |  | Long-lived |          
|                               |  | Revenue           |           |            | Assets            |   |           | Revenue           |            |   | Assets    |  |  | Revenue    |           |  | Assets |  
|                               |  |                   |           |            |                   |   |           |                   |            |   |           |  |  |            |           |  |        |  
|                               |  | (In thousands)    |          
|United States                  |  | $                 | 1,503,710 |            |                   | $ | 1,333,978 |                   |            | $ | 1,295,527 |  |  | $          | 1,207,454 |  |        | $ | 1,375,663 |  |  | $ | 1,101,889 | 
|Asia Pacific and Japan         |  |                   | 916,538   |            |                   |   | 122,901   |                   |            |   | 1,147,745 |  |  |            | 128,860   |  |        |   | 1,259,801 |  |  |   | 129,380   | 
|Europe, Middle East and Africa |  |                   | 1,082,261 |            |                   |   | 1,588     |                   |            |   | 1,231,794 |  |  |            | 891       |  |        |   | 1,354,421 |  |  |   | 731       | 
|Latin America and other        |  |                   | 263,050   |            |                   |   | 144       |                   |            |   | 104,448   |  |  |            | 284       |  |        |   | 96,558    |  |  |   | 157       | 
|                               |  |                   |           |            |                   |   |           |                   |            |   |           |  |  |            |           |  |        |  
|Total                          |  | $                 | 3,765,559 |            |                   | $ | 1,458,611 |                   |            | $ | 3,779,514 |  |  | $          | 1,337,489 |  |        | $ | 4,086,443 |  |  | $ | 1,232,157 | 
|                               |  |                   |           |            |                   |   |           |                   |            |   |           |  |  |            |           |  |        |  







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



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



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MAXTOR CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                          
|--- | -------------------------
|20. | Related Party Transaction



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















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








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



















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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, and Reports on
    Form 8-K





| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)-(2) Financial Statements and Financial Statement
    Schedules  See Index to Consolidated Financial
    Statements under Item 8 on page 53 of this report.
|
| | (3) Exhibits. See Index to Exhibits on
    pages 104 to 109 hereof.                                                                                            





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SIGNATURES






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



| |     |                  
| | --- | -----------------
| | By: | /s/ Dr. C.S. Park

| |                                     
| | ------------------------------------
| |                                     
| | Dr. C.S. Park                       
| | Chairman and Chief Executive Officer

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MAXTOR CORPORATION







SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                  |                                                           |                |   |         |                      |  |   |            |   |  |       |            |     |        |   |        |     |  |   |         | 
|----------------- | --------------------------------------------------------- | -------------- | - | ------- | -------------------- |  | - | ---------- | - |  | ----- | ---------- | --- | ------ | - | ------ | --- |  | - | ------- | 
|                  |                                                           | Balance at     |   |         | Additions Charged to |  |   |            |   |  |       | Balance at |    
|                  |                                                           | Beginning      |   |         | Cost, Expenses and   |  |   |            |   |  |       | End of     |    
|Fiscal Year Ended |                                                           | of Period      |   |         | Other Accounts       |  |   | Deductions |   |  | Other |            |     | Period |  
|                  |                                                           |                |   |         |                      |  |   |            |   |  |       |            |     |        |  
|                  |                                                           | (In thousands) |  
|2003              |                                                           |                |   |         |                      |  |   |            |   |  |       |            |     |        |   |        |     |  |   |        
|                  | Allowance for doubtful accounts                           |                | $ | 18,320  |                      |  | $ | (2,000     | ) |  | $     | 5,100      | (1) |        | $ |       |     |  | $ | 11,220  | 
|                  | Revenue reserves                                          |                | $ | 82,878  |                      |  | $ | 525,329    |   |  | $     | 525,399    | (3) |        | $ |       |     |  | $ | 82,809  | 
|                  | Valuation allowance for deferred tax assets (Restated)(4) |                | $ | 187,898 |                      |  | $ | (6,603     | ) |  | $     |           |     |        | $ |       |     |  | $ | 181,295 | 
|2002              |                                                           |                |   |         |                      |  |   |            |   |  |       |            |     |        |   |        |     |  |   |        
|                  | Allowance for doubtful accounts                           |                | $ | 21,638  |                      |  | $ | (1,000     | ) |  | $     | 2,318      | (1) |        | $ |       |     |  | $ | 18,320  | 
|                  | Revenue reserves                                          |                | $ | 102,332 |                      |  | $ | 339,266    |   |  | $     | 358,720    | (3) |        | $ |       |     |  | $ | 82,878  | 
|                  | Valuation allowance for deferred tax assets (Restated)(4) |                | $ | 175,608 |                      |  | $ | 12,290     |   |  | $     |           |     |        | $ |       |     |  | $ | 187,898 | 
|2001              |                                                           |                |   |         |                      |  |   |            |   |  |       |            |     |        |   |        |     |  |   |        
|                  | Allowance for doubtful accounts                           |                | $ | 15,148  |                      |  | $ | 7,200      |   |  | $     | 710        | (1) |        | $ |       |     |  | $ | 21,638  | 
|                  | Revenue reserves                                          |                | $ | 44,254  |                      |  | $ | 301,641    |   |  | $     | 303,823    | (3) |        | $ | 60,260 | (2) |  | $ | 102,332 | 
|                  | Valuation allowance for deferred tax assets (Restated)(4) |                | $ | 230,746 |                      |  | $ | (55,138    | ) |  | $     |           |     |        | $ |       |     |  | $ | 175,608 | 






