Form 10-Q
==============================================================================


                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

         [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934
                For the Quarterly Period Ended March 31, 2000
                                      OR
         [ ] 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                         (I.R.S. Employer
    incorporation or organization)                       Identification Number)

   One StorageTek Drive, Louisville,                           80028-4309
               Colorado
    (Address of principal executive                            (Zip Code)
               offices)



       Registrant's Telephone Number, including area code: (303) 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. /X/ YES / / NO

                     APPLICABLE ONLY TO CORPORATE ISSUERS

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

Common stock ($.10 Par Value) - 100,717,973 shares outstanding at May 5, 2000.

<PAGE>
                               Page 2, Form 10-Q






               STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
                              INDEX TO FORM 10-Q
                                March 31, 2000

                                                                          PAGE
                                                                         ------
PART I - FINANCIAL INFORMATION

      Item 1 - Financial Statements

              Consolidated Balance Sheet                                    3

              Consolidated Statement of Operations                          4

              Consolidated Statement of Cash Flows                          5

              Notes to Consolidated Financial Statements                    6

      Item 2 - Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                       11

      Item 3 - Quantitative and Qualitative Disclosures about Market Risk  26



PART II - OTHER INFORMATION

      Item 1 - Legal Proceedings                                           27

      Item 6 - Exhibits and Reports on Form 8-K                            29

      Exhibit Index                                                        32




<PAGE>
                               Page 3, Form 10-Q




                STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                          (In Thousands of Dollars)



                                                          03/31/00    12/31/99
                                                       ------------------------
                                                       (Unaudited)

ASSETS

Current assets:
  Cash and cash equivalents                            $   228,467   $ 215,421
  Accounts receivable                                      482,586     627,435
  Inventories (Note 2)                                     231,575     260,642
  Deferred income tax assets                               123,857     124,588
                                                        ----------   ---------
     Total current assets                                1,066,485   1,228,086


Property, plant and equipment, net                         301,016     322,061
Spare parts for maintenance, net                            45,777      41,995
Deferred income tax assets                                  41,285      40,882
Other assets                                               111,362     102,451
                                                        ----------   ---------
     Total assets                                       $1,565,925  $1,735,475
                                                         =========   =========


LIABILITIES

Current liabilities:

  Credit facilities                                    $   194,475  $  286,152
  Current portion of long-term debt                         10,148      13,943
  Accounts payable                                          82,684     111,253
  Accrued liabilities                                      314,961     303,110
  Income taxes payable                                      53,437      72,865
                                                       ----------- -----------
     Total current liabilities                             655,705     787,323
Long-term debt                                              27,798      28,953
                                                       ----------- -----------
     Total liabilities                                     683,503     816,276
                                                       ----------- -----------

Commitments and contingencies (Note 4)

STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 300,000,000 shares authorized;
  100,840,939 shares issued at March 31, 2000, and
  100,825,390 shares issued at December 31, 1999            10,084      10,083
Capital in excess of par value                             832,682     830,780
Retained earnings                                           45,166      84,704
Treasury stock of 113,774 shares at March 31, 2000,
  and at December 31, 1999                                  (2,334)     (2,334)
Unearned compensation                                       (3,176)     (4,034)
                                                      ------------ -----------
     Total stockholders' equity                            882,422     919,199
                                                      ------------ -----------
                                                        $1,565,925  $1,735,475
                                                      ============ ===========


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

<PAGE>
                               Page 4, Form 10-Q





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





                                                   Quarter Ended
                                            -------------------------
                                              03/31/00     03/26/99
                                            -------------------------
Revenue
   Storage products                          $301,112     $357,027
   Storage services                           158,557      160,476
                                              -------      -------
      Total revenue                           459,669      517,503
                                              -------      -------

Cost of revenue
   Storage products                           196,754      199,723
   Storage services                           108,362       94,363
                                              -------      --------
      Total cost of revenue                   305,116      294,086
                                              -------      -------

