UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q


                   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
                                       OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                       For the Quarter Ended July 4, 1999
                         Commission File Number 0-16852



                               KOMAG, INCORPORATED
                                  (Registrant)



                      Incorporated in the State of Delaware
                I.R.S. Employer Identification Number 94-2914864
               1704 Automation Parkway, San Jose, California 95131
                            Telephone: (408) 576-2000


     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
     required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     Registrant was required to file such reports),  and (2) has been subject to
     such filing requirements for the past 90 days.
                                 Yes _X_ No ___.

     On July 4, 1999,  65,448,887 shares of the Registrant's common stock, $0.01
     par value, were issued and outstanding.


<PAGE>


                                      INDEX

                               KOMAG, INCORPORATED


                                                                        Page No.
PART I.        FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements (Unaudited)

         Consolidated statements of operations--Three- and six-months
         ended July 4, 1999 and June 28, 1998 ............................    3

         Consolidated balance sheets--July 4, 1999
         and January 3, 1999 .............................................    4

         Consolidated statements of cash flows--Six months
         ended July 4, 1999 and June 28, 1998 ............................    5

         Notes to consolidated financial statements--
         July 4, 1999 .................................................... 6-11

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations ...................12-21

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings ...............................................   22

Item 2.  Changes in Securities ...........................................   22

Item 3.  Defaults Upon Senior Securities .................................   22

Item 4.  Submission of Matters to a Vote of Security Holders .............22-23

Item 5.  Other Information ...............................................   24

Item 6.  Exhibits and Reports on Form 8-K ................................   24

SIGNATURES ..............................................................    25

                                      -2-

<PAGE>


PART I.   FINANCIAL INFORMATION


<TABLE>
                                                         KOMAG, INCORPORATED
                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                                (In thousands, except per share data)
                                                             (Unaudited)

<CAPTION>
                                                                             Three Months Ended                Six Months Ended
                                                                          -------------------------       -------------------------
                                                                             July 4         June 28          July 4         June 28
                                                                               1999            1998            1999            1998
                                                                          ---------       ---------       ---------       ---------
<S>                                                                       <C>             <C>             <C>             <C>
Net Trade Sales                                                           $  23,913       $  78,808       $ 113,926       $ 154,865
Net Sales to Related Party                                                   69,313            --            69,313            --
                                                                          ---------       ---------       ---------       ---------
          NET SALES                                                          93,226          78,808         183,239         154,865

Cost of sales                                                                97,857         114,445         187,123         222,097
                                                                          ---------       ---------       ---------       ---------
          GROSS PROFIT (LOSS)                                                (4,631)        (35,637)         (3,884)        (67,232)

Operating expenses:
     Research, development and engineering                                   12,151          18,085          24,166          33,029
     Selling, general and administrative                                      5,612           4,942          11,090           9,553
     Amortization of Intangibles                                              7,359            --             7,359            --
     Restructuring charges                                                    4,321         187,768           4,321         187,768
                                                                          ---------       ---------       ---------       ---------
                                                                             29,443         210,795          46,936         230,350
                                                                          ---------       ---------       ---------       ---------
          OPERATING LOSS                                                    (34,074)       (246,432)        (50,820)       (297,582)

Other income (expense):
     Interest income                                                          1,345           2,381           2,961           4,933
     Interest expense                                                        (5,935)         (4,755)        (10,939)         (9,309)
     Other, net                                                                 869            (409)          1,530           3,914
                                                                          ---------       ---------       ---------       ---------
                                                                             (3,721)         (2,783)         (6,448)           (462)
Loss before income taxes, minority interest,
                                                                          ---------       ---------       ---------       ---------
   and equity in joint venture loss                                         (37,795)       (249,215)        (57,268)       (298,044)
Provision for income taxes                                                      350             703             750             703
                                                                          ---------       ---------       ---------       ---------
Loss before minority interest and equity in
   joint venture loss                                                       (38,145)       (249,918)        (58,018)       (298,747)
Minority interest in net income of consolidated subsidiary                       89             592             340             497
Equity in net loss of unconsolidated joint venture                             --           (11,374)         (1,402)        (20,798)
                                                                          ---------       ---------       ---------       ---------
          NET LOSS                                                        $ (38,234)      $(261,884)      $ (59,760)      $(320,042)
                                                                          =========       =========       =========       =========


Basic loss per share                                                      $   (0.60)      $   (4.95)      $   (1.01)      $   (6.05)
                                                                          =========       =========       =========       =========
Diluted loss per share                                                    $   (0.60)      $   (4.95)      $   (1.01)      $   (6.05)
                                                                          =========       =========       =========       =========

Number of shares used in basic computation                                   64,246          52,916          59,080          52,866
                                                                          =========       =========       =========       =========
Number of shares used in diluted computation                                 64,246          52,916          59,080          52,866
                                                                          =========       =========       =========       =========

<FN>
                                           See notes to consolidated financial statements.
</FN>
</TABLE>

                                                                -3-

<PAGE>


<TABLE>
                                                         KOMAG, INCORPORATED
                                                     CONSOLIDATED BALANCE SHEETS
                                                           (In thousands)

<CAPTION>
                                                                                                      July 4              January 3
                                                                                                        1999                   1999
                                                                                                   ---------              ---------
ASSETS                                                                                            (unaudited)               (note)
<S>                                                                                                <C>                    <C>
Current Assets
       Cash and cash equivalents                                                                   $  30,506              $  64,467
       Short-term investments                                                                         63,965                 63,350
       Accounts receivable (including $40,295 and
         $512 due from related parties in 1999
         and 1998, respectively) less allowances
         of $3,076 in 1999 and $2,847 in 1998                                                         51,682                 43,434
       Inventories:
            Raw materials                                                                              6,625                  8,434
            Work-in-process                                                                           11,913                 10,672
            Finished goods                                                                            25,728                 14,534
                                                                                                   ---------              ---------
                  Total inventories                                                                   44,266                 33,640
       Prepaid expenses and deposits                                                                   4,214                  4,348
       Income taxes receivable                                                                         2,216                  2,216
       Deferred income taxes                                                                           7,883                  7,883
                                                                                                   ---------              ---------
                  Total current assets                                                               204,732                219,338
Investment in Unconsolidated Joint Venture                                                              --                    1,399
Property, Plant and Equipment
       Land                                                                                            7,785                  7,785
       Building                                                                                      129,344                128,359
       Equipment                                                                                     704,884                686,169
       Furniture                                                                                      10,921                 10,911
       Leasehold Improvements                                                                         86,780                 86,565
                                                                                                   ---------              ---------
                                                                                                     939,714                919,789
       Less allowances for depreciation and amortization                                            (495,734)              (449,772)
                                                                                                   ---------              ---------
                  Net property, plant and equipment                                                  443,980                470,017
Net Intangible Assets                                                                                 77,258                   --
Deposits and Other Assets                                                                              2,629                  3,341
                                                                                                   ---------              ---------
                                                                                                   $ 728,599              $ 694,095
                                                                                                   =========              =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
       Current portion of long-term debt                                                           $ 260,000              $ 260,000
       Trade accounts payable                                                                         27,465                 27,274
       Accounts payable to related parties                                                             1,854                  1,848
       Accrued compensation and benefits                                                              16,446                 15,544
       Other liabilities                                                                              27,337                  7,382
       Income taxes payable                                                                              163                    134
                                                                                                   ---------              ---------
                  Total current liabilities                                                          333,265                312,182
Note Payable to Related Party                                                                         21,186                   --
Deferred Income Taxes                                                                                 52,564                 52,564
Other Long-term Liabilities                                                                           16,230                  1,403
Minority Interest in Consolidated Subsidiary                                                           4,479                  4,139
Stockholders' Equity
       Preferred stock                                                                                  --                     --
       Common stock                                                                                      654                    539
       Additional paid-in capital                                                                    444,262                407,549
       Accumulated deficit                                                                          (144,620)               (84,860)
       Accumulated other comprehensive income                                                            579                    579
                                                                                                   ---------              ---------
                  Total stockholders' equity                                                         300,875                323,807
                                                                                                   ---------              ---------
                                                                                                   $ 728,599              $ 694,095
                                                                                                   =========              =========

