Use these links to rapidly review the documentIndex

---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|ý                                            | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
|-------------------------------------------- | ----------------------------------------------------------------------------------------
|For the quarterly period ended June 27, 2003
|or                                          
|o                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to          

Commission file number 1-7534



STORAGE TECHNOLOGY CORPORATION(Exact name of registrant as specified in its charter)

Delaware

84-0593263(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)One StorageTek Drive, Louisville, Colorado

80028-4309(Address of principal executive offices)

(Zip Code)


Registrant's
telephone number, including area code303-673-5151

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. ý Yes       o No

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
ý Yes      o No   The registrant had 109,543,525 shares
of common stock outstanding as of August 4, 2003.

---

# STORAGE TECHNOLOGY
CORPORATION INDEX TO FORM 10-Q June 27, 2003

|                                                                                                                       | PAGE
|---------------------------------------------------------------------------------------------------------------------- | ----
|PART I - FINANCIAL INFORMATION                                                                                         |     
|Item 1 - Financial Statements                                                                                          |     
|Consolidated Balance Sheets                                                                                            |     
|Consolidated Statements of Operations                                                                                  |     
|Consolidated Statements of Cash Flows                                                                                  |     
|Consolidated Statements of Comprehensive Income                                                                        |     
|Notes to Consolidated Financial Statements                                                                             |     
|Item 2 - Managements Discussion and Analysis of Financial                         Condition and Results of Operations |     
|Item 3 - Quantitative and Qualitative Disclosures about Market Risk                                                    |     
|Item 4 - Controls and Procedures                                                                                       |     
|PART II - OTHER INFORMATION                                                                                            |     
|Item 1 - Legal Proceedings                                                                                             |     
|Item 4 - Submission of Matters to a Vote of Security Holders                                                           |     
|Item 6 - Exhibits and Reports on Form 8-K                                                                              |     
|Signatures                                                                                                             |     

2

---

# STORAGE TECHNOLOGY
CORPORATIONCONSOLIDATED BALANCE SHEETS (In Thousands, Except Share Amounts)

|                                                                                                                                                                             | 06/27/03 |  | 12/27/02 |          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- |  | -------- | ---------
|
|ASSETS                                                                                                                                                                       |          |  |          |          
|Current assets:                                                                                                                                                              |          | 
|Cash and cash equivalents                                                                                                                                                    |          |  | $        | 806,153  
|Accounts receivable                                                                                                                                                          |          |  |          | 491,373  
|Inventories                                                                                                                                                                  |          |  |          | 122,334  
|Deferred income tax assets                                                                                                                                                   |          |  |          | 115,245  
|Other current assets                                                                                                                                                         |          |  |          | 5,349    
|                                                                                                                                                                             |          |  |          |          
|Total current assets                                                                                                                                                         |          |  |          | 1,540,454
|Property, plant, and equipment                                                                                                                                               |          |  |          | 221,419  
|Spare parts for maintenance                                                                                                                                                  |          |  |          | 44,333   
|Deferred income tax assets                                                                                                                                                   |          |  |          | 102,200  
|Other assets                                                                                                                                                                 |          |  |          | 124,906  
|                                                                                                                                                                             |          |  |          |          
|Total assets                                                                                                                                                                 |          |  | $        | 2,033,312
|                                                                                                                                                                             |          |  |          |          
|LIABILITIES                                                                                                                                                                  |          | 
|Current liabilities:                                                                                                                                                         |          |  |          |          
|Current portion of long-term debt                                                                                                                                            |          |  | $        | 989      
|Accounts payable                                                                                                                                                             |          |  |          | 100,393  
|Accrued liabilities                                                                                                                                                          |          |  |          | 421,115  
|Income taxes payable                                                                                                                                                         |          |  |          | 222,534  
|Other current liabilities                                                                                                                                                    |          |  |          | 39,795   
|                                                                                                                                                                             |          |  |          |          
|Total current liabilities                                                                                                                                                    |          |  |          | 784,826  
|Long-term debt                                                                                                                                                               |          |  |          | 10,794   
|                                                                                                                                                                             |          |  |          |          
|Total liabilities                                                                                                                                                            |          |  |          | 795,620  
|                                                                                                                                                                             |          |  |          |          
|Commitments and Contingencies (Note 4)                                                                                                                                       |          | 
|                                                                                                                                                                            
|STOCKHOLDERS EQUITY                                                                                                                                                         |         
|Common stock, $0.10 par value, 300,000,000 shares authorized;
        109,526,407 shares issued at June 27, 2003, and
        106,849,329 shares issued at December 27, 2002 |          |  |          | 10,953   
|Capital in excess of par value                                                                                                                                               |          |  |          | 958,129  
|Retained earnings                                                                                                                                                            |          |  |          | 306,720  
|Accumulated other comprehensive loss                                                                                                                                         |          |  |          | (16,366  
|Treasury stock, 260,496 shares at June 27, 2003,
        and 238,276 shares at December 27, 2002, at cost                                                                    |          |  |          | (4,949   
|Unearned compensation                                                                                                                                                        |          |  |          | (16,795  
|                                                                                                                                                                             |          |  |          |          
|Total stockholders equity                                                                                                                                                   |          |  |          | 1,237,692
|                                                                                                                                                                             |          |  |          |          
|Total liabilities and stockholders equity                                                                                                                                   |          |  | $        | 2,033,312
|                                                                                                                                                                             |          |  |          |          

The accompanying notes are an integral part of the consolidated financial statements.

3

---

# STORAGE TECHNOLOGY CORPORATION CONSOLIDATED STATEMENT
OF OPERATIONS (Unaudited)  (In Thousands, Except Per Share Amounts)

|                                               | Quarter Ended |  | Six Months Ended |        
|---------------------------------------------- | ------------- |  | ---------------- | -------
|
|Revenue:                                       |               |  |                  |        
|Storage products                               |               |  | $                | 313,150
|Storage services                               |               |  |                  | 214,113
|                                               |               |  |                  |        
|Total revenue                                  |               |  |                  | 527,263
|                                               |               |  |                  |        
|Cost of revenue:                               |               |  |                  |        
|Storage products                               |               |  |                  | 169,154
|Storage services                               |               |  |                  | 120,443
|                                               |               |  |                  |        
|Total cost of revenue                          |               |  |                  | 289,597
|                                               |               |  |                  |        
|Gross profit                                   |               |  |                  | 237,666
|Research and product development costs         |               |  |                  | 50,522 
|Selling, general, and administrative expense   |               |  |                  | 146,206
|                                               |               |  |                  |        
|Operating profit                               |               |  |                  | 40,938 
|Interest income                                |               |  |                  | 2,566  
|Interest expense                               |               |  |                  | (398   
|                                               |               |  |                  |        
|Income before income taxes                     |               |  |                  | 43,106 
|Provision for income taxes                     |               |  |                  | (13,000
|                                               |               |  |                  |        
|Net income                                     |               |  | $                | 30,106 
|                                               |               |  |                  |        
|EARNINGS PER COMMON SHARE                      |               | 
|Basic earnings per common share                |               |  | $                | 0.28   
|                                               |               |  |                  |        
|Weighted-average shares                        |               |  |                  | 107,653
|                                               |               |  |                  |        
|Diluted earnings per common share              |               |  | $                | 0.27   
|                                               |               |  |                  |        
|Weighted-average and dilutive potential shares |               |  |                  | 110,193
|                                               |               |  |                  |        

The
accompanying notes are an integral part of the consolidated financial statements.