  Gross profit                                154,553      223,417


Research and product development costs         65,180       73,476
Selling, general, administrative and
  other income and expense, net               134,120      137,859
Restructuring expense (Note 5)                 11,442
                                              -------      -------
  Operating profit (loss)                     (56,189)      12,082

Interest expense                               (6,325)      (3,899)
Interest income                                 1,676          930
                                              -------      -------
  Income (loss) before income taxes           (60,838)       9,113

Benefit (provision) for income taxes           21,300       (3,300)
                                              -------      -------
  Net income (loss)                          $(39,538)    $  5,813
                                              =======      =======




EARNINGS (LOSS) PER COMMON SHARE (Note 8)

Basic earnings (loss) per share              $  (0.39)    $    0.06
                                              =======      ========

Weighted-average shares                       100,387        99,804
                                              =======      ========


Diluted earnings (loss) per share            $  (0.39)    $    0.06
                                              =======      ========

Weighted-average and dilutive
  potential shares                            100,387       101,982
                                              =======      ========


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

<PAGE>
                               Page 5, Form 10-Q






               STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (Unaudited)
                          (In Thousands of Dollars)

                                                         Quarter Ended
                                                     ------------------------
                                                     03/31/00      03/26/99
                                                     ------------------------
OPERATING ACTIVITIES
Cash received from customers                          $ 615,104   $ 628,897
Cash paid to suppliers and employees                   (465,310)   (573,249)
Cash paid for restructuring activities (Note 5)         (10,142)
Interest paid                                            (5,927)     (3,356)
Interest received                                         1,676         930
Income tax refunded, net                                  2,547      16,144
                                                       --------    --------
   Net cash provided by operating activities            137,948      69,366
                                                       --------    --------

INVESTING ACTIVITIES
Purchases of property, plant and equipment, net         (20,955)    (32,498)
Other assets, net                                        (7,588)     (2,582)
                                                       --------    --------
Net cash used in investing activities                   (28,543)    (35,080)
                                                       --------    --------

FINANCING ACTIVITIES
Repayments of credit facilities, net                    (92,992)    (26,887)
Repayments of other debt, net                              (426)     (1,527)
Repurchases of common stock                                         (17,427)
Proceeds from employee stock plans                          183       3,820
                                                       --------    --------
   Net cash used in financing activities                (93,235)    (42,021)
                                                       --------    --------

   Effect of exchange rate changes on cash               (3,124)     (6,472)
                                                       --------    --------

Increase (decrease) in cash and cash equivalents         13,046     (14,207)
   Cash and cash equivalents - beginning of the period  215,421     231,985
                                                       --------    --------
Cash and cash equivalents - end of the period         $ 228,467   $ 217,778
                                                       ========    ========


RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
   PROVIDED BY OPERATING ACTIVITIES
Net income (loss)                                     $ (39,538)  $   5,813
Depreciation and amortization expense                    38,521      26,901
Inventory write downs                                    33,831       9,501
Non-cash restructuring expense (Note 5)                   1,300
Translation loss                                          7,902      11,201
Other non-cash adjustments to income                     10,558      (7,803)
Decrease in accounts receivable                         157,914     110,039
(Increase) decrease in inventories, net                  (3,543)    (71,322)
Increase in spare parts                                 (11,511)       (997)
(Increase) decrease in deferred income tax assets, net    2,334      (3,031)
Decrease in accounts payable and accrued liabilities    (38,221)    (32,459)
Increase (decrease) in income taxes payable             (21,599)     21,523
                                                       --------    --------
   Net cash provided by operating activities          $ 137,948   $  69,366
                                                       ========    ========

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

<PAGE>
                               Page 6, Form 10-Q




               STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


NOTE 1 - BASIS OF PREPARATION
------------------------------

The  accompanying   consolidated  financial  statements  of  Storage  Technology
Corporation and its subsidiaries  (StorageTek or the Company) have been prepared
in accordance with the Securities and Exchange Commission  requirements for Form
10-Q. In the opinion of management,  these  statements  reflect all  adjustments
necessary for the fair  presentation of results for the periods  presented,  and
such adjustments are of a normal,  recurring  nature.  For further  information,
refer to the  consolidated  financial  statements and footnotes  included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.

