<PAGE>   1
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                              --------------------

                                    FORM 10-Q
(Mark One)

[X]      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934.

                  For the quarterly period ended June 30, 1998


[ ]      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: 0-11778

                              --------------------

                          SEEQ TECHNOLOGY INCORPORATED
             (Exact name of registrant as specified in its charter)

                Delaware                                       94-2711298
     (State or other jurisdiction of                      (I.R.S. Employer
      incorporation or organization)                      Identification No.)

                              47200 Bayside Parkway
                            Fremont, California 94538
                                 (510) 226-7400
             (Address, including zip code, of Registrant's principal
          executive offices and telephone number, including area code)

                              --------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                 Yes [X] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, $0.01 par value                         30,726,879
  (Class of common stock)                  (Shares outstanding at June 30, 1998)

--------------------------------------------------------------------------------

This report on Form 10-Q, including all exhibits, contains 14 pages.



                                       1
<PAGE>   2

                          SEEQ TECHNOLOGY INCORPORATED

                                    FORM 10-Q

                                Table of Contents


<TABLE>
<CAPTION>
                                                                                                            PAGE
<S>                                                                                                         <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Financial Statements...............................................................        3

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.......        8


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings............................................................................       12

Item 2.  Changes in Securities........................................................................       13

Item 3.  Defaults upon Senior Securities..............................................................       13

Item 4.  Submission of Matters to a Vote of Security Holders..........................................       13

Item 5.  Other Information............................................................................       13

Item 6.  Exhibits and Reports on Form 8-K.............................................................       13
</TABLE>



                                       2

<PAGE>   3

This Quarterly Report of Form 10-Q may contain forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in any such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the captions "Legal Proceedings" and "Factors Affecting
Operating Results" contained herein and under the caption "Business Risks" in
the Company's fiscal 1997 annual report on Form 10-K.

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS



                          SEEQ TECHNOLOGY INCORPORATED
                       CONDENSED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                        Three months ended                  Nine months ended
                                                      Jun. 30,         Jun. 30,         Jun. 30,         Jun. 30,
                                                        1998             1997             1998             1997
<S>                                                   <C>              <C>              <C>              <C>     
Revenues                                              $  6,171         $  7,611         $ 21,603         $ 22,266
Cost of revenues                                         3,999            4,591           12,624           14,210
                                                      --------         --------         --------         --------

Gross profit                                             2,172            3,020            8,979            8,056
                                                      --------         --------         --------         --------

Operating expense
         Research and development                        1,097              899            3,019            2,581
         Marketing, general and administrative           1,814            1,277            4,793            3,973
                                                      --------         --------         --------         --------
Total operating expenses                                 2,911            2,176            7,812            6,554
                                                      --------         --------         --------         --------

Income (loss) from operations                             (739)             844            1,167            1,502
Interest expense                                           (95)             (96)            (263)            (266)
Interest and other income, net                             159               87              458              268

Income (loss) before income taxes                         (675)             835            1,362            1,504
Income tax (provision), benefit                             20              (24)              36              (45)
                                                      --------         --------         --------         --------

Net income (loss)                                     $   (655)        $    811         $  1,398         $  1,459
                                                      ========         ========         ========         ========


Net income (loss) per share:
   Basic                                              $  (0.02)        $   0.03         $   0.05         $   0.05
   Diluted                                            $  (0.02)        $   0.03         $   0.04         $   0.05

Shares used in per share calculation:
   Basic                                                30,714           30,304           30,604           30,288
   Diluted                                              30,714           31,284           32,223           31,628
-----------------------------------------------------------------------------------------------------------------
</TABLE>



           See accompanying notes to condensed financial statements.



                                       3
<PAGE>   4

                          SEEQ TECHNOLOGY INCORPORATED
                            CONDENSED BALANCE SHEETS
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------------------
                                                                 June 30,     September 30,
(Thousands, except share amounts)                                  1998           1997
-------------------------------------------------------------------------------------------
<S>                                                              <C>          <C>    
ASSETS
Current assets:
Cash and cash equivalents                                        $ 9,898        $ 6,937
Accounts receivable, less allowances                               5,200          7,284
Inventories                                                        4,694          3,176
Deferred tax asset                                                 2,029          1,950
Other current assets                                                 401            332
---------------------------------------------------------------------------------------
Total current assets                                              22,222         19,679
---------------------------------------------------------------------------------------