<FN>
       Note: The balance sheet at January 3, 1999 has been derived from the audited
             financial statements at that date.

                                           See notes to consolidated financial statements.
</FN>
</TABLE>

                                                                -4-

<PAGE>


<TABLE>
                                                         KOMAG, INCORPORATED
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                           (In thousands)
                                                             (Unaudited)

<CAPTION>
                                                                                                             Six Months Ended
                                                                                                       ----------------------------
                                                                                                          July 4            June 28
                                                                                                            1999               1998
                                                                                                       ---------          ---------
<S>                                                                                                    <C>                <C>
OPERATING ACTIVITIES
      Net loss                                                                                         $ (59,760)         $(320,042)
      Adjustments to reconcile net loss to net cash
          provided by (used in) operating activities:
            Depreciation and amortization                                                                 48,608             68,496
            Amortization of Intangibles                                                                    7,359               --
            Provision for losses on accounts receivable                                                      225             (1,320)
            Equity in net loss of unconsolidated joint venture                                             1,402             20,798
            (Gain) Loss on disposal of property, plant and equipment                                         229             (1,116)
            Impairment charge related to property, plant and equipment                                      --              175,000
            Deferred rent                                                                                  1,095                216
            Minority interest in net income of consolidated subsidiary                                       340                497
            Changes in operating assets and liabilities:
                  Accounts receivable                                                                     31,310             46,184
                  Accounts receivable from related parties                                               (39,783)             3,997
                  Inventories                                                                             (8,477)            16,273
                  Prepaid expenses and deposits                                                              131              1,000
                  Trade accounts payable                                                                     191             (8,696)
                  Accounts payable to related parties                                                          6             (2,434)
                  Accrued compensation and benefits                                                          902              1,853
                  Other liabilities                                                                       (1,482)             2,971
                  Income taxes receivable                                                                     29             22,180
                  Restructuring liability                                                                   (367)             7,779
                                                                                                       ---------          ---------
                           Net cash provided by (used in) operating activities                           (18,042)            33,636

INVESTING ACTIVITIES
      Acquisition of property, plant and equipment                                                       (17,564)           (74,329)
      Purchases of short-term investments                                                                 (1,965)           (38,300)
      Proceeds from short-term investments at maturity                                                     1,350               --
      Proceeds from disposal of property, plant and equipment                                                 30              5,325
      Deposits and other assets                                                                              (25)               414
                                                                                                       ---------          ---------
                         Net cash used in investing activities                                           (18,174)          (106,890)

FINANCING ACTIVITIES
      Increase in long-term obligations                                                                     --               15,000
      Sale of Common Stock, net of issuance costs                                                          2,255              3,585
                                                                                                       ---------          ---------
                         Net cash provided by financing activities                                         2,255             18,585

                      Increase (decrease) in cash and cash equivalents                                   (33,961)           (54,669)

      Cash and cash equivalents at beginning of year                                                      64,467            133,897
                                                                                                       ---------          ---------

                      Cash and cash equivalents at end of period                                       $  30,506          $  79,228
                                                                                                       =========          =========

<FN>
                                           See notes to consolidated financial statements.
</FN>
</TABLE>

                                                                -5-

<PAGE>


                               KOMAG, INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JULY 4, 1999


NOTE 1 - BASIS OF PRESENTATION

         The accompanying  unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods ended July
4, 1999 are not  necessarily  indicative of the results that may be expected for
the year ending January 2, 2000.

         The financial  statements  have been prepared on a going concern basis.
The Report of Independent Auditors on the Company's financial statements for the
year ended January 3, 1999 included in the Company's  Annual Report on Form 10-K
contained an explanatory  paragraph which indicated  substantial doubt about the
Company's  ability to continue as a going  concern  because of recent  operating
losses  and lack of  compliance  with  certain  covenants  of its  various  bank
agreements.  Such  non-compliance  constitutes  an event of  default  under  the
agreements.  The Company  has not been in payment  default  under  these  credit
facilities  and has  continued  to pay  all  interest  charges  and  other  fees
associated  with  these  facilities  on  their  scheduled  due  dates.   Amounts
outstanding  under these unsecured credit agreements at July 4, 1999 amounted to
$260 million.  To date, the Company's lenders have not accelerated any principal
payments under these facilities.  The Company is currently  negotiating with its
lenders  for  amendments  to its  existing  credit  facilities.  There can be no
assurance that the Company will be able to obtain such  amendments to its credit
facilities on commercially  reasonable terms. In the event that the Company does
not   successfully   amend  its  credit   facilities  or  restructure  its  debt
obligations,  the Company could be required to significantly  reduce or possibly
suspend its operations, and/or sell additional securities on terms that would be
highly dilutive to current stockholders of the Company. The financial statements
do not include any  adjustments  to reflect the possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
assets and liabilities that may result from the outcome of this uncertainty.

                                      -6-

<PAGE>


         For further information, refer to the consolidated financial statements
and footnotes  thereto  included in the Company's Annual Report on Form 10-K for
the year ended January 3, 1999.

         The Company uses a 52-53 week fiscal year ending on the Sunday  closest
to December  31. The three- and  six-month  reporting  periods  included in this
report are comprised of thirteen and twenty-six weeks, respectively.