4

---

# STORAGE TECHNOLOGY CORPORATIONCONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)(In Thousands)

|                                                     | Six Months Ended | 
|---------------------------------------------------- | ---------------- | 
|
|OPERATING ACTIVITIES                                 |                  | 
|Cash received from customers                         |                  | 
|Cash paid to suppliers and employees                 |                  | 
|Interest received                                    |                  | 
|Interest paid                                        |                  | 
|Income tax (paid) refunded                           |                  | 
|                                                     |                  | 
|Net cash provided by operating activities            |                  | 
|                                                     |                  | 
|INVESTING ACTIVITIES                                 |                  | 
|Purchases of property, plant, and equipment          |                  | 
|Proceeds from sale of property, plant, and equipment |                  | 
|Other assets                                         |                  | 
|                                                     |                  | 
|Net cash used in investing activities                |                  | 
|                                                     |                  | 
|FINANCING ACTIVITIES                                 |                  | 
|Repayments of credit facilities, net                 |                  | 
|Proceeds from employee stock plans                   |                  | 
|Proceeds from other debt                             |                  | 
|Repayments of other debt                             |                  | 
|                                                     |                  | 
|Net cash provided by (used in) financing activities  |                  | 
|                                                     |                  | 
|Effect of exchange rate changes on cash              |                  | 
|                                                     |                  | 
|Increase in cash and cash equivalents                |                  | 
|Cash and cash equivalents - beginning of the period  |                  | 
|                                                     |                  | 
|Cash and cash equivalents - end of the period        |                  | 
|                                                     |                  | 
|RECONCILIATION OF NET INCOME TO NET CASH             |                  | 
|PROVIDED BY OPERATING ACTIVITIES                     |                  | 
|Net income                                           |                  | 
|Depreciation and amortization expense                |                  | 
|Inventory writedowns                                 |                  | 
|Translation (gain) loss                              |                  | 
|Other non-cash adjustments to income                 |                  | 
|Decrease in accounts receivable                      |                  | 
|Increase in other current assets                     |                  | 
|(Increase) decrease in inventories                   |                  | 
|Increase in spare parts                              |                  | 
|Increase (decrease) in deferred income tax assets    |                  | 
|Increase (decrease) in accounts payable              |                  | 
|Decrease in accrued liabilities                      |                  | 
|Increase (decrease) in other current liabilities     |                  | 
|Increase in income taxes payable                     |                  | 
|                                                     |                  | 
|Net cash provided by operating activities            |                  | 
|                                                     |                  | 

The
accompanying notes are an integral part of the consolidated financial statements.

5

---

# STORAGE TECHNOLOGY
CORPORATION CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)(In Thousands)

|                                                                                                                                                                                           | Quarter Ended |  | Six Months Ended |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------- |  | ---------------- | ------
|
|Net income                                                                                                                                                                                 |               |  | $                | 30,106
|                                                                                                                                                                                           |               |  |                  |       
|Other comprehensive loss, net of tax:                                                                                                                                                      |               | 
|Unrealized gain on marketable securities:                                                                                                                                                  |              
|Holding gain,  net of tax expense of $152, $0,            $565, and $0                                                                                                                     |               |  |                  | 354   
|Reclassification  adjustment  for net gains included            in net income,  net of tax expense of $534, $0,           $534, and $0                                                     |               |  |                  | (1,245
|Foreign currency hedging contracts:                                                                                                                                                        |               | 
|Net loss on foreign  currency cash flow hedges,  net           of tax benefit of $5,626, $11,739, $8,662,           and $11,753                                                            |               |  |                  | (9,025
|Reclassification  adjustment  for net losses (gains)           included  in net  income,  net  of  tax  benefit            (expense)  of $2,974, $(1,143), $4,389, and            $(2,005) |               |  |                  | 4,771 
|                                                                                                                                                                                           |               |  |                  |       
|Other comprehensive loss, net of tax                                                                                                                                                       |               |  |                  | (5,145
|                                                                                                                                                                                           |               |  |                  |       
|Comprehensive income (loss)                                                                                                                                                                |               |  | $                | 24,961
|                                                                                                                                                                                           |               |  |                  |       

The
accompanying notes are an integral part of the consolidated financial statements.

6

---

# STORAGE TECHNOLOGY
CORPORATION

# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# (Unaudited)

# NOTE 1  BASIS OF
PREPARATION

The accompanying interim consolidated
financial statements of Storage Technology Corporation and its wholly owned subsidiaries
(StorageTek or the Company) have been prepared on substantially the same basis as the
Companys annual consolidated financial statements and should be read in conjunction
with the Companys Annual Report on Form 10-K for the year ended December 27, 2002.
In the opinion of management, the interim consolidated financial statements reflect all
adjustments necessary for the fair presentation of results for the periods presented, and
such adjustments are of a normal, recurring nature. Certain prior year amounts have been
reclassified to conform to the current year presentation.

The consolidated results for interim
periods are not necessarily indicative of expected results for the full fiscal year.

# NOTE 2 
STOCK-BASED COMPENSATION PLANS

The Company accounts for stock-based
compensation plans under the recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. Stock-based compensation cost related to
restricted stock is reflected in net income. No stock-based compensation cost related to
stock options is reflected in net income, as all options granted under those plans have an
exercise price equal to the market value of the underlying common stock on the date of
grant.

The following table illustrates the
effect on net income and earnings per share if the Company had applied the fair value
recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, to stock-based compensation (in
thousands, except per share amounts):

|                                                                                                                                         | Quarter Ended |  | Six Months Ended |       
|---------------------------------------------------------------------------------------------------------------------------------------- | ------------- |  | ---------------- | ------
|
|Net income, as reported                                                                                                                  |               |  | $                | 30,106
|                                                                                                                                         |               |  |                  |       
|Add: Stock-based compensation expense included in     reported net income, net of related tax effects                                    |               |  |                  | 1,158 
|                                                                                                                                         |               |  |                  |       
|Deduct: Total stock-based compensation expense    determined under fair value based method for all    awards, net of related tax effects |               |  |                  | (6,053
|                                                                                                                                         |               |  |                  |       
|Pro forma net income                                                                                                                     |               |  | $                | 25,211
|                                                                                                                                         |               |  |                  |       
|Earnings per share:                                                                                                                      |              
|Basic, as reported                                                                                                                       |               |  | $                | 0.28  
|Basic, pro forma                                                                                                                         |               |  | $                | 0.23  
|                                                                                                                                         |               |  |                  |       
|Diluted, as reported                                                                                                                     |               |  | $                | 0.27  
|Diluted, pro forma                                                                                                                       |               |  | $                | 0.23  

7

---

# NOTE 3 
INVENTORIES

Inventories, net of associated
reserves, consist of the following (in thousands):

|                | 06/27/03 |  | 12/27/02 |        
|--------------- | -------- |  | -------- | -------
|Raw materials   |          |  | $        | 23,103 
|Work-in-process |          |  |          | 31,319 
|Finished goods  |          |  |          | 67,912 
|                |          |  |          |        
|                |          |  | $        | 122,334
|                |          |  |          |        

# NOTE 4  LITIGATION

The Company is involved in a number
of pending legal proceedings that arise from time to time in the ordinary course of
business. Management believes that any liability as a result of adverse outcomes in such
proceedings would not have a material adverse effect on the financial condition of the
Company taken as a whole. However, the outcome of these actions is inherently difficult to
predict. In the event of an adverse outcome, the ultimate potential loss could have a
material adverse effect on the Companys financial condition or reported results of
operations in a particular quarter. An unfavorable decision, particularly in patent
litigation, could require material changes in production processes and products or result
in the Companys inability to ship products or components found to have violated
third-party patent rights.

# NOTE 5  FINANCING
ARRANGEMENTS

Effective July 31, 2003, the Company
reduced its existing $150.0 million revolving credit facility (the Revolver) to $75.0
million. The Revolver expires in October 2004. The interest rates for borrowing under the
Revolver are dependent on the Companys Total Debt to rolling four quarter Earnings
Before Interest Expense, Taxes, Depreciation, and Amortization (EBITDA) ratio and the term
of the outstanding borrowing. The rate ranges from the applicable LIBOR plus 1.75% to
2.50% or the agent banks base rate plus 0.00% to 0.50%. The Company pays a 0.50% per
annum commitment fee on any unused borrowings. The Company had no outstanding borrowings
under the Revolver as of June 27, 2003. The Revolver is secured by the Companys U.S.
accounts receivable and U.S. inventory, and contains certain financial and other
covenants, including restrictions on the payment of cash dividends on the Companys
common stock.

# NOTE 6  OPERATIONS
OF BUSINESS SEGMENTS

The Company is organized into two
reportable business segments based on the definitions provided in SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information: storage
products and storage services. The storage products segment includes sales of tape
products, disk products, network products, and other miscellaneous products. The storage
services segment includes maintenance and support services, as well as professional
services.