Property and equipment, net                                        6,806          4,384
Other assets                                                       2,849          2,977
---------------------------------------------------------------------------------------
                                                                 $31,877        $27,040
=======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                                 $ 2,610        $ 1,582
Accrued salaries, wages and employee benefits                        602            698
Other accrued liabilities                                            779            997
Deferred income on sales to distributors                             224            146
Current portion of capitalized lease obligations                   1,661          1,091
---------------------------------------------------------------------------------------
Total current liabilities                                          5,876          4,514
---------------------------------------------------------------------------------------
Long-term liabilities                                              4,921          3,308
---------------------------------------------------------------------------------------
Total stockholders' equity                                        21,080         19,218
---------------------------------------------------------------------------------------
                                                                 $31,877        $27,040
=======================================================================================
</TABLE>



           See accompanying notes to condensed financial statements.



                                       4
<PAGE>   5

                          SEEQ TECHNOLOGY INCORPORATED
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                          Nine months ended
                                                                       -----------------------
                                                                       Jun. 30,        Jun. 30,
                                                                         1998            1997
                                                                       -------         -------
<S>                                                                    <C>             <C>    
OPERATING ACTIVITIES:
Net income                                                             $ 1,398         $ 1,459
Adjustments to reconcile net income to cash provided by
operating activities:
         Depreciation and amortization                                   1,402           1,324
         Deferred taxes                                                    (79)             --
         (Gain) on equipment disposal                                       --             (62)
         Changes in assets and liabilities:
                  Accounts receivable                                    2,084           1,981
                  Inventories                                           (1,518)            749
                  Prepaid expenses and other assets                       (211)           (279)
                  Accounts payable                                       1,028          (3,853)
                  Accrued liabilities and long term obligations           (361)             17

                                                                       -------         -------
Net cash provided by (used for) operating activities                     3,743           1,336
                                                                       -------         -------

INVESTING ACTIVITIES:
Capital expenditures                                                      (324)           (146)
Proceeds on disposal of equipment                                           --              96
                                                                       -------         -------
Net cash provided by (used for) investing activities                      (324)            (50)
                                                                       -------         -------

FINANCING ACTIVITIES:
Payments of capital lease obligations                                     (922)           (742)
Proceeds from issuance of stock                                            464             133
                                                                       -------         -------
Net cash used for financing activities                                    (458)           (609)
                                                                       -------         -------

Net increase (decrease) in cash and cash equivalents                     2,961             677
Cash and cash equivalents at beginning of period                         6,937           3,974
                                                                       -------         -------
Cash and cash equivalents at end of period                             $ 9,898         $ 4,651
                                                                       =======         =======
</TABLE>



           See accompanying notes to condensed financial statements.



                                       5
<PAGE>   6

                          SEEQ TECHNOLOGY INCORPORATED
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1. BASIS OF PRESENTATION

         The accompanying unaudited condensed financial statements of SEEQ
Technology Incorporated ("SEEQ" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements and should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report to
Stockholders for the fiscal year ended September 30, 1997. These financial
statements reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position and results of operations as of and for the periods indicated.

         The results of operations for the nine months ended June 30, 1998 are
not necessarily indicative of the results expected for the year ending September
30, 1998.

         For purposes of presentation, the Company has shown its fiscal quarters
as ending on December 31, March 31, June 30 and September 30; whereas, in fact,
the Company operates on a 52/53-week fiscal year ending on the last Sunday in
September of each year. The fiscal quarter ends are actually December 28, March
29, June 28 and September 27 for the year ending September 30, 1998, and
actually December 29, March 30, June 29 and September 28 for the year ending
September 30, 1997


NOTE 2. INVENTORIES

         Inventories were comprised of the following:

<TABLE>
<CAPTION>
                                 Jun. 30,        Sep. 30,
                                   1998            1997
                                 --------        --------
                                      (in thousands)
<S>                              <C>             <C>     
          Work in process        $  1,696        $    437
          Finished goods            2,998           2,739
                                 --------        --------
                                 $  4,694        $  3,176
                                 ========        ========
</TABLE>

NOTE 3. NON-RECURRING PRODUCTION TRANSFER COSTS

         Non-recurring costs such as tooling and engineering costs resulting
from transferring production of current products to new foundries are
capitalized and amortized to cost of revenues over the shorter of: the remaining
life of the product, the term of the foundry agreement or two years.
Non-recurring costs which are associated with the development of new products
are expensed as research and development costs when incurred. During the nine
month period ended June 30, 1998 the Company did not capitalize any of such
costs. During the nine month period ended June 30, 1997 the Company capitalized
$250,000 of non-recurring production transfer costs. Amortization of aggregate
capitalized non-recurring costs for the nine month periods ended June 30, 1998
and June 30, 1997 was $270,000 and $381,000, respectively.