NOTE 2 - INVENTORIES
--------------------

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

                                              03/31/00          12/31/99
                                             ---------------------------
      Raw materials                           $ 63,376          $ 59,141
      Work-in-process                           40,070            45,717
      Finished goods                           128,129           155,784
                                               -------           -------
                                              $231,575          $260,642
                                               =======           =======

NOTE 3 - DEBT AND FINANCING ARRANGEMENTS
----------------------------------------

The Company has a financing  agreement with a bank that provides for the sale of
promissory  notes in the principal amount of up to $120,000,000 at any one time.
The agreement,  which expires in January 2001,  provides for  commitments by the
bank to purchase  the  Company's  promissory  notes  denominated  in a number of
foreign  currencies.  As of March 31, 2000, the Company had promissory  notes of
$49,475,000  outstanding  under this  financing  agreement  and had committed to
borrowings  between  April 2000 and  January  2001 in the  cumulative  principal
amount  of  approximately  $276,922,000.  The notes  must be repaid  only to the
extent of future revenue.  Obligations under the agreement are not cancelable by
the  Company  or the bank.  Gains and  losses  associated  with  changes  in the
underlying  foreign  currencies are deferred  during the  commitment  period and
recognized as an adjustment to the revenue  supporting the note repayment at the
time the bank purchases the promissory  notes.  The promissory  notes,  together
with accrued interest,  are payable in U.S. dollars within 40 days from the date
of issuance.  The weighted  average interest rate associated with the promissory
notes  outstanding  as of March  31,  2000,  was  8.47%.  Under the terms of the
agreement,  the Company is required to comply with certain  covenants and, under
certain  circumstances,  may be  required  to  maintain  a  collateral  account,
including cash and qualifying  investments,  in an amount up to the  outstanding
balance of the promissory notes.

See the  Company's  1999  Form 10-K for  additional  information  regarding  the
Company's debt and financing arrangements.
<PAGE>
                               Page 7, Form 10-Q


NOTE 4 - LITIGATION
-------------------

In January 1994,  Stuff Technology  Partners II, a Colorado Limited  Partnership
(Stuff),  filed suit in Boulder County,  Colorado,  District Court (the District
Court) against the Company and certain  subsidiaries.  The suit alleged that the
Company  breached  a  1990  settlement   agreement  that  had  resolved  earlier
litigation  between  the  parties  concerning  an  optical  disk  drive  storage
development  project entered into in 1981 which was  unsuccessful and terminated
in 1985.  The suit  sought  injunctive  relief  and  damages  in the  amount  of
$2,400,000,000.  On December 28, 1995,  the District Court granted the Company's
motion for summary  judgment and dismissed  the  complaint.  Stuff  appealed the
dismissal  to the Colorado  Court of Appeals  (the Court of  Appeals).  In March
1997, the Court of Appeals  reversed the District  Court's judgment and remanded
the case to the District  Court for further  proceedings.  On July 15, 1999, the
District Court again dismissed,  with prejudice,  all of Stuff's material claims
against the Company. On August 30, 1999, Stuff filed a notice of appeal with the
Appeals  Court  seeking  to  overturn  the  decision  of  the  District   Court.
Subsequently,  the parties have filed various appellate briefs. No oral argument
date has been set. The Company  continues  to believe  that  Stuff's  claims are
wholly  without  merit and  intends to defend  vigorously  any  further  actions
arising from this complaint.