|    |                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Deductions represent recoveries of previously reserved balances
    and write-offs of fully reserved balances for which collection
    efforts have been exhausted.
|   
|(2) | Reflects reserves acquired from the acquisition of Quantum HDD
    in 2001.                                                                                        

Allowance for Doubtful Accounts.


Revenue Reserves.




|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|(3) |  | Represents actual returns and allowances.                                                                              
|   
|(4) |  | For additional information regarding the restatement, see
    note 2 of Notes to the Consolidated Financial Statements.

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INDEX TO EXHIBITS


|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                    
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1(10)      |  | Restated Certificate of Incorporation of Registrant.                                                                                                                                                                                                                                                                                               
|       
|        | 3  | .2(11)      |  | Certificate of Correction to the Restated Certificate of
    Incorporation of Registrant.                                                                                                                                                                                                                                                          
|       
|        | 3  | .3(12)      |  | Amended and Restated Bylaws of Registrant, dated March 12,
    2001.                                                                                                                                                                                                                                                                               
|       
|        | 3  | .4(13)      |  | Certificate of Merger as filed with the Secretary of State of
    State of Delaware on April 2, 2001.                                                                                                                                                                                                                                              
|       
|        | 4  | .1(5)       |  | Stockholder Agreement dated June 25, 1998.                                                                                                                                                                                                                                                                                                         
|       
|        | 4  | .2(14)      |  | Reimbursement Agreement between Registrant and Quantum
    Corporation, dated April 2, 2001, together with the Third
    Supplemental Trust Indenture dated April 2, 2001, the
    Second Supplemental Trust Indenture dated August 4, 1999,
    the Supplemental Trust Indenture dated August 1, 1997, and
    the Indenture dated August 1, 1997.
|       
|        | 4  | .3(20)      |  | Indenture between Registrant and U.S. Bank National
    Association, dated as of May 7, 2003.                                                                                                                                                                                                                                                      
|       
|        | 4  | .4(20)      |  | 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(7)       |  | Form of Indemnification Agreement between Registrant and
    Registrants directors and officers.**                                                                                                                                                                                                                                                
|       
|        | 10 | .2(5)       |  | Indenture dated as of March 1, 1987 between Registrant and
    Security Pacific National Bank, as Trustee.                                                                                                                                                                                                                                         
|       
|        | 10 | .3(2)       |  | Amendment to the Financing Agreement among Registrant and the
    CIT Group/Business Credit, Inc., dated October 17, 1995.                                                                                                                                                                                                                         
|       
|        | 10 | .4(4)       |  | Employment Agreement between Michael R. Cannon and Registrant,
    dated June 17, 1996.**                                                                                                                                                                                                                                                          
|       
|        | 10 | .5(4)       |  | Employment Agreement between Paul J. Tufano and Registrant,
    dated July 12, 1996.**                                                                                                                                                                                                                                                             
|       
|        | 10 | .6(5)       |  | Employment Agreement between Philip Duncan and Registrant dated