                                       6
<PAGE>   7

NOTE 4. NET INCOME (LOSS) PER SHARE


         The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128") during the first quarter of fiscal 1998.
This statement simplifies the standards for computing earnings per share (EPS)
previously defined in Accounting Principles Board Opinion No. 15 "Earnings Per
Share." All prior-period earnings per share data has been restated in accordance
with SFAS 128. SFAS 128 requires presentation of both Basic EPS and Diluted EPS
on the face of the income statement. Basic EPS is computed by dividing net
income available to common stockholders (numerator) by the weighted average
number of common shares outstanding (denominator) during the period. Diluted EPS
gives effect to all dilutive potential common shares outstanding during the
period including stock options, using the treasury stock method. In computing
Diluted EPS, the average stock price for the period is used in determining the
number of shares assumed to be purchased from the exercise of stock options.

         Following is a reconciliation of the numerators and denominators of the
Basic and Diluted EPS computations for the periods presented below:


                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                             Three Months Ended               Nine Months Ended
                                                          -------------------------        ------------------------
                                                          June 30,         June 30,        June 30,        June 30,
                                                            1998             1997            1998            1997
                                                          --------         --------        --------        --------
<S>                                                       <C>              <C>             <C>             <C>     
Net income (loss) available to common stockholders
(numerator)                                                $  (655)        $    811        $  1,398        $  1,459

Shares calculation (denominator):

Weighted average shares outstanding                         30,714           30,304          30,604          30,288

Effect of dilutive securities:
Options                                                         --              980           1,619           1,340
                                                          --------         --------        --------        --------

Average shares outstanding assuming dilution                30,714           31,284          32,223          31,628
                                                          ========         ========        ========        ========

Basic earnings (loss) per share                            $ (0.02)        $   0.03        $   0.05        $   0.05
                                                          ========         ========        ========        ========

Diluted earnings (loss) per share                          $ (0.02)        $   0.03        $   0.04        $   0.05
                                                          ========         ========        ========        ========
</TABLE>


         Options to purchase 4,320,000 shares of common stock were outstanding
during the three month period ended June 30, 1998, but were not included in the
computations of diluted EPS as the Company was in a loss situation. Options to
purchase 1,258,000 shares of common stock were outstanding during the three
month period ended June 30, 1997, but were not included in the computations of
diluted EPS as the option exercise price was higher than the average market
price of the common shares. Options to purchase 418,000 and 974,000 shares of
common stock were outstanding during the nine month periods ended June 30, 1998
and June 30, 1997 respectively but were not included in the computations of
diluted EPS as the option exercise price was higher than the average market
price of the common shares.



                                       7
<PAGE>   8

NOTE 5.  RECENTLY ISSUED ACCOUNTING STANDARD

         In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). FAS 133 establishes a new
model for accounting for derivatives and hedging activities and supercedes and
amends a number of existing accounting standards. SFAS 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. Adopting the provisions of SFAS 133
is not expected to have a material effect on the Company's consolidated
financial statements, which will be effective for the Company's fiscal 2000.


NOTE 6. LITIGATION

         On November 28, 1995, Level One Communications Incorporated ("Level
One") filed a complaint against the Company, in the United States District Court
of Northern California, alleging patent infringement. In the complaint, Level
One claims that the Company has used and sold products in violation of two of
Level One's patents. Level One seeks immediate and permanent injunctive relief
preventing the Company from making, using, or selling any devices that infringe
such patents and unspecified damages. The Company intends to vigorously contest
all of Level One's claims. Based on the Company's review to date, management
believes that it has meritorious defenses to the claims asserted by Level One;
however, there can be no assurance that the outcome of these legal proceedings
will not have a material adverse effect on the Company's financial position or
results of operations. Patent litigation is often highly complex, can extend for
a protracted period of time, can involve substantial cost to the Company and may
divert the attention of the Company's management and technical personnel, which
can substantially increase the cost of such litigation. There can be no
assurance that such costs and diversion of resources will not have a material
adverse effect on the Company's business, financial condition and results of
operations.