NOTE 2 - INVESTMENT IN DEBT SECURITIES

         The Company  invests its excess cash in  high-quality,  short-term debt
and equity  instruments.  None of the Company's  investments in debt  securities
have  maturities  greater  than one year.  The  following  is a  summary  of the
Company's   investments   by  major   security  type  at  amortized  cost  which
approximates fair value:


                                                              Jul 4        Jan 3
(in thousands)                                                 1999         1999
                                                           --------     --------
Municipal auction rate preferred stock                     $ 62,000     $ 63,350
Corporate debt securities                                     9,526       33,765
Mortgage-backed securities                                   23,181       34,060
                                                           --------     --------
                                                           $ 94,707     $131,175
                                                           ========     ========

Amounts included in cash and cash equivalents              $ 30,742     $ 67,825
Amounts included in short-term investments                   63,965       63,350
                                                           --------     --------
                                                           $ 94,707     $131,175
                                                           ========     ========


         The Company  utilizes  zero-balance  accounts and other cash management
tools to invest all available  funds  including  bank balances in excess of book
balances.


NOTE 3 - INCOME TAXES

         The Company's income tax provisions of  approximately  $0.4 million and
$0.8 million for the three- and six-month  periods ended July 4, 1999  primarily
represent foreign withholding taxes. The Company's  wholly-owned thin-film media
operation,  Komag USA  (Malaysia)  Sdn.  ("KMS")  received an  extension  of its
initial five-year tax holiday for an additional five years commencing July 1998.
KMS has also been  granted a ten-year tax holiday for its second and third plant
sites in Malaysia.  The commencement  date for this new tax holiday has not been
determined as of August 4, 1999.

                                      -7-

<PAGE>


NOTE 4 - COMPREHENSIVE LOSS

<TABLE>
         The following are the components of comprehensive loss:

<CAPTION>
                                                                  Three Months Ended                       Six Months Ended
                                                           ------------------------------            ------------------------------
                                                              July 4              June 28               July 4              June 28
                                                                1999                 1998                 1999                 1998
                                                           ---------            ---------            ---------            ---------
<S>                                                        <C>                  <C>                  <C>                  <C>
(in thousands)
Net loss                                                   $ (38,234)           $(261,884)           $ (59,760)           $(320,042)
Foreign currency translation adjustments                        --                   (633)                --                 (2,560)
                                                           ---------            ---------            ---------            ---------
Comprehensive loss                                         $ (38,234)           $(262,517)           $ (59,760)           $(322,602)
                                                           =========            =========            =========            =========
</TABLE>


         Accumulated   foreign   currency   translation   adjustments   on   the
accompanying  Consolidated  Balance  Sheets  account  for  all of the  Company's
accumulated other comprehensive loss at July 4, 1999 and January 3, 1999.


NOTE 5 - LOSS PER SHARE

<TABLE>
         The net loss per share was  computed  using  only the  weighted-average
number of shares of common stock  outstanding  during the period.  The following
table  sets forth the  computation  of net loss per  share.

<CAPTION>
                                                                 Three Months Ended                          Six Month Ended
                                                           ------------------------------            ------------------------------
                                                              July 4              June 28               July 4              June 28
                                                                1999                 1998                 1999                 1998
                                                           ---------            ---------            ---------            ---------
(in thousands, except per share amounts)
<S>                                                        <C>                  <C>                  <C>                  <C>
Numerator:  Net loss                                       $ (38,234)           $(261,884)           $ (59,760)           $(320,042)
                                                           ---------            ---------            ---------            ---------

Denominator for basic
       loss per share -
       weighted-average shares                                64,246               52,916               59,080               52,866
                                                           ---------            ---------            ---------            ---------

Effect of dilutive securities:
       Employee stock options                                   --                   --                   --                   --

Denominator for diluted
                                                           ---------            ---------            ---------            ---------
       loss per share                                         64,246               52,916               59,080               52,866
                                                           ---------            ---------            ---------            ---------

Basic loss per share                                       $   (0.60)           $   (4.95)           $   (1.01)           $   (6.05)
                                                           =========            =========            =========            =========

Diluted loss per share                                     $   (0.60)           $   (4.95)           $   (1.01)           $   (6.05)
                                                           =========            =========            =========            =========
</TABLE>

                                                                 -8-

<PAGE>


         Incremental  common shares  attributable to the exercise of outstanding
options  (assuming  proceeds would be used to purchase treasury stock) of 60,803
and  412,795  for the  three  months  ended  July 4,  1999 and  June  28,  1998,
respectively, and of 1,069,004 and 620,610 for the six months ended July 4, 1999
and June 28,  1998,  respectively,  were not  included in the net loss per share
computation because the effect would be antidilutive.


NOTE 6 - USE OF ESTIMATES

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.


NOTE 7 - PURCHASE OF WESTERN DIGITAL CORPORATION'S MEDIA OPERATIONS

         In April 1999,  the  Company  purchased  the assets of Western  Digital
Corporation's  ("WDC's") media operations  through the issuance of approximately
10.8 million  shares of the  Company's  Common Stock and a note in the principal
amount of $30.1 million. The shares issued in the transaction, which represented
16.7%  of  the  Company's  outstanding  shares  on a  post-issuance  basis,  are
unregistered and subject to trading restrictions. WDC may resell these shares in
specified  increments  over a three and one-half year period under  registration
rights  granted  by the  Company  or under SEC  rules  after  expiration  of the
required holding periods.  Principal and interest accrued on the note are due in
three  years  and the  note  is  subordinated  to the  Company's  senior  credit
facilities.  In the event WDC realizes a return on its Komag equity  holdings in
excess of a targeted  amount  within three years,  the excess amount will reduce
the balance due under the note. The Company  discounted the principal  amount of
the subordinated note payable to $21.2 million based on the Company's  estimated
incremental borrowing rate of 18% for this class of financial instrument.

         Additionally,  the Company and WDC signed a volume  purchase  agreement
under which the Company  agreed to supply a  substantial  portion of WDC's media
needs over the next three years.  Under the volume purchase  agreement WDC began
to purchase  substantially all of its media  requirements from the Company after
the closing date. The Company  initially  expected that second quarter 1999 unit
sales  from the  combined  operations  would grow  sequentially  in the range of
20-35%  compared to the Company's  first  quarter of 1999  results.  Actual unit
shipments for the second quarter fell considerably  short of these  expectations
as customer order reductions (including those from WDC) and  lower-than-expected
volumes on certain new product programs restricted

                                      -9-

<PAGE>


sequential  unit sales growth to  approximately  10%. In response to competitive
market conditions the Company's  customers reduced the number of disks per drive
to support the  delivery of lower  priced disk drives to the rapidly  expanding,
low-cost  segment of the PC  market.  These  customer  actions,  the  continuing
imbalance  between the supply and demand for disk products,  and the lack of new
data-intensive   applications   continue  to  depress  the  Company's  financial
performance.  Due to this weak unit  demand  the  Company  closed the former WDC
media  operation  at the end of June 1999,  nearly  fifteen  months ahead of the
Company's original transition plan.