    July 15, 1996.**                                                                                                                                                                                                                                                               
|       
|        | 10 | .7(5)       |  | Employment Agreement between K.H. Teh and Registrant, dated
    March 23, 1997.**                                                                                                                                                                                                                                                                  
|       
|        | 10 | .8(5)       |  | Lease Agreement between Milpitas Oak Creek Delaware, Inc. and
    Registrant dated as of February 23, 1998.                                                                                                                                                                                                                                        
|       
|        | 10 | .9(5)       |  | Land Lease between Housing Development Board and Maxtor
    Singapore Limited dated as of March 8, 1991.                                                                                                                                                                                                                                           
|       
|        | 10 | .10(5)      |  | Sublicense Agreement between Hyundai Electronics Industries Co.,
    Ltd., and Registrant dated as of January 1, 1996.                                                                                                                                                                                                                             
|       
|        | 10 | .11(5)      |  | Tax Allocation Agreement dated as of July 21, 1995 among
    Hyundai Electronics America (n/k/a Hynix Semiconductor America
    Inc.), Registrant and certain other subsidiaries.                                                                                                                                                                  
|       
|        | 10 | .12(5)      |  | Tax Indemnification Agreement and Amendment to Tax Allocation
    Agreement dated June 26, 1998.                                                                                                                                                                                                                                                   
|       
|        | 10 | .13(5)      |  | Indemnity Agreement between Hyundai Electronics Industries Co.,
    Ltd. and Registrant dated June 25, 1998.                                                                                                                                                                                                                                       
|       
|        | 10 | .14(5)      |  | License Agreement between Registrant and Hyundai Electronics
    Industries Co., Ltd. dated June 25, 1998.                                                                                                                                                                                                                                         
|       
|        | 10 | .15(5)      |  | 1998 Restricted Stock Plan.**                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .16(5)      |  | Form of Restricted Stock Grant Agreement.**                                                                                                                                                                                                                                                                                                        
|       
|        | 10 | .17(5)      |  | Chief Executive Officer Retention Agreement dated as of
    May 29, 1998 between Registrant and Michael R. Cannon.**                                                                                                                                                                                                                               
|       
|        | 10 | .18(5)      |  | Retention Agreement dated as of May 29, 1998 between
    Registrant and Paul J. Tufano.**                                                                                                                                                                                                                                                          
|       
|        | 10 | .19(5)      |  | Form of Retention Agreement between Registrant and Executive
    Officers.**                                                                                                                                                                                                                                                                       
|       
|        | 10 | .20(6)      |  | Purchase and Sale Agreement, dated as of July 31, 1998,
    between Registrant and Maxtor Receivables Corporation.                                                                                                                                                                                                                                 
|       
|        | 10 | .21(6)      |  | Receivables Purchase Agreement, dated as of July 31, 1998,
    among Maxtor Receivables Corporation, Registrant, BlueKeel
    Funding LLC and Fleet National Bank.                                                                                                                                                                                 