         On January 21, 1998, the Court ruled upon certain motions filed by
SEEQ. SEEQ had filed motions to declare all asserted claims of the Level One
patents in the suit as invalid in view of certain prior art. As to these
motions, the Court denied SEEQ's request. SEEQ also had requested leave to amend
its counterclaim to add SEEQ's U.S. Patent 5,504,738. SEEQ asserts that Level
One's products, including the LXT 970 product, infringe the `738 patent in the
manner in which these products incorporate an auto-negotiate feature. The Court
granted SEEQ's motion to amend. Currently, the Level One litigation involves two
Level One patents and SEEQ's `738 patent. The Court has set a trial date for
August, 1998. No other motions are currently pending.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


         This Quarterly Report on Form 10-Q contains forward-looking statements
that involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in any such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed under the captions "Legal Proceedings" and "Factors Affecting
Operating Results" contained herein and under the caption "Business Risks" in
the Company's fiscal 1997 annual report on Form 10-K.

         The following discussion should be read in conjunction with the Interim
Condensed Financial Statements and Notes thereto and the SEEQ Technology
Incorporated fiscal 1997 annual report on Form 10-K.



                                       8
<PAGE>   9

RESULTS OF OPERATIONS

         Revenues

         Net revenues were $6,171,000 in the third quarter of fiscal 1998, a
decrease of $1,440,000 or 19% compared to net revenues of $7,611,000 for the
third quarter of fiscal 1997. Net revenues were $21,603,000 in the nine month
period ended June 30, 1998 compared to $22,266,000 for the nine month period
ended June 30, 1997, a decrease of $663,000 or 3%. In the third quarter of
fiscal 1998, products servicing the Fast Ethernet market accounted for
approximately 79% of revenues compared to 66% of revenues for the third quarter
of fiscal 1997. Revenues from Fast Ethernet products were approximately 73% and
53% of total revenues for the nine month periods ended June 30, 1998 and 1997,
respectively.

         Gross Product Margins

         The Company includes in cost of revenues all costs associated with
subcontractor manufacturing, electrical testing, subcontractor assembly and
final test of its integrated circuits and subsystems, warehousing, shipping,
product returns and reserves for inventory obsolescence. Allowances for product
returns are netted against revenues. Gross profit for the third quarter of
fiscal 1998 was $2,172,000 or 35% of net revenues, a decrease of $848,000 from
$3,020,000 or 40% of net revenues in the third quarter of fiscal 1997. The
decrease in gross profit percentage was primarily due to changes in product mix,
higher yield variances on certain new products and higher inventory reserves,
partially offset by better factory utilization. For the nine month period ended
June 30, 1998, the gross profit margin was $8,979,000 or 42% of net revenues,
compared to $8,056,000 or 36% of net revenues for the comparable period of
fiscal 1997. The increase in gross profit margin is primarily attributable to
changes in product mix, a shift to higher margin products and lower production
costs, all of which were partially offset by the under-utilization of
manufacturing capacity. Gross margins in future periods will be affected
primarily by revenue levels and changes in product mix, average selling prices,
factory utilization, wafer yields, the introduction of new products, and changes
in manufacturing costs.

         Research and Development

         Research and development expenditures increased $198,000 from $899,000,
or 12% of revenues in the third quarter of fiscal 1997, to $1,097,000, or 18% of
revenues in the third quarter of fiscal 1998. For the nine month periods ended
June 30, 1997 and 1998, research and development expenses increased $438,000
from $2,581,000, or 12% of revenues, to $3,019,000, or 14% of revenues,
respectively. These increases were primarily due to an increase in payroll,
outside consulting services, and equipment depreciation, partly offset by lower
tooling costs. The Company expects that the level of research and development
spending will increase in absolute dollars in the next several quarters as a
result of increased development efforts on new LAN products, but may vary as a
percentage of net revenues.

         Marketing, General and Administrative Expenses

         Marketing, general and administrative expenses increased $537,000 from
$1,277,000, or 17% of revenues in the third quarter of fiscal 1997, to
$1,814,000, or 29% of revenues in the third quarter of fiscal 1998. For the nine
month periods ended June 30, 1997 and 1998, marketing, general and
administrative expenses increased $820,000 from $3,973,000, or 18% of revenues,
to $4,793,000, or 22% or revenues, respectively. These increases are primarily
attributable to higher legal costs incurred in defending a patent infringement
lawsuit. Legal costs for the Company's fourth fiscal quarter are expected to be
similar to, or higher than in the third quarter. The Company anticipates that
the level of marketing, general and administrative expenses will vary in future
periods based on expected revenue growth.