         The Company's  acquisition of WDC's media operation was recorded in the
second quarter of 1999 as a business  combination  using the purchase  method of
accounting. Under this method the Company recorded the following (in millions):


Purchase Price Paid:
       Common Stock                                                  $  34.6
       Note Payable                                                     21.2
                                                                     -------
Direct Costs                                                         $  55.8
                                                                     =======

Assets Acquired:
       Goodwill                                                      $  79.2
       Volume Purchase Agreement                                         4.7
       Equipment                                                         5.3
       Inventory                                                         2.1
Liabilties Assumed:
       Remaining Lease Obligations
          for Equipment Removed
          from Service                                                 (26.5)
       Facility Closure Costs                                           (5.6)
       Purchase Order Cancellation
          Liabilities                                                   (2.6)
       Other Liabilities                                                (0.8)
                                                                     -------
Net Assets Acquired                                                  $  55.8
                                                                     =======


         The Company recognized  goodwill and other intangibles in the amount of
$83.9  million in connection  with the  acquisition  of WDC's media  operations.
Goodwill  typically reflects the difference between the fair value of the assets
acquired and  consideration  paid.  Under purchase  accounting rules the Company
also recorded  liabilities  that  increased  the amount of goodwill  recognized.
These  liabilities  included  estimated  costs for the closure of the former WDC
media operation as well as costs related to the remaining lease  obligations for
equipment taken out of service due to the closure. The Company is amortizing the
goodwill over the three-year  life that coincides

                                      -10-

<PAGE>


with the term of the Company's volume purchase agreement with WDC.

         During the second quarter of 1999 the Company paid  approximately  $2.9
million  against these  liabilities  primarily for equipment  lease  obligations
($2.4 million) and other liabilities ($0.5 million). Equipment lease obligations
are expected to be paid monthly  through  mid-2002.  At July 4, 1999 the current
portion of the equipment  lease  obligations  was  approximately  $10.3 million.
Facility closure costs,  purchase order cancellation costs and other liabilities
associated with the WDC transaction are expected to be paid by mid-2000.

                                      -11-

<PAGE>


                               KOMAG, INCORPORATED

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Results of Operations:

         The  following  discussion  contains  predictions,  estimates and other
forward-looking  statements  that  involve a number of risks and  uncertainties.
These  statements  may be  identified  by the use of  words  such as  "expects,"
"anticipates,"   "intends,"  "plans,"  and  similar   expressions.   While  this
discussion  represents the Company's current judgment on the future direction of
the business,  such risks and uncertainties could cause actual results to differ
materially from any future  performance  suggested  herein.  In particular,  the
actions  taken to  restructure  it U.S.  operations  might disrupt the Company's
ability to execute against  customer  obligations  and  operational  improvement
plans. Such failures to execute would jeopardize the anticipated improvements in
the Company's financial  performance  outlined below. Due to the volume purchase
agreement  with Western  Digital  Corporation  ("WDC"),  the  Company's  results
continue to remain highly  dependent on the relative  success of WDC in the data
storage market.  Other factors that could cause actual results to differ include
the following:  disk consumption per drive based on the relative growth rates of
areal  density and overall  storage  usage;  pricing  levels  determined  by the
continuing imbalance between supply and demand for disk products; growth rate of
the merchant disk market as influenced by the level of captive disk  production;
structural  changes  within the disk  media  industry  created by  combinations,
failures, and joint venture arrangements;  unit volumes derived from new product
qualifications;  changes in manufacturing  efficiencies,  in particular  product
yields and  material  input  costs;  factory  utilization  levels;  and  capital
expenditure  levels  required  to  maintain or acquire  process  equipment  with
capabilities to meet more stringent future product requirements.  Moreover,  the
Company must maintain  sufficient  cash  resources to operate  efficiently.  The
Company's ability to raise additional  funding,  if required,  will be dependent
upon  improvement in the Company's  financial  performance and the status of the
Company's credit facilities.  Improvement in the Company's financial performance
remains highly dependent on macro industry fundamentals. Other risk factors that
may affect  the  Company's  financial  performance  are listed in the  Company's
various SEC filings,  including  its Form 10-K for the fiscal year ended January
3, 1999 which was filed on April 2, 1999.  The Company  undertakes no obligation
to  publicly  release  the  result  of any  revisions  to these  forward-looking
statements which may be made to reflect events or  circumstances  after the date
hereof or to reflect the occurrence of unanticipated events.

Overview:

         Adverse market conditions, which began in mid-1997, continued to impact
the thin-film media market  throughout  1998 and the first half of 1999.  Demand
for disk drives grew rapidly  during the mid-1990s and industry  forecasts  were
for continued

                                      -12-

<PAGE>


strong growth.  The Company and a majority of its competitors  (both independent
disk manufacturers and captive disk manufacturers owned by vertically integrated
disk drive customers)  committed to expansion programs in 1996 and substantially
increased their media manufacturing capacity in 1997. In 1997 the rate of growth
in demand for disk drives fell. Disk drive manufacturers abruptly reduced orders
for media from  independent  suppliers  and  relied  more  heavily  on  internal
capacity to supply a larger  proportion of their media  requirements.  The media
industry's capacity  expansion,  coupled with the decrease in the rate of demand
growth,  has resulted in excess  media  production  capacity.  This excess media
production  capacity  caused sharp  declines in average  selling prices for disk
products as independent suppliers struggled to utilize their capacity.

         In addition to adversities  caused by the excess supply of media,  1998
was a year of tremendous transition for the Company and the disk drive industry.
Disk drive programs  utilizing  newer,  more advanced,  magnetoresistive  ("MR")
media and recording heads replaced older generation programs utilizing inductive
media and heads. By the end of 1998 most disk drives were  manufactured  with MR
components.   The  transition  to  MR  disk  drives  has  led  to   significant,
unprecedented increases in areal density and, therefore, the amount of data that
can be stored on a single disk platter. In the first and second quarters of 1999
the majority of the Company's 3 1/2-inch  disks were capable of storing at least
4.3 gigabytes (GB) per platter. This represented a 34% increase in disk capacity
relative to a product mix of predominately 3.2 GB platters in the fourth quarter
of 1998.  The  Company  expects 3 1/2-inch  disks  capable of storing 6.8 GB per
platter will account for the majority of the Company's unit shipments during the
second half of 1999.  Increased  disk  storage  capacity  per disk allows  drive
manufacturers  to offer  lower-priced  disk  drives  at given  capacity  points,
especially in the price-sensitive desktop segment,  through the incorporation of
fewer  components  into  their disk  drives.  The rapid  advancement  in storage
capacity  per disk  platter  has  further  slowed  disk  demand  throughout  the
industry. According to industry market analysts, this resulting reduction in the
average  number of disks per drive  will  likely  slow the  growth  rate of disk
shipments  below the growth rate of disk drives  during  1999.  The  significant
amount of captive  capacity  employed by certain disk drive  manufacturers  also
continues to reduce the market opportunities for independent disk suppliers such
as the Company.