104



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|        |    |         |             |                                                                                                                                                                                                                                                                             
|------- | -- | ------- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         |            
|Number  |    |         | Description
|        |    |         |            
|       
|        | 10 | .22(8)  |             | Executive Retention Incentive Agreement between Michael R.
    Cannon and Registrant dated June 25, 1999.**                                                                                                                                                                 
|       
|        | 10 | .23(8)  |             | Promissory Note between Michael R. Cannon and Registrant dated
    June 23, 1999.**                                                                                                                                                                                         
|       
|        | 10 | .24(9)  |             | Executive Retention Incentive Agreement and Promissory Note
    between Registrant and Paul J. Tufano, dated October 18,
    1999.**                                                                                                                                        
|       
|        | 10 | .25(8)  |             | Capital Assistant Scheme Loan Agreement between Maxtor
    Peripherals (S) Pte Ltd. and the Economic Development Board of
    Singapore dated September 9, 1999.                                                                                                            
|       
|        | 10 | .26(8)  |             | Guarantee Facility Agreement between Maxtor Peripherals (S) Pte
    Ltd. and the Bank of Nova Scotia, Singapore branch dated
    August 31, 1999.                                                                                                                           
|       
|        | 10 | .27(9)  |             | 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 | .28(9)  |             | Forms of Executive Retention Incentive Agreement and Promissory
    Note Between Registrant and Pantelis Alexopoulos, Michael
    D. Cordano, Phillip C. Duncan, Misha Rozenberg, Glenn H.
    Stevens, K.H. Teh and Michael J. Wingert, each dated
    November 19, 1999.**
|       
|        | 10 | .29(12) |             | 1998 Employee Stock Purchase Plan.**                                                                                                                                                                                                                                        
|       
|        | 10 | .30(10) |             | Form of Tax Opinion Insurance Policy.                                                                                                                                                                                                                                       
|       
|        | 10 | .31(14) |             | Form of Tax Opinion Insurance Policy Rider.                                                                                                                                                                                                                                 
|       
|        | 10 | .32(14) |             | Option to Purchase Shares of Stock by and between Hynix
    Semiconductor America, Inc. and Registrant.                                                                                                                                                                     
|       
|        | 10 | .33(15) |             | Master Agreement between Matsushita Kotobuki Electronics
    Industries, Ltd., and Registrant dated April 2, 2001.*                                                                                                                                                         
|       
|        | 10 | .34(15) |             | Purchase Agreement between Matsushita Kotobuki Electronics
    Industries, Ltd., and Registrant dated April 2, 2001.*                                                                                                                                                       
|       
|        | 10 | .35(13) |             | Separation and Redemption Agreement dated as of April 2,
    2001 among Quantum Corporation, Insula Corporation and
    Registrant.                                                                                                                                         
|       
|        | 10 | .36(13) |             | Tax Sharing and Indemnity Agreement dated as of April 2,
    2001 among Quantum Corporation, Insula Corporation and
    Registrant.                                                                                                                                         
|       
|        | 10 | .37(13) |             | Transitional Services Agreement dated as of April 2, 2001
    among Quantum Corporation, Insula Corporation and Registrant.                                                                                                                                                 
|       
|        | 10 | .38(13) |             | Intellectual Property Agreement dated as of April 2, 2001
    by and between Quantum Corporation and Insula Corporation.                                                                                                                                                    
|       
|        | 10 | .39(13) |             | Indemnification Agreement dated as of April 2, 2001 among
    Quantum Corporation, Insula Corporation and Registrant.                                                                                                                                                       
|       
|        | 10 | .40(13) |             | Real Estate Matters Agreement dated as of April 2, 2001
    among Quantum Corporation, Insula Corporation and Registrant.                                                                                                                                                   
|       
|        | 10 | .41(13) |             | General Assignment and Assumption Agreement dated as of
    April 2, 2001 among Quantum Corporation, Insula Corporation
    and Registrant.                                                                                                                                 
|       
|        | 10 | .42(15) |             | Amendment to Liquidity Agreement dated June 30, 2001, among
    Registrant, Blue Keel Funding, LLC, the Liquidity Institutions
    and Fleet National Bank.                                                                                                                 
|       
|        | 10 | .43(16) |             | 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 | .44(16) |             | Termination of Lease Agreement made effective as of
    September 20, 2001, by and between Pratt Land Limited
    Liability Company and Registrant.                                                                                                                         
|       
|        | 10 | .45(16) |             | Guaranty made as of September 2, 2001, by Registrant to and
    for the benefit of CIT Technologies Corporation.                                                                                                                                                            
|       
|        | 10 | .46(16) |             | $12,273,650.11 Promissory Note of MMC Technology, Inc. in favor
    of Hynix Semiconductor America Inc. and assumed by Registrant
    dated September 2, 2001.                                                                                                              