         Interest and other, net

         Interest and other income, net increased from $87,000 in the third
quarter of fiscal 1997 to $159,000 in the third quarter of fiscal 1998 and
increased from $268,000 for the nine months ended June 30, 1997 to $458,000 for
the nine months ended June 30, 1998. The fluctuations in interest income are



                                       9
<PAGE>   10

directly affected by average cash balances. Interest expense decreased from
$96,000 in the third fiscal quarter of 1997 to $95,000 in the third quarter of
fiscal 1998. Interest expense decreased from $266,000 for the nine months ended
June 30, 1997 to $263,000 for the nine months ended June 30, 1998.

         Income Taxes

         The effect of income taxes changed from a $24,000 provision in the
third quarter of fiscal 1997 to a benefit of $20,000 in the third quarter of
fiscal 1998. For the first nine months of fiscal 1998 the Company recognized a
portion of its deferred tax asset in the amount of $79,000. This was partially
offset by a provision of $43,000 for income taxes. For the first nine months of
fiscal 1997 the Company recorded a provision of $45,000 for income taxes. The
Company's provisions were computed by applying the estimated annual tax rate to
income taxes, taking into account net operating loss carryforwards and
alternative minimum taxes.



                                       10
<PAGE>   11

FACTORS AFFECTING OPERATING RESULTS

         The Company's quarterly operating results have varied significantly in
the past and are likely to vary significantly in the future, depending on a
number of factors, many of which are outside the control of the Company. A
complete description of risk factors is contained in the Company's 1997 annual
report on Form 10-K, in the section entitled "Risk Factors That May Affect
Future Results." These factors include, among others, customer concentration,
the timing of introduction of new products by the Company and its competitors,
changes in the markets addressed by the Company's products, market acceptance of
the Company's and its customers' products, the volume and timing of orders
received, changes in the Company's product mix and customer base, the timing and
extent of research and development expenditures, the availability and cost of
semiconductor wafers from outside foundries, fluctuations in manufacturing
yields, product obsolescence, price erosion, competitive factors, litigation
expenses, cyclical semiconductor industry conditions and general economic
conditions.

         The Company's net revenue and cost of revenues may vary depending upon
the mix of products sold. Any unfavorable change in manufacturing yields or
product mix, delays in new product introductions, under-utilization of
manufacturing capacity, increased price competition or other factors could have
a material adverse effect on the Company's operating results and financial
condition. Historically, average selling prices in the semiconductor industry
have decreased over the life of any particular product. There can be no
assurance that the average selling prices of the Company's current or future
products will not be subject to significant pricing pressures. In addition, the
Company's business is characterized by short-term orders and shipment schedules,
and customer orders typically can be cancelled or rescheduled without
significant penalty to the customer. Due to the absence of significant
non-cancelable backlog, the Company typically plans its production and inventory
levels based on internal forecasts of customer demand, which is highly
unpredictable and can fluctuate substantially. The Company is also limited in
its ability to reduce costs quickly in response to any revenue shortfalls, which
could have a material adverse effect on the Company's business, operating
results and financial condition. Due to the foregoing factors, it is possible
that in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's Common Stock would likely be materially adversely affected.

         The "Year 2000 issue" arises because most computer systems and programs
were designed to handle only a two-digit year, not a four-digit year. When the
Year 2000 begins, these computers may interpret "00" as the year 1900 and could
either stop processing date-related computations or could process them
incorrectly. The Company has recently updated its information systems and
accordingly does not anticipate any internal Year 2000 issues from its own
information systems, databases or programs. However, the Company could be
adversely impacted by Year 2000 issues faced by major distributors, suppliers,
customers, vendors and financial service organizations with which the Company
interacts.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has satisfied its cash requirements principally through
cash flow from operations, borrowings under bank lines of credit, capital lease
financing and the public and private sale of securities.

         The Company believes that existing sources of liquidity and anticipated
cash flow from operations will be adequate to satisfy its cash requirements at
least through the end of fiscal 1999. However, there can be no assurance that
the Company will have adequate resources to satisfy such requirements. It may
become necessary for the Company to raise funds from debt and/or equity
financing. There can be no assurance that such funds will be available on terms
acceptable to the Company, if at all. Issuance of additional equity securities
could result in dilution to stockholders. The inability to fund capital
requirements would have a material adverse effect on the Company's business,
financial condition and results of operations.

         The Company's cash and cash equivalents balance increased from
$6,937,000 as of September 30, 1997 to $9,898,000 as of June 30, 1998, primarily
from cash provided by operating activities, and partially offset by capital
expenditures and payments of capital lease obligations.