8

---

The Company does not have any
intersegment revenue, and segment operating performance is evaluated based on gross
profit. The aggregate gross profit by segment equals the consolidated gross profit, and
the Company does not allocate research and product development costs; selling, general,
and administrative expense; interest income; interest expense; or benefit (provision) for
income taxes to the segments. The following table shows revenue and gross profit by
segment (in thousands):

|                   | Quarter Ended |  | Six Months Ended |        
|------------------ | ------------- |  | ---------------- | -------
|
|Revenue:           |               |  |                  |        
|Storage products   |               |  | $                | 313,150
|Storage services   |               |  |                  | 214,113
|                   |               |  |                  |        
|Total revenue      |               |  | $                | 527,263
|                   |               |  |                  |        
|Gross profit:      |              
|Storage products   |               |  | $                | 143,996
|Storage services   |               |  |                  | 93,670 
|                   |               |  |                  |        
|Total gross profit |               |  | $                | 237,666
|                   |               |  |                  |        

The following table provides
supplemental financial data regarding revenue from the Companys storage products
segment (in thousands):

|                               | Quarter Ended |  | Six Months Ended |        
|------------------------------ | ------------- |  | ---------------- | -------
|
|Tape products                  |               |  | $                | 235,685
|Disk products                  |               |  |                  | 42,068 
|Network products               |               |  |                  | 22,441 
|Other                          |               |  |                  | 12,956 
|                               |               |  |                  |        
|Total storage products revenue |               |  | $                | 313,150
|                               |               |  |                  |        

# NOTE 7  EARNINGS
PER COMMON SHARE

The following table presents the
calculation of basic and diluted earnings per share (in thousands, except per share
amounts):

|                                            | Quarter Ended |  | Six Months Ended |        
|------------------------------------------- | ------------- |  | ---------------- | -------
|
|Net income                                  |               |  | $                | 30,106 
|                                            |               |  |                  |        
|Weighted average common shares outstanding: |               | 
|Basic                                       |               |  |                  | 107,653
|Effect of dilutive common stock             |               | 
|equivalents                                 |               |  |                  | 2,540  
|                                            |               |  |                  |        
|Diluted                                     |               |  |                  | 110,193
|                                            |               |  |                  |        
|Earnings per common share:                  |               | 
|Basic                                       |               |  | $                | 0.28   
|Diluted                                     |               |  | $                | 0.27   

9

---

For the quarters ended June 27, 2003,
and June 28, 2002, options to purchase 737,281 and 4,580,480 shares of common stock,
respectively, were excluded from the computation of diluted earnings per share because the
exercise price of the options was greater than the average market price of the
Companys common stock, and therefore, the effect would have been antidilutive. For
the six months ended June 27, 2003, and June 28, 2002, options to purchase 1,518,325 and
4,409,426 shares of common stock, respectively, were excluded from the computation of
diluted earnings per share for the same reason.

# NOTE 8 
INDEMNIFICATIONS AND WARRANTIES

Financial Accounting Standards Board
Interpretation No. 45 (FIN 45), Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, requires that a liability be recorded in the guarantors balance sheet
upon issuance of certain guarantees. FIN 45 also requires additional disclosures about the
guarantees an entity has issued, including a rollforward of the entitys product
warranty liabilities.

In the normal course of business, the
Company is party to a variety of agreements under which it may be obligated to indemnify
the other party for certain matters. These obligations typically arise in contracts where
the Company customarily agrees to hold the other party harmless against losses arising
from a breach of representations or covenants for certain matters such as title to assets
and intellectual property rights associated with the sale of products. The Company also
has indemnification obligations to its officers and directors. The duration of these
indemnifications varies, and in certain cases, is indefinite. In each of these
circumstances, payment by the Company depends upon the other party making an adverse claim
according to the procedures outlined in the particular agreement, which procedures
generally allow the Company to challenge the other partys claims. In certain
instances, the Company may have recourse against third parties for payments made by the
Company.

The Company is unable to reasonably
estimate the maximum potential amount of future payments under these or similar agreements
due to the unique facts and circumstances of each agreement and the fact that certain
indemnifications provide for no limitation to the maximum potential future payments under
the indemnification. The Company has not recorded any liability for these indemnifications
in the accompanying consolidated balance sheets; however, the Company does accrue losses
for any known contingent liability, including those that may arise from indemnification
provisions, when future payment is both probable and reasonably estimable.

The Company provides warranties
associated with the sale of its products. The Companys standard product warranties
provide for the repair or replacement of products that fail to meet their published
specifications. In situations where a product fails its essential purpose to the customer,
the Company may also be responsible for refunding the purchase price of the product if the
Company cannot remedy the product failure. The Company establishes a warranty liability
for the estimated cost of warranty-related claims at the time revenue is recognized. The
following table summarizes information related to the Companys warranty reserves (in
thousands):

|                               | Six Months Ended | 
|------------------------------ | ---------------- | 
|
|Balance at beginning of period |                  | 
|Accruals for warranties issued |                  | 
|Adjustments to warranties      |                  | 
|Amortization                   |                  | 
|                               |                  | 
|Balance at end of period       |                  | 
|                               |                  | 

10

---

# NOTE 9  RECENT
ACCOUNTING PRONOUNCEMENTS

In November 2002, the Emerging Issues
Task Force (EITF) issued EITF Issue No. 00-21, Accounting for Revenue Arrangements
with Multiple Deliverables. EITF Issue No. 00-21 addresses how to determine whether
a revenue arrangement involving multiple deliverables contains more than one unit of
accounting for the purposes of revenue recognition and how the revenue arrangement
consideration should be measured and allocated to the separate units of accounting. EITF
Issue No. 00-21 applies to all revenue arrangements that the Company enters into after
June 27, 2003. The adoption of this statement did not have a material impact on the
Companys financial condition or results of operations.

In January 2003, the FASB issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities.
FIN 46 provides guidance on how to identify a variable interest entity (VIE) and determine
when the assets, liabilities, and results of operations of a VIE need to be included in a
companys consolidated financial statements. FIN 46 also requires additional
disclosures by primary beneficiaries and other significant variable interest holders in a
VIE. The provisions of FIN 46 are effective immediately for all VIEs created after January
31, 2003. For VIEs created before February 1, 2003, the provisions of FIN 46 must be
adopted at the beginning of the first interim or annual reporting period beginning after
June 15, 2003. The adoption of this statement did not have a material impact on the
Companys financial condition or results of operations.

In April 2003, the FASB issued
SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities. SFAS No. 149 amends and clarifies the accounting for derivative
instruments, including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 149 is generally effective for contracts
entered into or modified after June 30, 2003, and for hedging relationships
designated after June 30, 2003. The adoption of this statement did not have a
material impact on the Companys financial condition or results of operations.

11

---

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

FORWARD-LOOKING STATEMENTS

All assumptions, anticipations,
expectations, and forecasts contained in the following discussion regarding our business,
future products, business plans, financial results, performance, and future events are
forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995. Our actual results may differ materially because of a number of risks and
uncertainties. Some of these risks are detailed below in FACTORS THAT MAY AFFECT
FUTURE RESULTS and elsewhere in this Form 10-Q. Forward-looking statements can be
identified by the use of words such as may, will,
should, expects, plans, anticipates,
believes, estimates, predicts, intends,
potential, continue, or the negative of such terms, or other
comparable words. Forward-looking statements also include the assumptions underlying or
relating to any such statements. The forward-looking statements contained in this Form
10-Q represent a good-faith assessment of our future performance for which management
believes there is a reasonable basis. We disclaim any obligation to update the
forward-looking statements contained herein, except as may be otherwise required by law.