105



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##### Table of Contents



|        |    |         |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ------- | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         |            
|Number  |    |         | Description
|        |    |         |            
|       
|        | 10 | .47(16) |             | $2,000,000 Promissory Note of Hyundai Electronics America (n/k/a
    Hynix Semiconductor America Inc.) in favor of Registrant dated
    January 5, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10 | .48(12) |             | Employment Offer Letter from Registrant to Michael J. Wingert
    dated October 31, 2001.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .49(12) |             | Forms of First Amendment to Executive Retention Incentive
    Agreement and Amended Restated Promissory Note Between
    Registrant and Pantelis Alexopoulos, Michael D. Cordano, Phillip
    C. Duncan, Misha Rozenberg, Glenn H. Stevens, K.H. Teh, Paul J.
    Tufano, Michael J. Wingert, David Beaver and Michael R. Cannon,
    each dated as of November 1, 2001.**                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .50(12) |             | First Amendment to Purchase Agreement between Matsushita
    Kotobuki Electronics Industries, Ltd. and Registrant dated as of
    November 2, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .51(12) |             | Amended and Restated Receivables Purchase Agreement, dated as of
    November 15, 2001, among Maxtor Receivables Corporation,
    Registrant, the Purchasers, the Committed Purchasers, the Agents
    and Fleet National Bank.                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10 | .52(12) |             | First Amendment to Amended and Restated Receivables Purchase
    Agreement, dated as of February 15, 2002, among Maxtor
    Receivables Corporation, Registrant, the Purchasers, the
    Committed Purchasers, the Agents and Fleet National Bank.                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10 | .53(12) |             | Second Amendment to Amended and Restated Receivables Purchase
    Agreement dated as of March 15, 2002, among Maxtor
    Receivables Corporation, Registrant, the Conduit Purchasers, the
    Committed Purchasers, the Agents and Fleet National Bank.                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .54(17) |             | Form of Second Amendment to Executive Retention Agreement
    between Registrant and Pantelis S. Alexopoulos, Michael D.
    Cordano, Phillip C. Duncan, Michael J. Wingert, David L. Beaver,
    Misha Rozenberg and Glenn H. Stevens, each dated as of
    May 24, 2002.**                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .55(17) |             | Third Amendment to Amended and Restated Receivables Purchase
    Agreement, dated as of May 28, 2002 by and among
    Registrant, Maxtor Receivables Corporation, the Conduit
    Purchasers, the Committed Purchasers, the Agents and Fleet
    National Bank.                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 10 | .56(17) |             | Bank Guarantee Facility of SGD 23,000,000, Amendments to
    Covenants on Tangible Networth and Consolidated Cash Balance,
    dated as of June 20, 2002, between the Bank of Nova Scotia,
    Singapore Branch, and Maxtor Peripherals(s) Pte Ltd.                                                                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 10 | .57(17) |             | Revolving Bank Guarantee Facility of SGD 666,000, Amendments to
    Covenants on Tangible Networth and Consolidated Cash Balance,
    dated as of June 20, 2002, between the Bank of Nova Scotia,
    Singapore Branch and Maxtor Peripherals(s) Pte Ltd.                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10 | .58(18) |             | Maxtor Corporation Amended and Restated Executive Deferred
    Compensation Plan effective April 2, 2001.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .59(18) |             | Maxtor Corporation Restricted Stock Unit Plan.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10 | .60(18) |             | Form of Restricted Stock Unit Award Agreement between Registrant
    and Michael R. Cannon (200,000 Restricted Stock Units), Paul J.
    Tufano (140,000 Restricted Stock Units), Victor B. Jipson
    (100,000 Restricted Stock Units), Michael Cordano (70,000
    Restricted Stock Units), K.H. Teh (70,000 Restricted Stock
    Units), Pantelis S. Alexopoulos (70,000 Restricted Stock Units),
    Phillip C. Duncan (50,000 Restricted Stock Units), Glenn H.
    Stevens (50,000 Restricted Stock Units), David L. Beaver (50,000
    Restricted Stock Units), Misha Rozenberg (50,000 Restricted
    Stock Units), each dated as of June 10, 2002.**
|       
|        | 10 | .61(18) |             | Bank Guarantee Facility of SGD 17,250,000, Waiver of the
    Consolidated Tangible Net Worth Covenant for 3rd Quarter
    Ended 28 September 2002, dated as of October 22, 2002, by
    and among the Bank of Nova Scotia and Maxtor Peripherals(s) Pte
    Ltd.                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10 | .62(18) |             | Revolving Bank Guarantee Facility of SGD 666,000, Waiver of the
    Consolidated Tangible Net Worth Covenant for 3rd Quarter
    Ended 28 September 2002, dated as of October 22, 2002, by
    and among the Bank of Nova Scotia and Maxtor Peripherals(s) Pte
    Ltd.                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10 | .63(18) |             | Fourth Amendment to Amended and Restated Receivables Purchase
    Agreement and Amendment to Fee Letter, dated as of
    November 5, 2002, by and among Maxtor Receivables
    Corporation, Registrant, the Committed Purchasers, the Conduit
    Purchasers, the Agents, and Fleet National Bank.                                                                                                                                                                                                                                                                                                                                                           