         In April 1999, the Company  acquired the thin-film media  operations of
Western Digital Corporation  ("WDC"). As part of the acquisition the Company and
WDC also entered into a volume purchase agreement under which the Company agreed
to supply a substantial portion of WDC's thin-film media requirements. Under the
volume purchase  agreement WDC began to purchase  substantially all of its media
requirements  from the Company  after the closing  date.  The Company  initially
expected that second quarter 1999 unit sales from the combined  operations would
grow sequentially in the range of 20-35% compared to the Company's first quarter
of 1999 results.  Actual unit shipments for the second quarter fell considerably
short of these  expectations as customer order

                                      -13-

<PAGE>


reductions (including those from WDC) and lower-than-expected volumes on certain
new product  programs  restricted  sequential unit sales growth to approximately
10%.  In response to  competitive  market  conditions  the  Company's  customers
reduced  the number of disks per drive to support the  delivery of lower  priced
disk drives to the rapidly expanding,  low-cost segment of the PC market.  These
customer  actions,  the continuing  imbalance  between the supply and demand for
disk  products,  and the lack of new  data-intensive  applications  continue  to
depress the Company's  financial  performance.  Due to this weak unit demand the
Company  closed the former WDC media  operation at the end of June 1999,  nearly
fifteen months ahead of the Company's original transition plan.

         Disk  industry  conditions  remain very  difficult.  Increased  storage
capacity  per disk is limiting  growth in unit volumes  while excess  production
capacity  within the disk industry  continues to push average selling prices for
disk products lower.  As a result of these negative  industry trends the Company
has reduced its expectations for revenue growth in the immediate future. In July
1999, the Company implemented a reorganization of its U.S. operations which will
result in a reduction  of  approximately  one-third of its U.S.  employees.  The
Company's U.S. operations will focus on activities related to research,  process
development,  product  prototyping,  and pilot  production.  Due to the  revised
expectations for slower growth in unit volumes the Company will be able to shift
production to its  Malaysian  facilities  faster than  previously  planned.  The
Company  expects  that the cost  advantages  of its  Malaysian  facilities  will
improve  its cost  structure  and  ability to respond  to the  continuing  price
pressures for thin-film media.

         As part of its reorganization the Company is consolidating the separate
engineering  and  managerial  staffs  of its  U.S.-based  manufacturing  and R&D
organizations  into a single  organization.  Staff reductions in these functions
and in selling and administrative functions total approximately 500 people. This
work force  reduction,  combined with the June 1999 work force  reduction of 400
people at the former WDC media  operation,  is expected to reduce the employment
base at the Company's U.S.  operations from 1,950 people in April (subsequent to
the  acquisition  of WDC's media  operation)  to 1,050  people by the end of the
third quarter of 1999.  The Company  employs  approximately  2,750 people in its
Malaysian manufacturing operations.  The Company expects to record a significant
charge  in  the  third  quarter  of  1999  for  severance  pay  related  to  the
reorganization  and for the write down of various  assets that will be idled due
to the lower  production  level at its U.S.  operations.  The  Company is in the
process of determining the extent of the charge.

Revenue:

         Net sales  increased to $93.2 million in the second quarter of 1999, up
18% compared to $78.8 million in the second quarter of 1998. The  year-over-year
increase  was due to the net effect of a 41% increase in unit sales volume and a
16% decrease in the overall average selling price.  Net sales in second quarters
of 1999 and 1998  included  $2.2 million and $2.1  million of  substrate  sales,
respectively.  The Company  periodically  sells

                                      -14-

<PAGE>


substrate products but does not currently anticipate that such sales will become
a significant portion of its revenue.  Second quarter 1999 unit sales (excluding
sales of substrate  products)  increased to 11.1 million  disks from 7.8 million
disks in the second quarter of 1998. Unit sales for the second quarter 1998 were
unusually low due to weakened  demand for desktop media products as several disk
drive manufacturers  sharply reduced their desktop product production during the
first half of 1998 in response to supply/demand  imbalances within the industry.
The severe pricing pressures generated by the continuing imbalance in supply and
demand  for  thin-film  media in the  second  quarter  of 1999  resulted  in the
significant  year-over-year  decrease in the overall average selling price.  Net
sales in the first half of 1999 also increased 18% relative to the first half of
1998.  Net sales in first six months of 1999 and 1998  included $6.1 million and
$4.2  million of substrate  sales,  respectively.  Percentage  increases in unit
sales  (excluding  sales of  substrate  products)  and  decreases in the overall
average  selling prices were  comparable to those  percentages  discussed in the
quarterly comparison.

         In addition to sales of internally produced disk products,  the Company
has periodically  resold products  manufactured by its 50%-owned  Japanese joint
venture,  Asahi Komag Co., Ltd.  (AKCL).  Distribution  sales of thin-film media
manufactured  by AKCL were  negligible  in both the  second  quarter of 1999 and
1998.  Distribution sales of these products were negligible in the first half of
1999 and  accounted  for $2.4  million  in the first half of 1998.  The  Company
expects  that  distribution  sales  of  AKCL  product  will be  minimal  for the
remainder of 1999.

         During  the  second  quarter  of  1999  two  customers   accounted  for
approximately 92% of consolidated net sales:  Western Digital  Corporation (74%)
and Maxtor  Corporation  (18%).  The Company  expects  that it will  continue to
derive a substantial  portion of its sales from  relatively few  customers.  The
distribution  of sales among customers may vary from quarter to quarter based on
the  match of the  Company's  product  capabilities  with  specific  disk  drive
programs of customers.  Additionally,  as a result of the April 1999 acquisition
of WDC's media  operation and related volume purchase  agreement,  the Company's
sales remain highly dependent upon WDC's performance in the disk drive industry.

Gross Margin:

         The Company recorded a negative gross margin  percentage of 5.0% in the
second  quarter  of 1999  compared  to a negative  gross  margin of 45.2% in the
second  quarter  of  1998.  The  substantial  improvement  in the  gross  margin
percentage  resulted  from the  combination  of  improvements  in  manufacturing
efficiencies,   higher  unit  production   volumes,   and  reductions  in  fixed
manufacturing  costs.  These favorable  manufacturing  cost reductions more than
offset the 16%  decline in the  overall  average  selling  price.  Manufacturing
efficiency  improvements  included both  improvements  in production  yields and
reductions  in product input costs.  The Company  produced 11.3 million units in
the second  quarter of 1999 compared to 8.9 million units in the second  quarter
of 1998.