# BUSINESS SEGMENTS
SUMMARY (in thousands, except percentages)

|                                                          | Quarter Ended |  | Six Months Ended |        
|--------------------------------------------------------- | ------------- |  | ---------------- | -------
|
|Revenue                                                   |               |  |                  |        
|Storage products                                          |               |  | $                | 313,150
|Storage services                                          |               |  |                  | 214,113
|                                                          |               |  |                  |        
|Total revenue                                             |               |  | $                | 527,263
|                                                          |               |  |                  |        
|Cost of revenue                                           |              
|Storage products                                          |               |  | $                | 169,154
|Storage services                                          |               |  |                  | 120,443
|                                                          |               |  |                  |        
|Total cost of revenue                                     |               |  | $                | 289,597
|                                                          |               |  |                  |        
|Gross profit                                              |              
|Storage products                                          |               |  | $                | 143,996
|Storage services                                          |               |  |                  | 93,670 
|                                                          |               |  |                  |        
|Total gross profit                                        |               |  | $                | 237,666
|                                                          |               |  |                  |        
|Gross profit margin                                       |              
|Storage products                                          |               |  |                  | 46.0   
|Storage services                                          |               |  |                  | 43.7   
|Total gross profit margin                                 |               |  |                  | 45.1   
|                                                         
|Supplemental financial data -    storage products revenue |              
|Tape products                                             |               |  | $                | 235,685
|Disk products                                             |               |  |                  | 42,068 
|Network products                                          |               |  |                  | 22,441 
|Other                                                     |               |  |                  | 12,956 
|                                                          |               |  |                  |        
|Total storage products revenue                            |               |  | $                | 313,150
|                                                          |               |  |                  |        

12

---

SECOND QUARTER 2003
FINANCIAL OVERVIEW

We increased revenue and earnings in
the second quarter of 2003, compared to the second quarter of 2002, despite the continuing
effects of the global economic downturn and depressed information technology spending. We
continue to focus on providing our customers with integrated storage solutions that
optimize their storage environments. We also continue to focus on reducing costs and
expenses.

Our cash and cash equivalents
increased from $657.6 million as of December 27, 2002, to $806.2 million as of June 27,
2003, a $148.6 million increase. Our debt-to-capitalization ratio remains constant at 1%,
and we continue to generate positive cash flows from operations.

REVENUE AND GROSS PROFIT
MARGIN

Total revenue for the second quarter
of 2003 was $527.3 million, an increase of 7% compared to the same period in 2002. Total
revenue for the first six months of 2003 was $1.0 billion, an increase of 6% compared to
the same period in 2002. These increases were primarily due to favorable foreign currency
fluctuations, as well as increased revenue from the storage services segment. Total gross
profit margin for the second quarter of 2003 was 45.1%, an increase from 44.2% for the
same period in 2002. Total gross profit margin for the first six months of 2003 was 44.7%,
an increase from 43.6% for the same period in 2002. These increases were primarily due to
higher gross profit margins from the storage products segment.

# Storage Products

Our storage products revenue
primarily consists of sales of tape products, disk products, and network products,
including related software, for the mainframe and open-systems markets. The open-systems
market consists of products designed to operate in the UNIX, NT, and other non-MVS
operating environments.

Storage products revenue increased 4%
and 2% for the second quarter and first six months of 2003, respectively, compared to the
same periods in 2002, primarily due to increases in disk and network product revenue. The
increase in disk product revenue is primarily the result of an increase in the amount of
storage capacity we sold, and reflects the continued strength of our open-systems disk
offerings. We also continue to experience an increase in product revenue contribution from
sales of open-systems tape products. Storage products gross profit margin increased from
43.5% and 43.3% for the second quarter and first six months of 2002, respectively, to
46.0% and 45.7% for the same periods in 2003, primarily due to our efforts to reduce
product costs and improve inventory management.

# Storage Services

Our storage services revenue
primarily consists of revenue associated with the maintenance and support of StorageTek
products and third-party storage products, as well as professional services revenue
associated with various storage consulting activities.

Storage services revenue increased
11% and 13% during the second quarter and first six months of 2003, respectively, compared
to the same periods in 2002. The growth in service revenue was driven by both increased
maintenance and professional services revenue. Storage services gross profit margin
decreased to 43.7% and 43.2% for the second quarter and first six months of 2003,
respectively, from 45.4% and 44.2% for the same periods in 2002, primarily as a result of
an increasing revenue contribution from professional services, which typically carry lower
margins.

13

---

RESEARCH AND PRODUCT
DEVELOPMENT

Research and product development
costs decreased 7% during the second quarter and first six months of 2003, compared to the
same periods in 2002. Research and product development costs as a percentage of revenue
were 10% for the second quarter and first six months of 2003. This percentage compares to
11% for the second quarter of 2002 and 12% for the first six months of 2002. The decrease
is primarily due to engineering initiatives designed to improve research and product
development productivity, increase strategic alignment, and eliminate non-essential
spending. We continue to evaluate and prioritize research and product development programs
to maximize our return on investment. Our research and product development activities
focus on tape and disk products, virtual storage, storage area network (SAN) products, and
related services.

SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSE

Selling, general, and administrative
expense (SG&A) increased 7% and 6% during the second quarter and first six months of
2003, respectively, compared to the same periods in 2002, primarily due to the unfavorable
impacts of foreign currency movements on the operating expenses of our international
operations. As a percentage of revenue, SG&A was basically unchanged from the second
quarter and first six months of 2002. In light of the prolonged economic downturn, we are
continuing our efforts to control discretionary spending and identify new opportunities to
drive increased profitability. We continue to make investments in the sales and marketing
areas of our business. These investments are principally focused on expanding sales
coverage in the growing open-systems environment.

INCOME TAXES

Our effective tax rate was 30% for
the second quarter and first six months of 2003, compared to 32% for the same periods in
2002. The decrease in the effective tax rate is primarily due to the continued realization
of benefits associated with our global manufacturing and distribution strategy.

Statement of Financial Accounting
Standards (SFAS) No. 109 requires that deferred income tax assets be recognized to the
extent realization of such assets is more likely than not. Based on the currently
available information, we have determined that we will more likely than not realize $217.4
million of deferred income tax assets as of June 27, 2003. Our valuation allowance of
approximately $24.6 million as of June 27, 2003, relates principally to foreign net
operating loss carryforwards.

CRITICAL ACCOUNTING
POLICIES

Our critical accounting policies are
disclosed in our Annual Report on Form 10-K for the year ended December 27, 2002. We have
made no changes to those policies during the six months ended June 27, 2003.

RECENT ACCOUNTING
PRONOUNCEMENTS

For information regarding recent
accounting pronouncements, see Note 9 of NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS, included in Item 1 of this Form 10-Q, which information is incorporated
by reference into this Item 2.

14

---

LIQUIDITY AND CAPITAL
RESOURCES

# Internal Sources of
Liquidity

Our cash balance increased $148.6
million during the first six months of 2003 primarily as a result of cash flows generated
by our operations. Our operating activities provided cash of $132.7 million during the
first six months of 2003, compared to cash of $190.8 million generated from operations
during the same period in 2002. The decrease in cash generated from operations during the
first six months of 2003, compared to the same period in 2002, was primarily due to a
higher level of inventory purchases in 2003, as well as a shift in the timing of payments
resulting from our lean manufacturing initiatives in 2002. Cash used in investing
activities decreased to $17.7 million during the first six months of 2003 from $88.5
million during the first six months of 2002, primarily due to a $52.2 million payment for
the purchase of equipment from Electronic Data Systems Corporation in 2002. Our financing
activities provided $32.0 million of cash during the first six months of 2003, primarily
related to proceeds from employee stock plans. Cash used in financing activities was $59.9
million during the first six months of 2002, primarily as a result of the repayment of
borrowings under our credit facilities during the first six months of 2002, partially
offset by proceeds from employee stock plans.

We expect that cash flows from
operations will continue to serve as our principal source of working capital. Cash flows
from operations could be negatively impacted by a decrease in demand for our products and
services as a result of rapid technological changes and other risks described under
FACTORS THAT MAY AFFECT FUTURE RESULTS.

# External Sources of
Liquidity

Effective July 31, 2003, we decided
to reduce our existing $150.0 million revolving credit facility (the Revolver) to $75.0
million. The Revolver expires in October 2004. The interest rates for borrowing under the
Revolver are dependent on our Total Debt to rolling four quarter Earnings Before Interest
Expense, Taxes, Depreciation, and Amortization (EBITDA) ratio and the term of the
outstanding borrowing. The rate ranges from the applicable LIBOR plus 1.75% to 2.50% or
the agent banks base rate plus 0.00% to 0.50%. We pay a 0.50% per annum commitment
fee on any unused borrowings. We had no outstanding borrowings under the Revolver as of
June 27, 2003. The Revolver is secured by our U.S. accounts receivable and U.S. inventory,
and contains certain financial and other covenants, including restrictions on the payment
of cash dividends on our common stock.

Our debt-to-capitalization ratio was
1% as of June 27, 2003. See Internal Sources of Liquidity above for a
discussion of cash sources and uses.