106



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##### Table of Contents



|        |    |         |             |                                                                                                                                                                                                                                                                                                                        
|------- | -- | ------- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         |            
|Number  |    |         | Description
|        |    |         |            
|       
|        | 10 | .64(18) |             | Amendment to Liquidity Agreement, dated as of November 5,
    2002 by and among Blue Keel Funding, LLC, the Liquidity
    Institutions, and Fleet National Bank.                                                                                                                                                       
|       
|        | 10 | .65(18) |             | Waiver, dated as of October 21, 2002, by and among
    Registrant, Maxtor Receivables Corporation, the Conduit
    Purchasers, the Committed Purchasers, the Agents, and Fleet
    National Bank.                                                                                                                      
|       
|        | 10 | .66(19) |             | Maxtor Corporation Amended and Restated 1996 Stock Option Plan.**                                                                                                                                                                                                                                                      
|       
|        | 10 | .67(19) |             | Fifth Amendment to Amended and Restated Receivables Purchase
    Agreement, dated as of December 13, 2002 by and among
    Registrant, Maxtor Receivables Corporation, the Committed
    Purchasers, and Fleet National Bank.                                                                                          
|       
|        | 10 | .68(19) |             | Repurchase Agreement dated as of December 31, 2002 by and
    among Registrant, Maxtor Receivables Corporation, the
    Purchasers, and Fleet National Bank.                                                                                                                                                           
|       
|        | 10 | .69(19) |             | Bank Guarantee Facility of SGD 17,250,000, Deletion of
    Consolidated Tangible Net Worth Covenant dated as of
    January 29, 2003, by and among the Bank of Nova Scotia and
    Maxtor Peripherals(s) Pte Ltd.                                                                                                      
|       
|        | 10 | .70(19) |             | Revolving Bank Guarantee Facility, Increase in limit from SGD
    660,000 to SGD 1,200,000, and Deletion of Consolidated Tangible
    Net Worth Covenant dated as of January 29, 2003, by and
    among the Bank of Nova Scotia and Maxtor Peripherals(s) Pte Ltd.                                                     
|       
|        | 10 | .71(19) |             | Extension of Master Business Agreement Dated April 30,
    1998, between Registrant and Texas Instruments Incorporated, as
    accepted and agreed to on December 13, 2002.                                                                                                                                            
|       
|        | 10 | .72(19) |             | Standard Volume Purchase Agreement between Registrant, Agere
    Systems, Inc., and Agere Systems Singapore Pte. Ltd., effective
    as of January 1, 2002.*                                                                                                                                                           
|       
|        | 10 | .73(19) |             | Second Amendment to Purchase Agreement between Matsushita
    Kotobuki Electronics Industries, Ltd. and Registrant, dated
    February 5, 2003.                                                                                                                                                                        
|       
|        | 10 | .74(20) |             | Employment Offer Letter from Registrant to Paul J. Tufano, dated
    February 24, 2003.**                                                                                                                                                                                                                              
|       
|        | 10 | .75(20) |             | 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 | .76(20) |             | 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.
|       
|        | 10 | .77(21) |             | 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 | .78(21) |             | Purchase and Contribution Agreement between Registrant and
    Maxtor Funding Corporation LLC, dated as of May 9, 2003.                                                                                                                                                                                                
|       
|        | 10 | .79(23) |             | Employment Offer Letter from Registrant to Keyur A. Patel, dated
    June 16, 2003.**                                                                                                                                                                                                                                  
|       
|        | 10 | .80(22) |             | 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 | .81(23) |             | Employment Offer Letter and related documentation from
    Registrant to Robert L. Edwards, dated July 23, 2003.**                                                                                                                                                                                                     
|       
|        | 10 | .82(23) |             | Letter of Guarantee from Oversea-Chinese Banking Corporation
    Limited to Maxtor Peripherals (S) Pte Ltd, dated July 29,
    2003.                                                                                                                                                                                   
|       
|        | 10 | .83(22) |             | 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 | .84(22) |             | First Amendment to Purchase and Contribution Agreement between
    Registrant and Maxtor Funding LLC, dated as of August 7,
    2003.                                                                                                                                                                                  