The Company is also involved in various other less  significant  legal  actions.
While the Company currently  believes that the amount of any ultimate  potential
loss would not be material to the Company's financial  position,  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  position 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 - RESTRUCTURING
----------------------

On October  28,  1999,  the  Company  announced  a broad  restructuring  program
intended  to  return  the  Company  to   profitability.   Key  elements  of  the
restructuring plan include:

o  an anticipated  reduction of  approximately  1,200 to 1,400  positions,  with
   approximately  550  positions  eliminated  during  fiscal  year  1999 and the
   majority of the remaining  reductions projected to be completed by the end of
   the second quarter of 2000;

o  a reduction in investment in certain businesses,  including  consulting and
   integration services and managed storage services;

o  a recommitment  to the Company's core strengths of tape  automation,  virtual
   storage and open storage area networks  (including  related  maintenance  and
   professional services);

o  modifications to the sales model for the United States and Canada intended to
   improve productivity and increase account coverage and growth;

o  other   organizational   and  operational   changes   intended  to  improve
   efficiency and competitiveness.
<PAGE>
                               Page 8, Form 10-Q


The  elements  of  the  restructuring   included  an  involuntary  reduction  in
headcount,  the  elimination  of a  significant  number  of  temporary  employee
positions,  and managing the replacement of terminating  employees due to normal
attrition. The headcount reductions were targeted in all areas of the Company.

The following table summarizes the reserves in connection with the first quarter
of 2000 restructuring activities (in thousands of dollars):

                                Employee     Asset    Other Exit
                               Severance   Writedowns    Costs        Total
                               ---------------------------------------------

  Balances, December 31, 1999  $  3,917                             $  3,917
  Restructuring expense          10,429       $ 760      $   253      11,442
  Cash payments                 (10,142)                             (10,142)
  Asset writedowns                             (760)                    (760)
                                -------        ----       ------     -------
  Balances, March 31, 2000     $  4,204       $   0      $   253    $  4,457
                                =======        ====       ======     =======

Employee  severance  expense  of  $10,429,000  was  recognized  during the first
quarter of 2000 in connection with the restructuring.  This expense is comprised
of separation  charges related to the fixed and determinable  severance payments
owed to approximately 550 employees who were involuntarily terminated during the
first quarter of 2000 in connection with the restructuring. Substantially all of
the  $4,204,000  of severance  charges  incurred,  but not paid, as of March 31,
2000, relate to severance payments which are expected to be paid within the next
three months.

On March 30, 2000, the Company spun off its managed storage  services  business.
The  Company  contributed  various  assets  into a company,  including  accounts
receivable,  storage hardware and software products,  intellectual property, and
fixed  assets.  In  consideration  for its  contribution,  the Company  received
redeemable  preferred  stock and a minority  interest in the common stock of the
new company.  The common stock  investment  will be accounted for using the cost
method of accounting.  An asset  writedown of $760,000 was recognized as part of
the restructuring  charges in the first quarter of 2000 to reflect the excess of
the carrying  value of the assets  contributed  over the  carrying  value of the
investment received by the Company.

Other exit costs of $253,000  were  recognized  during the first quarter of 2000
associated  with legal expenses  incurred in connection with the spin-off of the
managed storage services business.

NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS
-----------------------------------------

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be
recognized as either assets or liabilities on the Consolidated  Balance Sheet at
their fair  value.  The  corresponding  change in fair  value of the  derivative
instrument  will  be  recognized   either  in  the  Consolidated   Statement  of
Operations,  net of any change in fair value of the related hedged item, or as a
component  of   comprehensive   income  depending  upon  the  intended  use  and
designation.
<PAGE>
                               Page 9, Form 10-Q


In June  1999,  the FASB  issued  SFAS No.  137,  "Accounting  for  Derivative
Instruments  and Hedging  Activities -- Deferral of the Effective  Date of FASB
Statement No. 133 -- an amendment of FASB  Statement No. 133." SFAS No. 137 has
the effect of  delaying  the  required  adoption  date of SFAS No. 133 for the
Company until January  2001.  The Company  continues to evaluate the impact of
SFAS No. 133 and its associated  interpretations on its consolidated financial
statements and its plans for adopting the new accounting standard.