INTERNATIONAL OPERATIONS

International operations accounted
for approximately 52% and 53% of our revenue during the second quarter and first six
months of 2003, respectively, compared to 51% and 49% during the same periods of 2002. We
also sell products through U.S. indirect distribution channels that have end-user
customers located outside the United States. We expect that we will continue to generate a
significant portion of our revenue from international operations. See We may be
materially affected by the risks of conducting business outside the United States
under FACTORS THAT MAY AFFECT FUTURE RESULTS for a discussion of the risks
associated with international operations.

15

---

The majority of our international
operations involve transactions denominated in the local currencies of countries within
western Europe, principally Germany, France, and the United Kingdom; Australia; Canada;
Japan; and South Korea. An increase in the exchange value of the U.S. dollar reduces the
value of revenue and profits generated by our international operations. As a result, our
operating and financial results can be materially affected by fluctuations in foreign
currency exchange rates. In an attempt to mitigate the impact of foreign currency
fluctuations, we employ a foreign currency hedging program. See MARKET RISK
MANAGEMENT below.

MARKET RISK MANAGEMENT

# Foreign Currency
Exchange Rate Risk

Our primary market risk relates to
changes in foreign currency exchange rates. The functional currency for our foreign
subsidiaries is the U.S. dollar. A significant portion of our revenue is generated by our
international operations. As a result, our financial condition, results of operations, and
cash flows can be materially affected by changes in foreign currency exchange rates. We
attempt to mitigate this exposure as part of our foreign currency hedging program. The
primary goal of our foreign currency hedging program is to reduce the risk of adverse
foreign currency movements on the reported financial results of our non-U.S. dollar
transactions. Factors that could have an impact on the effectiveness of our hedging
program include the accuracy of forecasts and the volatility of foreign currency markets.
All foreign currency derivatives are authorized and executed pursuant to our policies. We
do not hold or issue derivatives or any other financial instruments for trading or
speculative purposes.

To implement our foreign currency
hedging program, we use foreign currency options and forwards. These derivatives are used
to hedge the risk that forecasted revenue denominated in foreign currencies might be
adversely affected by changes in foreign currency exchange rates. Foreign currency
forwards are also used to reduce our exposure to foreign currency exchange rate
fluctuations in connection with monetary assets and liabilities denominated in foreign
currencies.

A hypothetical 10% adverse movement
in foreign exchange rates applied to our foreign currency exchange rate sensitive
instruments held as of June 27, 2003, and as of December 27, 2002, would result in a
hypothetical loss in fair value of approximately $39.7 million and $64.5 million,
respectively. The decrease in the hypothetical loss is primarily due to a decrease in
outstanding derivatives used to hedge net monetary assets. These hypothetical losses do
not take our underlying international operations into consideration. We anticipate that
any hypothetical loss associated with our foreign currency exchange rate sensitive
instruments would be substantially offset by gains associated with our underlying
international operations.

# Interest Rate Risk

Changes in interest rates affect
interest income earned on our cash investments, as well as interest expense on short-term
borrowings. A hypothetical 10% adverse movement in interest rates applied to cash
investments and short-term borrowings as of June 27, 2003, and December 27, 2002, would
not have a material adverse effect on our financial condition, results of operations, or
cash flows.

# Credit Risk

We are exposed to credit risk
associated with cash investments, foreign currency derivatives, and trade receivables. We
do not believe that our cash investments and foreign currency derivatives present
significant credit risks, because the counterparties to the instruments consist of major
financial institutions, and we manage the notional amount of contracts entered into with
any one counterparty. Substantially all trade receivable balances are unsecured. Our
credit risk on trade receivables is limited by the large number of customers in our
customer base and their dispersion across various industries and geographic areas.
Although we have a large number of customers who are dispersed across different industries
and geographic areas, a prolonged economic downturn could increase our exposure to credit
risk on our trade receivables. We perform credit evaluations of our customers and maintain
an allowance for potential credit losses.

16

---

FACTORS THAT MAY AFFECT
FUTURE RESULTS

# We may be materially
affected by global economic and political conditions

Our ability to generate revenue
growth during 2001 and 2002 was adversely affected by the slowdown in the global economy
as customers delayed their purchase decisions, reduced their information technology
spending budgets, increased their purchase authorization approval requirements, and
reduced their capital expenditures by maximizing the current capacities of their data
storage equipment. We do not currently anticipate any significant improvement in
information technology spending during 2003. While we saw some signs of economic
improvement in the United States during the second quarter of 2003, we did not see any
improvement in Europe or some of the emerging market areas. During 2001 and 2002, we
implemented various cost-saving measures to help mitigate the adverse effects of the
slowdown in the global economy. We cannot provide any assurance that a prolonged economic
downturn will not have additional adverse effects on our financial condition, results of
operations, or our ability to generate revenue growth. Furthermore, we cannot provide any
assurance that our cost-saving measures will be successful or sufficient to allow us to
continue to generate improved operating results in future periods.

Our financial condition and results
of operations could also be materially affected by unstable global political conditions.
Terrorist attacks or acts of war could significantly disrupt our operations and the
operations of our customers, suppliers, distributors, or resellers. We cannot predict the
potential impact on our financial condition or results of operations should such events
occur.

We may be materially affected by a
decrease in demand for our tape products or by an inability to maintain key competitive
advantages in tape

In the second quarter and first six
months of 2003, approximately 75% of our storage products revenue was generated by sales
of our tape products. Services associated with our tape products also represent a
significant portion of our storage services revenue. If overall demand for tape storage
products declines, or if we lose market share in tape, our financial condition and results
of operations could be materially affected.

One of the key competitive advantages
that our tape products have over competing disk products is that tape products store data
at a fraction of the cost of disk storage. The cost of disk storage continues to decrease
rapidly due to competition and new disk drive technologies such as Advanced Technology
Attachment (ATA). We must continue to develop and introduce new tape products that reduce
the cost of tape storage at a rate that is similar to or greater than the decline in disk
storage costs in order to maintain this competitive advantage. We cannot provide any
assurance that we will be able to reduce the cost of our tape products at a rate similar
to the decline in disk storage costs.

# We may be materially
affected by aggressive competition

The data storage industry is highly
competitive, and customers make their decisions based on a number of competitive factors,
including the following:

- Functionality
- Technology
- Performance
- Reliability
- System scalability
- Price
- Quality
- Product availability
- Customer service
- Brand recognition

17

---

We must address each of these factors
effectively in order to successfully compete. If we are unable to adapt our products and
services to changes in these competitive factors, we may lose market share to our
competitors.

In order to grow revenue in the
future, it is critical that we execute on our Information Lifecycle Management (ILM)
strategy by continuing to capitalize on our ability to deliver complete storage solutions
to satisfy customer storage requirements. Our ILM strategy requires that we successfully
integrate the sale of products and services. Our ability to compete is significantly
dependent upon the successful rollout of our ILM strategy. We achieved some initial
success during 2002 in our efforts to address customer storage needs by focusing on the
delivery of storage solutions that include a combination of tape, disk, and network
products, together with the associated services. This success has continued through the
first half of 2003, resulting in increased revenue contributions from disk products,
network products, and services. We cannot provide any assurance that we will successfully
execute our ILM strategy or that this strategy will successfully address the significant
competition in the data storage industry.

We may be materially affected by
our ability to grow our indirect channels successfully

We are continually developing our
indirect distribution channels, including original equipment manufacturers (OEMs),
value-added distributors (VADs), value-added resellers (VARs), and other distributors.
Indirect channels sales contributed approximately 49% of our total product revenue for
both the second quarter and first six months of 2003 compared to 46% for the same periods
in 2002. Increasing our sales through these indirect channels is critical to expanding our
reach into the growing open-systems market. Successfully managing the interaction of our
direct and indirect channel efforts to effectively reach all the potential customer
segments for our products and services is a complex process. We cannot provide any
assurance that we will be successful in expanding our indirect channel sales. Our ability
to forecast future demand for our products may be adversely affected by unforeseen changes
in demand from our indirect channel partners. Maintenance revenue also may be adversely
affected in future periods to the extent that customers of our indirect channel partners
elect to purchase maintenance services from our competitors. Our financial results may
also be negatively affected if the financial condition of one or more of our channel
partners weakens or if the current economic downturn continues.