                                      -15-

<PAGE>


The higher unit production  volume reduced the Company's unit production cost as
fixed costs were spread over more units. Additionally, fixed manufacturing costs
were lower in the second quarter of 1999,  compared to the comparable  period of
1998, as a result of a $175.0 million asset  impairment  charge recorded in June
1998.  The asset  impairment  charge  effectively  reduced  asset  valuations to
reflect the  economic  effect of industry  price  erosion for disk media and the
projected underutilization of the Company's production equipment and facilities.
Due to the reduced asset valuations  depreciation  expense was approximately 27%
lower in the second quarter of 1999 compared to the second quarter of 1998.

         The gross margin improved to a negative 2.1% for the first half of 1999
from a negative 43.4% for the first half of 1998. Unit  production  increased to
21.4 million  disks in the first half of 1999  compared to 15.4 million disks in
the first half of 1998.  The Company  operated well below  capacity in the first
half of 1998 in order to match unit  production  to the sharply lower demand for
its products. Improvements in manufacturing efficiencies, higher unit production
volumes,  and reductions in fixed  manufacturing  costs  favorably  impacted the
Company's gross margin in 1999.  Depreciation  charges in the first half of 1999
were approximately 29% lower than in the first half of 1998 primarily due to the
asset impairment charge recorded in June 1998. The effect of these manufacturing
cost  reductions  more than  offset  the effect of the  decline  in the  overall
average selling price on the Company's gross margin.

Operating Expenses:

         Research and development ("R&D") expenses decreased to $12.2 million in
the second quarter of 1999 from $18.1 million in the second quarter of 1998. R&D
expenses decreased to $24.2 million in the first half of 1999 from $33.0 million
in the  first  half of 1998.  Decreased  R&D  staffing  and lower  facility  and
equipment costs (primarily due to the 1998 impairment charge) accounted for most
of the  decrease  in R&D  expenses in both the three- and  six-month  periods of
1999.  Selling,  general and administrative  ("SG&A") expenses increased to $5.6
million in the second quarter of 1999 from $4.9 million in the second quarter of
1998.  SG&A  expenses  increased to $11.1 million in the first half of 1999 from
$9.6 million in the first half of 1998.  The  increases  for both the three- and
six-month  periods of 1999 were  primarily due to higher bad debt  provisions in
the three- and six-month  periods of 1999 relative to the comparable  periods of
1998.  Excluding provisions for bad debt, SG&A expenses increased less than $0.1
million in both the three- and six-month  periods of 1999 compared to the three-
and six-month periods of 1998.

                                      -16-

<PAGE>


Goodwill Amortization:

         The Company's  acquisition of WDC's media operation was recorded in the
second quarter of 1999 as a business  combination  using the purchase  method of
accounting. Under this method the Company recorded the following (in millions):


Purchase Price Paid:
       Common Stock                                                  $  34.6
       Note Payable                                                     21.2
                                                                     -------
Direct Costs                                                         $  55.8
                                                                     =======

Assets Acquired:
       Goodwill                                                      $  79.2
       Volume Purchase Agreement                                         4.7
       Equipment                                                         5.3
       Inventory                                                         2.1
Liabilties Assumed:
       Remaining Lease Obligations
          for Equipment Removed
          from Service                                                 (26.5)
       Facility Closure Costs                                           (5.6)
       Purchase Order Cancellation
          Liabilities                                                   (2.6)
       Other Liabilities                                                (0.8)
                                                                     -------
Net Assets Acquired                                                  $  55.8
                                                                     =======


         The Company  recognized  goodwill and other  intangibles  in connection
with the  acquisition of the WDC media operation in the amount of $83.9 million.
Goodwill  typically reflects the difference between the fair value of the assets
acquired and  consideration  paid.  Under purchase  accounting rules the Company
also recorded  liabilities  that  increased  the amount of goodwill  recognized.
These  liabilities  included  estimated  costs for the closure of the former WDC
media operation as well as costs related to the remaining lease  obligations for
equipment taken out of service due to the closure. The Company is amortizing the
goodwill over the three-year  life that coincides with the term of the Company's
volume purchase agreement with WDC.

         During the second quarter of 1999 the Company paid  approximately  $2.9
million against theses  liabilities  primarily for equipment  lease  obligations
($2.4 million) and other liabilities ($0.5 million). Equipment lease obligations
are expected to be paid monthly  through  mid-2002.  At July 4, 1999 the current
portion of the equipment  lease  obligations  was  approximately  $10.3 million.
Facility closure costs,  purchase order cancellation costs and other liabilities
associated with the WDC transaction are expected

                                      -17-

<PAGE>


to be paid by mid-2000.

Restructuring Charge:

         The  Company  recorded  restructuring  charges  of $4.3  million in the
second  quarter of 1999 and $187.8  million in the second  quarter of 1998.  The
1999  restructuring  charge primarily  related to the severance of approximately
400 employees. Approximately $3.4 million was paid to these employees during the
second  quarter of 1999 and the  remaining  $0.9  million is expected to be paid
during  the third  quarter  of 1999.  The 1998  restructuring  charge  consisted
primarily  of a  $175.0  million  non-cash  asset  impairment  charge.  The cash
component  of the 1998 charge was $12.8  million for employee  severance  costs,
equipment order cancellations costs, and facility closure costs.

Interest and Other Income/Expense:

         Interest  income  decreased  $1.0 million in the second quarter of 1999
relative  to the second  quarter  of 1998 and $2.0  million in the first half of
1999 relative to the first half of 1998 due to lower average cash and short-term
investment balances in the current year periods. Interest expense increased $1.2
million in the second quarter of 1999 compared to the second quarter of 1998 and
increased  $1.6 million in the first half of 1999  compared to the first half of
1998. The increases for both the three- and six-month periods were primarily due
to an additional  $0.9 million in interest  expense  under the  Company's  $21.2
million note payable to WDC in connection  with the  acquisition  of WDC's media
operation.  The  note  payable  to WDC  has  been  discounted  to the  Company's
estimated  incremental  borrowing rate of 18% for subordinated debt instruments.
Other income  increased  $1.3 million in the second  quarter of 1999 compared to
the second  quarter of 1998.  The increase was  primarily due to lower losses on
disposals  of  property,  plant and  equipment  in the  second  quarter  of 1999
compared to the second quarter of 1998.  Other income  decreased $2.4 million in
the first half of 1999 relative to the first half of 1998. Other income in first
half of 1998  included a $3.1 million gain on the March 1998 sale of vacant land
located in Milpitas, California.

Income Taxes:

         The Company's income tax provision was  approximately  $0.4 million and
$0.8  million  for the  three-  and  six-month  periods  of 1999,  respectively,
compared to $0.7 million for both the three- and six-month  periods of 1998. The
income tax provisions for both the 1999 and 1998 periods  primarily  represented
foreign withholding taxes. The Company's wholly-owned thin-film media operation,
Komag  USA  (Malaysia)  Sdn.  ("KMS"),  received  an  extension  of its  initial
five-year tax holiday for an additional five years  commencing in July 1998. KMS
has also been  granted a ten-year  tax  holiday  for its second and third  plant
sites in Malaysia.  The commencement  date for this new tax holiday has not been
determined as of August 4, 1999.