107



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##### Table of Contents



|        |    |         |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | -- | ------- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         |            
|Number  |    |         | Description
|        |    |         |            
|       
|        | 10 | .85(23) |             | 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 | .86(23) |             | Loan Agreement between Maxtor Peripherals (S) Pte Ltd and the
    Singapore Economic Development Board, dated September 3,
    2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10 | .87(24) |             | Maxtor Corporation Executive Retention and Severance Plan.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10 | .88(24) |             | Maxtor Corporation Restricted Stock Unit Plan (as amended and
    restated).**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       
|        | 10 | .89(24) |             | 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.                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 12 | .1(24)  |             | Statement regarding Computation of Ratio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 21 | .1(24)  |             | 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.                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 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 Schedule 14A filed
    July 14, 1995.                                                                           
|
| | (2) | Incorporated by reference to exhibits of Form 10-Q filed
    February 14, 1996.                                                              
|
| | (3) | Incorporated by reference to exhibits of Form 8-K filed
    June 28, 1996.                                                                   
|
| | (4) | Incorporated by reference to exhibits of Form 10-K filed
    March 27, 1997.                                                                 
|
| | (5) | Incorporated by reference to exhibits to registration statement
    on Form S-1, File No. 333-56099, filed June 5,
    1998, as amended.     
|
| | (6) | Incorporated by reference to exhibits of Form 10-Q filed
    November 10, 1998.                                                              
|
| | (7) | Incorporated by reference to exhibits of registration statement
    on Form S-3, File No. 333-69307, filed
    December 21, 1998, as amended.
|
| | (8) | Incorporated by reference to exhibits of Form 10-Q filed
    November 16, 1999.                                                              
|
| | (9) | Incorporated by reference to exhibits of Form 10-K filed
    March 29, 2000.                                                                 



|     |                                                                                                                                              
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to exhibits of registration statement
    on Form S-4, File No. 333-51592, filed
    December 11, 2000, as amended.

108



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##### Table of Contents





|     |                                                                                                                                         
|---- | ----------------------------------------------------------------------------------------------------------------------------------------
|(11) | Incorporated by reference to exhibit of Form 8-K filed
    March 2, 2001.                                                               
|    
|(12) | Incorporated by reference to exhibits of Form 10-K filed
    March 30, 2001, as amended.                                                
|    
|(13) | Incorporated by reference to exhibits of Form 8-K filed
    April 17, 2001.                                                             
|    
|(14) | Incorporated by reference to exhibits to registration statement
    on Form S-3, File No. 333-61770, filed May 29,
    2001, as amended.
|    
|(15) | Incorporated by reference to exhibits of Form 10-Q filed
    August 14, 2001, as amended.                                               
|    
|(16) | Incorporated by reference to exhibits of Form 10-Q filed
    November 13, 2001.                                                         
|    
|(17) | Incorporated by reference to exhibits of Form 10-Q filed
    August 13, 2002.                                                           
|    
|(18) | Incorporated by reference to exhibits of Form 10-Q filed
    November 12, 2002.                                                         
|    
|(19) | Incorporated by reference to exhibits of Form 10-K filed
    March 28, 2003.                                                            
|    
|(20) | Incorporated by reference to exhibits of Form 10-Q filed
    May 13, 2003.                                                              
|    
|(21) | Incorporated by reference to exhibits of Form S-3 filed
    June 24, 2003.                                                              
|    
|(22) | Incorporated by reference to exhibits of Form 10-Q filed
    August 12, 2003.                                                           
|    
|(23) | Incorporated by reference to exhibits of Form 10-Q filed
    November 12, 2003.                                                         
|    
|(24) | Incorporated by reference to exhibits of Form 10-K filed
    March 11, 2004.                                                            

109