We may be materially affected by
the risks associated with expanding our service offerings

Services contributed approximately
41% of our total revenue in both the second quarter and first six months of 2003,
respectively, compared to approximately 39% for the same periods in 2002. This growth was
partially driven by new service offerings such as storage consulting services,
implementation services, and storage management services. The development and delivery of
these new services are critical to the success of our plan to deliver complete storage
solutions to our customers. We must ensure that service professionals have the necessary
skill sets, experience, tools, and training to support these new service offerings. Any
failure to properly develop or deliver our new and existing service offerings could have a
material adverse effect on our financial condition and results of operations.

18

---

We may be materially affected by
the risks associated with sole source suppliers

We purchase certain key parts,
components, and services from sole source suppliers who we believe are currently the only
providers that meet our specifications or for which alternative sources of supply are not
readily available. The following table shows our significant sole source suppliers and the
products or services they provide:

|Name of sole source supplier |  | Product or service provided                                                        
|---------------------------- |  | -----------------------------------------------------------------------------------
|Imation Corporation          |  | T9840 and T9940 series tape media                                                  
|Sanmina-SCI Corporation      |  | Printed circuit boards and certain other manufacturing and repair services         
|LSI Logic Storage Systems    |  | D-Series open-systems disk products                                                
|Fujitsu Electronics America  |  | Application-specific integrated circuits (ASICs) for various tape and disk products
|Philips Semiconductors       |  | ASICs for various tape and disk products                                           
|Celestica                    |  | SN6000 network product                                                             
|Herald Datanetics Ltd. (HDL) |  | Key component used in certain tape products                                        

We also obtain certain key parts and
components from less significant sole source suppliers. If a sole source supplier did not
continue to provide its products or services, we would need to identify and qualify other
acceptable suppliers. This process could take an extended period, and we cannot provide
any assurance that we could identify and qualify an alternative source on a timely basis
or at an acceptable quality or price. We cannot provide any assurance that significant
sole source suppliers will be able to meet our ongoing quality or delivery requirements.
Failure to meet these requirements may have a material adverse impact on our financial
condition and results of operations.

HDL is located in the Peoples
Republic of China (PRC). Our dependence on HDL is subject to additional risks beyond those
associated with other sole source suppliers, including the lack of a well-established
court system or acceptance of the rule of law in the PRC, the degree to which the PRC
permits economic reform policies to continue, the political relationship between the PRC
and the United States, and broader political and economic factors. To date, we have not
experienced any material problems securing key components from HDL; however, we cannot
provide any assurance that we will not experience material problems in the future.

We may be materially affected by a
failure to obtain quality parts and components in a timely manner or by a failure to
effectively manage inventory levels

We generally use standard parts and
components for our products and believe that there are a number of alternative, competent
vendors for most of those parts and components. Certain suppliers have experienced
occasional technical, financial, or other problems that have delayed deliveries in the
past. An unanticipated failure of suppliers to meet our requirements for an extended
period, or the inability to secure comparable components in a timely manner, could result
in a shortage of key components or products, longer lead times, reduced control over
production and delivery schedules, and an inability to fulfill customer orders in a timely
manner.

19

---

We have implemented various lean
manufacturing initiatives to help us manage our inventory levels. As we continue to move
toward a lean manufacturing environment, we will become increasingly dependent on a
limited supplier base to deliver quality parts and components in a timely manner. A
suppliers inability to deliver parts and components on a timely basis, or our
failure to effectively manage inventory levels, could have a material adverse effect on
our financial condition and results of operations.

We may be materially affected by
uneven sales patterns and by our ability to forecast customer demand accurately

In the past, our results have
followed a seasonal pattern, which reflects the tendency of customers to make their
purchase decisions at the end of a calendar year. During any fiscal quarter, a
disproportionately large percentage of total product sales is earned in the last weeks or
days of the quarter. It is difficult to predict the extent to which these historical
trends will continue in the future. We cannot provide any assurance that we will be able
to manage our uneven sales patterns.

We prepare and update our forecasts
on a regular basis to predict customer demand for our products and services. If predicted
demand is higher than actual demand, we may have excess inventory or an underutilized
employee base. If actual demand exceeds predicted demand, we may not be able to meet
customer requirements in a timely manner due to manufacturing or service constraints. We
cannot provide any assurance that we will be able to forecast customer demand accurately
or respond quickly to changes in customer demand.

Our gross profit margin may be
materially affected by product mix, channel mix, and resale of third-party products

We provide a variety of solutions to
meet customer needs, including tape, disk, and network products, along with associated
services. Our products and services contribute varying gross profit margins, and the gross
margin earned on a customers total solution is dependent on the amounts and types of
products or services involved. We cannot provide any assurance that our future gross
profit margin will be similar to our historical gross profit margin.

We market our solutions through a
combination of a direct sales organization and indirect channel partners. Direct sales to
the end-user customer usually result in higher gross profit margins than indirect channel
sales. We cannot provide any assurance that changes in our channel mix will not have a
material impact on gross profit margin in the future.

Third-party product sales continue to
increase as a percentage of total product sales, and our gross profit margin may be
adversely affected as those products become a larger portion of our total storage
solutions. We may also be at a cost disadvantage in acquiring third-party products that
are manufactured by competitors.

We may be materially affected by
rapid technological change and evolving industry standards

Short product life cycles are
inherent in high-technology industries due to rapid technological change and evolving
industry standards. Our financial condition and results of operations depend on our
ability to respond effectively to these changes. We cannot provide any assurance that we
will be able to successfully develop, manufacture, and market innovative new products or
adapt our current products to new technologies or new industry standards. In addition,
customers may be reluctant to adopt new technologies and standards, or they may prefer
competing technologies and standards.

20

---

SAN solutions are an example of the
rapid technological change in our industry, since SAN technologies and standards are
continually evolving. We continue to develop the necessary product modifications and
professional services knowledge to implement our SAN solutions successfully in various
customer operating environments. Because the SAN market changes so quickly, it is
difficult to predict the future rate of adoption of our SAN solutions.

# We may be materially
affected by risks associated with new product development

New product research and development
is complex and requires the investigation and evaluation of multiple alternatives, as well
as planning the design and manufacture of those alternatives selected for further
development. Research and development efforts could be adversely affected by any of the
following:

- Hardware and software design flaws
- Product development delays
- Changes in data storage technology
- Changes in operating systems
- Changes in industry standards

In addition, we have outsourced
software development for certain tape and network products. We cannot provide any
assurance that research and development activities will be successful in bringing new
products to market.

Manufacturing new products involves
integrating complex designs and processes, coordinating with suppliers for parts and
components, and managing manufacturing capacities to accommodate forecasted demand.
Failure to obtain sufficient quantities of parts and components, as well as other
manufacturing delays or constraints, could adversely affect the timing of new product
introductions. We have experienced product development and manufacturing delays in the
past that adversely affected our results of operations and competitive position.

When we introduce new products, we
must effectively manage the transition from our existing products to the new products. If
we do not manage the transition effectively, we may be subject to the following adverse
effects:

- Excess or obsolete inventory
- Insufficient inventory or manufacturing capacity to meet customer demand
- Delayed customer purchases
- Lost sales if customers purchase from our competitors

In addition, sales of our new
products may replace some of the sales of our existing products. We cannot provide any
assurance that we will be able to successfully manage the development, introduction, or
transition of new products in the future.

We may be materially affected by
the risks associated with developing and protecting intellectual property

We depend on our ability to develop new
intellectual property that does not infringe on the rights of others. We cannot provide
any assurance that we will be able to continue to develop such new intellectual property.

21

---

We rely on a combination of U.S.
patent, copyright, trademark, and trade secret laws to protect our intellectual property
rights. We enter into confidentiality agreements relating to our intellectual property
with our employees and consultants, and we include confidentiality provisions in license
and non-exclusive sales agreements with our customers.

We also file patent and trademark
registration applications with foreign governments; however, many foreign countries do not
have intellectual property laws that are as well developed as those of the United States.

Despite our efforts to protect our
intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain
or use our intellectual property. Monitoring the unauthorized use of our intellectual
property is difficult, particularly in foreign countries. We cannot provide any assurance
that we will be able to adequately protect our intellectual property.