Minority Interest in KMT/Equity in Net Income (Loss) of AKCL:

         The  minority  interest  in the net income of  consolidated  subsidiary
represented

                                      -18-

<PAGE>


Kobe  Steel USA  Holdings  Inc.'s  ("Kobe  USA's")  20% share of Komag  Material
Technology, Inc.'s ("KMT's") net income. KMT recorded net income of $0.4 million
and $1.7  million in the second  quarter  and first half of 1999,  respectively,
compared to $3.0 million and $2.5  million in the second  quarter and first half
of 1998, respectively.

         The Company owns a 50% interest in AKCL and records its share of AKCL's
net  income  (loss) as  equity in net  income  (loss)  of  unconsolidated  joint
venture. During the first three months of 1999, the Company's investment in AKCL
was reduced to zero as a result of recording a portion of the Company's share of
AKCL's losses for the first quarter of 1999.  Approximately  $0.6 million of the
Company's  share of AKCL's first  quarter loss was not recorded as it would have
reduced the net book value of the  investment in AKCL below zero.  AKCL recorded
net income of $0.3 million for the second  quarter of 1999.  The Company has not
recorded its share of this income as the Company's cumulative  unrecorded equity
in AKCL is a loss of  approximately  $0.4  million.  Assuming  AKCL  reports net
income in future periods,  the Company will record its share of such income only
to the extent by which the income exceeds the losses incurred  subsequent to the
date on which the investment balance became zero.

Year 2000 Issue:

         Many computer systems were not designed to properly handle dates beyond
the year 1999.  Such systems were designed  using two digits rather than four to
define the  applicable  year.  Any computer  programs  that have  time-sensitive
software  may  recognize a date using "00" as the year 1900 rather than the year
2000.  This  could  result  in  a  system  failure  or  miscalculations  causing
disruptions  of  operations.  Disruptions  may also  occur if key  suppliers  or
customers  experience  disruptions in their ability to transact with the Company
due to Year 2000 issues.  The Company's  global  operations  rely heavily on the
infrastructures  of the countries in which it conducts  business.  The Year 2000
readiness within infrastructure  suppliers (utilities,  government agencies such
as customs, shipping organizations) will be critical to the Company's ability to
avoid  disruption of its operations.  The Company is working with industry trade
associations  to evaluate the Year 2000 readiness of  infrastructure  suppliers.
The Company has completed  the  assessment  phase of its Year 2000 program.  The
Company has committed  personnel and  resources to resolve  potential  Year 2000
issues and is working with key suppliers and customers to ensure their Year 2000
readiness.

         The  Company's  Year 2000 efforts are focused on three primary areas of
potential  impact:  internal  information  technology  ("IT") systems,  internal
non-IT  systems,  and the  readiness of third  parties with whom the Company has
critical  business  relationships.  Testing and  remediation  of internal IT and
non-IT systems is  approximately  90% complete.  The Company expects to complete
the testing and remediation for these systems by October 1, 1999.

         The Company has developed a process for  identifying and assessing Year
2000

                                      -19-

<PAGE>


readiness  of its  critical  suppliers.  This  process  generally  involves  the
following  steps:  initial  supplier  survey,  follow-up  supplier  review,  and
contingency  planning.  The Company is following up with critical suppliers that
either did not respond  initially or whose  responses  were  unsatisfactory.  To
date,  the  Company  has  received  responses  from a majority  of its  critical
suppliers,  most of whom have responded that they expect to address all of their
significant Year 2000 issues on a timely basis.

         Remediation  costs of the Year 2000 issue have not been material to the
Company's  results  of  operations  or  financial  position.   The  Company  has
cumulatively  incurred  remediation  costs of  approximately  $0.5 million.  The
Company does not separately  track the internal costs incurred for the Year 2000
project  (primarily the payroll cost for its information  systems group).  While
the Company currently expects that the Year 2000 issue will not pose significant
operational  problems, a failure to fully identify all Year 2000 dependencies in
the  Company's  systems  and in the  systems  of its  suppliers,  customers  and
financial  institutions  could have  material  adverse  consequences,  including
delays  in the  delivery  or  sales  of  products.  Therefore,  the  Company  is
developing  contingency  plans  for  continuing  operations  in the  event  such
problems arise.  These contingency plans are expected to be completed by October
1, 1999.

         The  Company is working to identify  and  analyze  the most  reasonably
likely  worst-case  scenarios  where it may be  affected  by Year  2000  related
interruptions.  These scenarios could include possible infrastructure  collapse,
the  failure  of power and water  supplies,  major  transportation  disruptions,
unforeseen  product  shortages  due to hoarding of material  and  supplies,  and
failures of  communications  and financial  systems.  Any one of these scenarios
could have a major and material  effect on the Company's  ability to produce and
deliver products to its customers.  While the Company is developing  contingency
plans to address issues under its control, an infrastructure  problem outside of
its control or some  combination  of several of these problems could result in a
delay in product shipments depending on the nature and severity of the problems.
The Company would expect that most utilities and service providers would be able
to restore service within days although more pervasive system problems involving
multiple  providers  could  last  several  weeks  or  longer  depending  on  the
complexity of the systems and the effectiveness of their contingency plans.

         The Company's products are not date sensitive. Additionally, disk drive
manufacturers  have generally  stated that disk drives as a stand-alone  product
are not date sensitive.  The Company expects that it will have limited  exposure
to product liability litigation resulting from Year 2000 related failures.

                                      -20-

<PAGE>


Liquidity and Capital Resources:

         Cash and  short-term  investments  of $94.5  million  at the end of the
second quarter of 1999 decreased  $33.3 million from the end of the prior fiscal
year.  Working capital  decreased $35.7 million from the end of the prior fiscal
year.  Consolidated  operating  activities consumed $18.0 million in cash during
the first half of 1999.  The $59.8 million  operating loss for the first half of
1999, net of non-cash  depreciation and  amortization  charges of $56.0 million,
the non-cash  equity loss from AKCL of $1.4 million and other  non-cash/deferred
charges  totaling $1.9 million,  used $0.5 million.  Changes in operating assets
and  liabilities  used $17.5  million.  Increases  in  accounts  receivable  and
inventories  each  consumed  $8.5  million.  The Company  spent $17.6 million on
capital  requirements during the first half of 1999. Sales of Common Stock under
the Company's stock programs generated $2.3 million.