                                       11
<PAGE>   12

         Operating Activities

         Cash flows provided by operating activities were $3,743,000 for the
nine months ended June 30, 1998 compared to $1,336,000 for the nine months ended
June 30, 1997. The increase is primarily attributable to the timing of inventory
purchases and payments of trade accounts payable.

         Investing Activities

         Cash flows used for investing activities were $324,000 during the first
nine months of fiscal 1998, compared to $50,000 for the first nine months of
fiscal 1997, due primarily to an increase in capital expenditures.

         Financing Activities

         Cash flows used for financing activities were $458,000 in the nine
month period ended June 30, 1998 compared to $609,000 in the nine month period
ended June 30, 1997. Net proceeds from the issuance of stock pursuant to stock
options and the Company's employee stock purchase plan were $464,000 for the
first nine months of fiscal 1998 compared to $133,000 for the first nine months
of fiscal 1997. Principal payments against capital lease obligations were
$922,000 for the nine months ended June 30, 1998 compared to $742,000 for the
three months ended June 30, 1997.

         In August 1996, the Company entered into a one-year revolving line of
credit agreement with Silicon Valley Bank. This credit agreement was renewed by
the Company in July 1997. Under the terms of the revolving line of credit, the
Company can borrow the lesser of $7,000,000 or an amount determined by a formula
applied to eligible accounts receivable, at a variable interest rate equal to
the prime rate plus 0.25%. The revolving line of credit is secured by a security
interest in the Company's assets, including intellectual property and expires
August 17, 1998. The loan agreement requires the Company to remain profitable
each fiscal quarter and to maintain certain quarterly financial ratios. The
Company has received a waiver for the quarterly profitability requirement in the
current quarter. The loan agreement also requires the Company to maintain a
level of tangible net worth which, in effect, limits the ability of the Company
to make payments of cash dividends. There were no borrowings outstanding under
this revolving line of credit as of June 30, 1998. The Company is currently
negotiating a renewal to the line of credit agreement.


PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On November 28, 1995, Level One Communications Incorporated ("Level
One") filed a complaint against the Company, in the United States District Court
of Northern California, alleging patent infringement. In the complaint, Level
One claims that the Company has used and sold products in violation of two of
Level One's patents. Level One seeks immediate and permanent injunctive relief
preventing the Company from making, using, or selling any devices that infringe
such patents and unspecified damages. The Company intends to vigorously contest
all of Level One's claims. Based on the Company's review to date, management
believes that it has meritorious defenses to the claims asserted by Level One;
however, there can be no assurance that the outcome of these legal proceedings
will not have a material adverse effect on the Company's financial position or
results of operations. Patent litigation is often highly complex, can extend for
a protracted period of time, can involve substantial cost to the Company and may
divert the attention of the Company's management and technical personnel, which
can substantially increase the cost of such litigation. There can be no
assurance that such costs and diversion of resources will not have a material
adverse effect on the Company's business, financial condition and results of
operations.


         On January 21, 1998, the Court ruled upon certain motions filed by the
Company. The Company had filed motions to declare all asserted claims of the
Level One patents in the suit as invalid in view of certain prior art. As to
these motions, the Court denied the Company's request. The Company also



                                       12
<PAGE>   13

requested leave to amend its counterclaim to add the Company's U.S. Patent
5,504,738, asserting that Level One's products, including the LXT 970 product,
infringe the `738 patent in the manner in which these products incorporate an
auto-negotiate feature. The Court granted the Company's motion to amend.
Currently, the Level One litigation involves two Level One patents and The
Company's `738 patent. The Court has set a trial date for August, 1998. [No
other motions are currently pending.]

ITEM 2.  CHANGES IN SECURITIES

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

ITEM 5.  OTHER INFORMATION

         Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits:

                    27.1  Financial Data Schedule

         (b) No reports on Form 8-K were filed for the period for which this
report is being filed.



                                       13
<PAGE>   14

                                   SIGNATURES



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




                                        SEEQ TECHNOLOGY INCORPORATED
                                        (Registrant)



Dated:    August 11, 1998               By:

                                         /s/ Phillip J. Salsbury
                                        ----------------------------------------
                                        Phillip J. Salsbury
                                        President and Chief Executive Officer



Dated:    August 11, 1998               By:

                                         /s/ Gary R. Fish
                                        ----------------------------------------
                                        Gary R. Fish
                                        Vice President, Finance, Chief Financial
                                        Officer and Secretary



                                       14
<PAGE>   15


                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT 
NUMBER                             DESCRIPTION
------                             -----------
<S>                                <C>
 27.1                              Financial Data Schedule
</TABLE>