We may be materially affected if
we are unable to attract and retain key employees

Our future success depends in large part
on our ability to attract and retain our key employees. We face significant competition
for individuals who possess the skills required to sell our products and services, as well
as design, develop, manufacture, service, and market those products and services. An
inability to successfully attract and retain these employees could have an adverse effect
on our future financial condition and results of operations.

We may be materially affected by
the risks of conducting business outside the United States

Our international business may be
affected by changes in demand resulting from global and localized economic, business, and
political conditions. We are subject to the risks of conducting business outside the
United States, including the following risks:

- Adverse political and economic conditions
- Impositions of tariffs or quotas
- Changes in laws or regulations
- Difficulty in obtaining export licenses
- Potentially adverse tax or labor laws
- The burdens of complying with a variety of foreign laws
- Longer payment cycles typically associated with international sales
- Other factors outside our control

We expect these risks to increase in
the future as we expand our operations in Eastern Europe, Latin America, and Asia. We
cannot provide any assurance that these factors will not have a material adverse effect on
our financial condition or results of operations in the future.

# Our manufacturing
operations may be materially affected by weather-related risks

We manufacture and assemble a
significant portion of our products in Puerto Rico. Our ability to perform these
activities may be significantly affected by weather-related risks beyond our control. We
believe that if the Puerto Rico facility were significantly affected by adverse weather,
we could relocate to an alternative facility within a reasonable period of time; however,
we cannot provide any assurance that we would be able to relocate that facility without a
material adverse impact on our financial condition or results of operations.

22

---

# We may be materially
affected by restructuring activities

We have recognized significant
restructuring charges in the past and it is possible that changes in our business,
industry, or in the global economy may necessitate restructuring activities in the future.
The necessity for restructuring activities may result in expenses that adversely affect
our financial condition and results of operations and may require incremental cash
payments.

# ITEM 3 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required under this
Item 3 is included in the section above entitled MARKET RISK MANAGEMENT.

# ITEM 4  CONTROLS
AND PROCEDURES

Under the supervision and with the
participation of management, including the principal executive officer and principal
financial officer, we conducted an evaluation of our disclosure controls and procedures
(as defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934) as
of June 27, 2003, the end of the period covered by this report. Based on their evaluation,
the principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective.

During the fiscal quarter ended June
27, 2003, there has been no change in our internal control over financial reporting (as
defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that has materially
affected, or is reasonably likely to materially affect, our internal control over
financial reporting.

23

---

# PART II

# ITEM 1  LEGAL
PROCEEDINGS

For information regarding legal
proceedings, see Note 4 of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS,
included in Part 1, Item 1, of this Form 10-Q, which information is incorporated by
reference into this Part II, Item 1.

# ITEM 4  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our Annual Meeting of Stockholders
(the Annual Meeting) was held on May 21, 2003. A total of 92,786,662 shares of common
stock, par value $0.10 per share (the Common Stock), were present at the Annual Meeting,
either in person or by proxy, constituting a quorum. The matters voted upon at the Annual
Meeting by the stockholders consisted of the three proposals set forth in our definitive
Proxy Statement, dated April 16, 2003.

The first proposal related to the
election of eight persons to serve on our Board of Directors. The Boards nominees
were each elected and received, respectively, the following votes:

|Director            |  | For        |  | Withheld  | 
|------------------- |  | ---------- |  | --------- | 
|James R. Adams      |  | 90,278,056 |  | 2,508,606 | 
|Charles E. Foster   |  | 90,750,598 |  | 2,036,064 | 
|Dennis H. Jones     |  | 90,692,953 |  | 2,093,709 | 
|William T. Kerr     |  | 90,155,005 |  | 2,631,656 | 
|Robert E. La Blanc  |  | 90,734,652 |  | 2,052,009 | 
|Robert E. Lee       |  | 90,155,636 |  | 2,631,025 | 
|Patrick J. Martin   |  | 91,041,939 |  | 1,744,723 | 
|Richard C. Steadman |  | 90,724,690 |  | 2,061,971 | 

The second proposal related to
approval of an additional 3,000,000 shares for the Employee Stock Purchase Plan (ESPP).
This proposal was approved as detailed below.

The third proposal was a stockholder
proposal regarding cumulative voting. This proposal was rejected as detailed below.

|Proposal   |  | For        |  | Against    |  | Abstentions |  | Broker Non-Votes | 
|---------- |  | ---------- |  | ---------- |  | ----------- |  | ---------------- | 
|Proposal 2 |  | 84,389,086 |  | 8,199,622  |  | 197,953     |  | N/A              | 
|          
|Proposal 3 |  | 38,302,902 |  | 40,806,524 |  | 4,855,483   |  | 8,821,753        | 

# ITEM 6  EXHIBITS
AND REPORTS ON FORM 8-K

(a)    
          Exhibits:

The exhibits listed below are filed
as part of this Quarterly Report on Form 10-Q or are incorporated by reference into this
Quarterly Report on Form 10-Q:

|3.1 |  | Restated
Certificate of Incorporation of Storage Technology Corporation dated July 28, 1987
(previously filed as Exhibit 3.1 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 29, 2000, filed on February 21, 2001, and incorporated herein
by reference)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---

|3.2 |  | Certificate
of Amendment dated May 22, 1989, to the Restated Certificate of Incorporation dated July
28, 1987 (previously filed as Exhibit 3.2 to the Companys Annual Report on Form
10-K for the fiscal year ended December 29, 2000, filed on February 21, 2001, and
incorporated herein by reference)
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Certificate
of Second Amendment dated May 28, 1992, to the Restated Certificate of Incorporation
dated July 28, 1987 (previously filed as Exhibit 3.3 to the Companys Annual Report
on Form 10-K for the fiscal year ended December 29, 2000, filed on February 21, 2001, and
incorporated herein by reference)
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Certificate
of Third Amendment dated May 21, 1999, to the Restated Certificate of Incorporation dated
July 28, 1987 (previously filed as Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q for the fiscal quarter ended June 25, 1999, filed on August 9, 1999, and
incorporated herein by reference)
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Restated
Bylaws of Storage Technology Corporation, as amended through November 16, 2002
(previously filed as Exhibit 3.5 to the Companys Annual Report on Form 10-K for the
fiscal year ended December 27, 2002, filed on March 7, 2003, and incorporated herein by
reference)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Specimen
Certificate of Common Stock, $0.10 par value of Registrant (previously filed as Exhibit
(c)(2) to the Companys Current Report on Form 8-K dated June 2, 1989, and
incorporated herein by reference)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.1 1 |  | Storage
Technology Corporation Amended and Restated 1987 Employee Stock Purchase Plan, as amended
through May 21, 2003 (previously filed as Exhibit 4.6 to the Companys Registration
Statement on Form S-8 (Registration No. 333-106930) filed on July 10, 2003, and
incorporated herein by reference)
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.2 1 |  | Storage
Technology Corporation Amended and Restated 1995 Equity Participation Plan (previously
filed as Exhibit 10.6 to the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, filed on March 10, 2000, and incorporated herein by
reference)
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.3 1 |  | Storage
Technology Corporation Management by Objective Bonus Plan (previously filed as Exhibit
10.3 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 2001, filed on May 14, 2001, and incorporated herein by reference)
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.4 1 |  | Storage
Technology Corporation Amended and Restated Stock Option Plan for Non-Employee Directors
(previously filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for
the fiscal quarter ended June 28, 1996, filed on August 12, 1996, and incorporated herein
by reference)
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.5 1 |  | Storage
Technology Corporation Flexible Option Plan, dated December 2001 (previously filed as
Exhibit 10.5 to the Companys Annual Report on Form 10-K for the fiscal year ended
December 28, 2001, filed on March 4, 2002, and incorporated herein by reference)
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