         Total  capital   expenditures   for  1999  are  currently   planned  at
approximately  $40 million.  Current  noncancellable  capital  commitments total
approximately  $5  million.  In  light  of the  continuing  weak  disk  industry
conditions  the Company  plans to closely  monitor its capital needs in order to
limit capital spending for the last half of 1999 and future periods. The size of
the  Company's  second  quarter of 1998 net loss has resulted in a default under
certain  financial  covenants  contained  in the  Company's  various bank credit
facilities.  The Company currently has $260 million of unsecured bank borrowings
outstanding.  No additional  borrowing  capacity is available as a result of the
technical default. The Company is not in payment default under any of its credit
facilities. The Company is currently negotiating with its lenders for amendments
to the  existing  credit  facilities.  The  Company's  ability  to  successfully
conclude these negotiations has been delayed during the past year as a result of
changes in the Company's  business  model due to the  acquisition of WDC's media
facility and  continuing  deterioration  in the disk  industry.  There can be no
assurance that the Company will be able to obtain such  amendments to its credit
facilities  on   commercially   reasonable   terms.  If  the  Company  does  not
successfully amend these credit facilities, it would remain in technical default
of its bank loans and the lenders  would retain their rights and remedies  under
the existing credit agreements.  As long as the lenders choose not to accelerate
any principal payments, the Company would continue to operate in default for the
near term.  However,  the Company will likely need to raise  additional funds to
restructure its debt obligations and to operate its business for the long term.

         There can be no assurance  that the Company will be able to secure such
financial  resources on commercially  reasonable terms. If the Company is unable
to obtain adequate  financing,  it could be required to significantly  reduce or
possibly suspend its operations,  and/or to sell additional  securities on terms
that would be highly dilutive to current stockholders.

                                      -21-

<PAGE>


PART II. OTHER INFORMATION

         ITEM 1. Legal Proceedings-Not Applicable.

         ITEM 2. Changes in Securities-Not Applicable.

         ITEM 3. Defaults Upon Senior Securities-

                  The size of the Company's  second quarter of 1998 net loss has
         resulted in a default under certain  financial  covenants  contained in
         the Company's various bank credit facilities. The Company currently has
         $260 million of unsecured bank  borrowings  outstanding.  No additional
         borrowing  capacity is available as a result of the technical  default.
         The  Company  is not  in  payment  default  under  any  of  its  credit
         facilities.  The Company is currently  negotiating with its lenders for
         amendments to the existing credit facilities.

         ITEM  4.  Submission  of  Matters  to a Vote  of  Security  Holders-Not
                   Applicable.

                  (a)      The Annual Meeting of  Stockholders  was held May 25,
                           1999.

                  (b)      The  meeting  included  the  election of the Board of
                           Directors,  submitted  as Item No. 1, whose names are
                           as follows:

                           Tu Chen
                           Stephen C. Johnson
                           Chris A. Eyre
                           Irwin Federman
                           George A. Neil
                           Max Palevsky
                           Michael R. Splinter
                           Anthony Sun
                           Masayoshi Takebayashi

                  (c)      Other matters voted upon at the stockholders  meeting
                           were:

                           Item No. 2, Approval of an amendment to the Company's
                           1988  Employee  Stock  Purchase  Plan to increase the
                           number of shares  issuable  thereunder  by  2,550,000
                           shares;

                           Item No.  3,  Renewal  of  authorization  to sell and
                           issue up to $250,000,000 of Common Stock in equity or
                           equity-linked  private transactions from time to time
                           until October 1, 2000 at a price below book value but
                           at or above  the  then  current  market  value of the
                           Common Stock;

                           Item No. 4, Approval of an amendment to the Company's
                           Restated  1987  Stock  Option  Plan to  increase  the
                           number of stock options granted to non-employee Board
                           members under the Automatic Option Grant Program from
                           7,500 to 12,000  upon  re-election  to the Board each
                           year; and

                           Item No. 5,  Ratification of the Appointment of Ernst
                           & Young LLP as the Company's Independent Auditors for
                           the year ended January 2, 2000.

                                      -22-

<PAGE>


                  Shares of Common Stock voted were as follows:


Item No. 1
(Election of Board of Directors)
                                     Total Vote For      Total Vote Withheld
                                      Each Director      From Each Director
                                      -------------      ------------------
Tu Chen                                49,189,459             1,164,498
Stephen C. Johnson                     49,204,927             1,149,030
Chris A. Eyre                          49,202,932             1,151,025
Irwin Federman                         42,485,102             7,868,855
George A. Neil                         49,205,645             1,148,312
Max Palevsky                           42,477,516             7,876,441
Michael R. Splinter                    49,203,710             1,150,247
Anthony Sun                            42,148,308             8,205,649
Masayoshi Takebayashi                  49,211,340             1,142,617


<TABLE>
<CAPTION>
                                                                                                                            Broker
                                                              For                Against              Abstain              Non-Vote
                                                           ----------           ----------           ----------           ----------
<S>                                                        <C>                   <C>                     <C>              <C>
Item No. 2
(Amendment to 1988
Employee Stock Purchase
Plan)                                                      39,490,535           10,778,148               83,374                1,900

Item No. 3
(Renew authorization
to sell up to $250 million
of equity below book
value)                                                     29,726,612            2,407,519               96,951           18,122,875

Item No. 4
(Amendment to 1987
Restated Stock Option
Plan)                                                      37,093,314           13,175,921               82,822                1,900

Item No. 5
(Selection of
Independent Auditors)                                      50,053,519              257,033               43,405                 --
</TABLE>


                  (d)      Not Applicable

                                      -23-

<PAGE>


         ITEM 5. Other Information-Not Applicable.

         ITEM 6. Exhibits and Reports on Form 8-K

                  a) Exhibits

                  Exhibit 10.1.13--Asset  Purchase Agreement between the Company
                  and  Western   Digital   Corporation   dated  April  8,  1999.
                  (Confidential treatment requested as to certain portions.)

                  Exhibit  10.1.14--Volume  Purchase Agreement dated as of April
                  8,  1999  by and  between  the  Company  and  Western  Digital
                  Corporation.  (Confidential  treatment requested as to certain
                  portions.)

                  Exhibit 27--Financial Data Schedule.

                  b) Reports on Form 8-K

                  On July 7, 1999 the  Company  filed  Form 8-K  containing  the
                  contents of its press  release  dated June 30,  1999  entitled
                  "Komag Updates Second Quarter 1999 Outlook".

                                      -24-

<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                               KOMAG, INCORPORATED
                                  (Registrant)



DATE:  August 4, 1999               BY: /s/ William L. Potts, Jr.
     ------------------                ---------------------------
                                    William L. Potts, Jr.
                                    Senior Vice President and
                                    Chief Financial Officer



DATE:  August 4, 1999               BY:  /s/ Stephen C. Johnson
     ------------------                ---------------------------
                                    Stephen C. Johnson
                                    President and
                                    Chief Executive Officer

                                      -25-