---

|10.6 1 |  | Agreement
between the Company and Gary Francis, dated August 19, 1997 (previously filed as Exhibit
10.25 to the Companys Annual Report on Form 10-K for the fiscal year ended December
26, 1997, filed on March 6, 1998, and incorporated herein by reference)
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.7 1 |  | Severance
Agreement, dated as of July 1, 2001, between the Company and Robert S. Kocol (previously
filed as Exhibit 10.9 to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 2001, filed on November 8, 2001, and incorporated herein by
reference)
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.8 1 |  | Restricted
Stock Award Agreement, dated as of September 27, 2001, by and between the Company and
Robert S. Kocol (previously filed as Exhibit 10.9 to the Companys Annual Report on
Form 10-K for the fiscal year ended December 28, 2001, filed on March 4, 2002, and
incorporated herein by reference)
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.9 1 |  | Offer
Letter, dated May 10, 2001, from the Company to Michael McLay (previously filed as
Exhibit 10.17 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended June 29, 2001, filed on August 9, 2001, and incorporated herein by reference)
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 1 |  | Offer
Letter, dated February 9, 2001, from the Company to Jill F. Kenney (previously filed as
Exhibit 10.19 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2001, filed on May 14, 2001, and incorporated herein by reference)
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 1 |  | Offer
Letter, dated February 9, 2001, from the Company to Roger Gaston (previously filed as
Exhibit 10.20 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2001, filed on May 14, 2001, and incorporated herein by reference)
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 1 |  | Promissory
Note, dated May 11, 2001, from Michael McLay to the Company, in the principal amount of
$390,000 (previously filed as Exhibit 10.23 to the Companys Quarterly Report on
Form 10-Q for the fiscal quarter ended June 29, 2001, filed on August 9, 2001, and
incorporated herein by reference)
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 1 |  | Promissory
Note, dated May 11, 2001, from Michael McLay to the Company, in the principal amount of
$160,000 (previously filed as Exhibit 10.24 to the Companys Quarterly Report on
Form 10-Q for the fiscal quarter ended June 29, 2001, filed on August 9, 2001, and
incorporated herein by reference)
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 1 |  | Form
of LEAP Participation Agreement, dated April 30, 2001 (previously filed as Exhibit 10.25
to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended June 29,
2001, filed on August 9, 2001, and incorporated herein by reference)
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 1 |  | Offer
Letter, dated July 16, 2001, from the Company to Roy Perry (previously filed as Exhibit
10.28 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended
September 28, 2001, filed on November 8, 2001, and incorporated herein by reference)
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 1 |  | Offer
Letter, dated June 27, 2001, from the Company to Angel Garcia (previously filed as
Exhibit 10.29 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended September 28, 2001, filed on November 8, 2001, and incorporated herein by
reference)
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | Credit
Agreement, dated as of October 10, 2001, among the Company, the several financial
institutions thereto, Bank of America, N.A., as letter of credit issuing bank and sole
administrative agent for the Banks, Key Corporate Capital, Inc. as Documentation Agent,
Fleet National Bank as Syndication Agent, and Banc of America Securities LLC as sole lead
arranger and sole book manager (previously filed as Exhibit 10.13 to the Companys
Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2001, filed on
November 8, 2001, and incorporated herein by reference)
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

---

|10.18 |  | Security
Agreement, dated as of October 10, 2001, by and among the Company, Bank of America, N.A.,
as Collateral Agent for itself and other Secured Parties referred to therein (previously
filed as Exhibit 10.14 to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 2001, filed on November 8, 2001, and incorporated herein by
reference)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Guaranty,
dated as of October 10, 2001, by StorageTek Holding Corporation, in favor of the Banks
party to a certain Credit Agreement and Bank of America, N.A., as Agent and Issuing Bank
and Collateral Agent (previously filed as Exhibit 10.15 to the Companys Quarterly
Report on Form 10-Q for the fiscal quarter ended September 28, 2001, filed on November 8,
2001, and incorporated herein by reference)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 1 |  | Form
of Executive Severance Agreement (previously filed as Exhibit 10.32 to the Companys
Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2002, filed on May
13, 2002, and incorporated herein by reference)
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | Master
Services Agreement (MSA), between each of the Company, Electronic Data Systems
Corporation, and EDS Information Services L.L.C., dated as of April 1, 2002 (previously
filed as Exhibit 10.33 to the Companys Quarterly Report on Form 10-Q for the fiscal
quarter ended March 29, 2002, filed on May 13, 2002, and incorporated herein by
reference)
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Authorization
Letter #1 pursuant to the MSA, dated April 1, 2002 (previously filed as Exhibit 10.34 to
the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 29,
2002, filed on May 13, 2002, and incorporated herein by reference)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Authorization
Letter #2 pursuant to the MSA, dated April 1, 2002 (previously filed as Exhibit 10.35 to
the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended March 29,
2002, filed on May 13, 2002, and incorporated herein by reference)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Master
Secondary Storage Services Agreement, between the Company and Electronic Data Systems
Corporation, dated March 29, 2002 (previously filed as Exhibit 10.36 to the Companys
Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2002, filed on May
13, 2002, and incorporated herein by reference)
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 1 |  | Offer
Letter, dated June 25, 2002, between the Company and Mark Roellig (previously filed as
Exhibit 10.28 to the Companys Quarterly Report on Form 10-Q for the fiscal quarter
ended June 28, 2002, filed on August 12, 2002, and incorporated herein by reference)
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 1 |  | Form
of Indemnification Agreement, dated as of November 22, 2002, between the Company and each
director (previously filed as Exhibit 10.31 to the Companys Annual Report on Form
10-K for the fiscal year ended December 27, 2002, filed on March 7, 2003, and
incorporated herein by reference)
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

27

---

|10.27 1 |  | Storage
Technology Corporation 1993 Non-Statutory Stock Option Plan (previously filed as Exhibit
10.32 to the Companys Annual Report on Form 10-K for the fiscal year ended December
27, 2002, filed on March 7, 2003, and incorporated herein by reference)
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 1 |  | Offer
Letter, dated November 12, 2002, between the Company and Pierre Cousin (previously filed
as Exhibit 10.33 to the Companys Annual Report on Form 10-K for the fiscal year
ended December 27, 2002, filed on March 7, 2003, and incorporated herein by reference)
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.291 |  | Agreement,
dated December 1, 2002, between the Company and Pierre Cousin (previously filed as
Exhibit 10.34 to the Companys Annual Report on Form 10-K for the fiscal year ended
December 27, 2002, filed on March 7, 2003, and incorporated herein by reference)
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.301 |  | Amended
and Restated CEO Employment Agreement, dated March 27, 2003, between the Company and
Patrick J. Martin (previously filed as Exhibit 10.36 to the Companys Quarterly
Report on Form 10-Q for the fiscal quarter ended March 28, 2003, filed on May 9, 2003,
and incorporated herein by reference)
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.311 |  | Form
of Executive Agreement, dated as of February 12, 2003, between the Company and each
executive officer (previously filed as Exhibit 10.37 to the Companys Quarterly
Report on Form 10-Q for the fiscal quarter ended March 28, 2003, filed on May 9, 2003,
and incorporated herein by reference)
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.322 |  | Letter,
dated July 24, 2003, from the Company to Bank of America, N.A.
|------ |  | ----------------------------------------------------------------------

|31.12 |  | Certification
 Pursuant to Exchange Act Rules 13a-14 and 15d-14,  as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------

|31.22 |  | Certification
 Pursuant to Exchange Act Rules 13a-14 and 15d-14,  as Adopted Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------

|32.12 |  | Certification
  Pursuant  to  18  U.S.C.   Section  1350,  as  Adopted  Pursuant  to  Section  906  of
 the Sarbanes-Oxley Act of 2002
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------

|32.22 |  | Certification
  Pursuant  to  18  U.S.C.   Section  1350,  as  Adopted  Pursuant  to  Section  906  of
 the Sarbanes-Oxley Act of 2002
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------

---

1 Contract or compensatory plan or
arrangement in which directors and/or officers participate 2 Indicates exhibit filed with
this Quarterly Report on Form 10-Q

(b)    
          Reports on Form 8-K.

Current report on Form 8-K, filed on
April 23, 2003, relating to an Item 9, Regulation FD Disclosure, regarding the
announcement of our results of operations for the fiscal quarter ended March 28, 2003,
including a copy of the script of the prepared remarks of the Chief Executive Officer and
Chief Financial Officer from a conference call regarding such results of operations.

28

---

# 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.

|August 8, 2003(Date)
August 8, 2003(Date) |  | STORAGE TECHNOLOGY CORPORATION(Registrant)    /s/ ROBERT S. KOCOL
Robert S. KocolCorporate Vice Presidentand Chief Financial Officer(Principal Financial Officer)
/s/ THOMAS G. ARNOLD
Thomas G. ArnoldVice President and Corporate Controller(Principal Accounting Officer)
|--------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29