In December  1999, the  Securities  and Exchange  Commission  (SEC) staff issued
Staff Accounting Bulletin No. 101 (SAB 101),  "Revenue  Recognition in Financial
Statements." SAB 101 provides guidance  regarding the recognition,  presentation
and disclosure of revenue in financial  statements  filed with the SEC. In March
2000,  the SEC issued SAB 101A that delayed the required  implementation  of SAB
101 until the second  quarter of 2000.  The Company is currently  evaluating the
impact, if any, of adopting SAB 101.

NOTE 7 - OPERATIONS OF BUSINESS SEGMENTS
----------------------------------------

In the first quarter of 2000,  the Company  changed its  reportable  segments to
reflect  changes in its business  operations  resulting  from its  restructuring
activities.  The Company is now organized into two reportable  segments based on
the  definitions  of segments  provided  under SFAS No. 131  "Disclosures  about
Segments of an Enterprise and Related Information": storage products and storage
services.  The  principle  effect of this  change  was the  reclassification  of
storage management  software from a separate reportable segment to its inclusion
within  the  storage  products  segment,  and the  reclassification  of  storage
integration  products from the storage  services segment to the storage products
segment.  The 1999  quarterly  segment data has been  restated to conform to the
current year presentation.

The storage products segment sells tape, disk,  network,  and other products for
the enterprise and client-server  computing  environment  including storage area
networks  (SAN) and  licenses  software  tools and  applications  for  improving
storage product performance and simplifying information storage management.  The
storage  services segment  provides  maintenance  services for the Company's and
third party products,  as well as storage consulting  services associated mainly
with SAN's, virtual technologies and software solutions.

The  Company  does not have  any  intersegment  revenue  and  evaluates  segment
performance  based on gross profit.  The sum of the segment gross profits equals
the  consolidated  gross profit and the Company  does not allocate  research and
product development costs; selling, general, administrative and other income and
expense; interest expense; interest income; or provision for income taxes to the
segments.  The revenue and gross profit by segment are as follows (in  thousands
of dollars):

                                                Quarter Ended
                                          ----------------------
                                          03/31/00      03/26/99
                                          ----------------------
          Revenue:
          Storage products                $301,112      $357,027
          Storage services                 158,557       160,476
                                           -------       -------
               Total revenue              $459,669      $517,503
                                           =======       =======

          Gross profit:
            Storage products              $104,358      $157,304
            Storage services                50,195        66,113
                                           -------       -------
               Total gross profit         $154,553      $223,417
                                           =======       =======
<PAGE>
                               Page 10, Form 10-Q


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

                                                 Quarter Ended
                                            ----------------------
                                            03/31/00      03/26/99
                                            ----------------------

            Tape products                  $233,668      $251,433
            Disk products                    31,828        88,186
            Network and other                35,616        17,408
                                            -------       -------
              Total storage products
                revenue                    $301,112      $357,027
                                            =======       =======

NOTE 8 - EARNINGS (LOSS) PER COMMON SHARE
-----------------------------------------

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

                                                    Quarter Ended
                                              --------------------------
                                              03/31/00          03/26/99
                                              --------------------------

      Net income (loss)                       $(39,538)         $  5,813
                                               =======           =======

      Denominator:
      Basic weighted-average shares            100,387            99,804
      Effect of dilutive shares                                    2,178
                                               -------           -------
      Diluted weighted-average shares          100,387           101,982
                                               =======           =======

      Basic earnings (loss) per share         $  (0.39)         $   0.06
                                               =======           =======

      Diluted earnings (loss) per share       $  (0.39)         $   0.06
                                               =======           =======

Options to purchase  12,481,628  shares of common stock were  outstanding  as of
March 31, 2000, but not included as common stock  equivalents in the computation
of diluted EPS, as these  options are  antidilutive  as a result of the net loss
incurred for the first quarter ended March 31, 2000.


<PAGE>
                               Page 11, Form 10-Q



               STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                MARCH 31, 2000


All  assumptions,  anticipations,  expectations  and forecasts  contained in the
following  discussion regarding the Company's future product and business plans,
financial results,  performance and events are forward-looking statements within
the meaning of the Private  Securities  Reform Act of 1995. The Company's 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.  The  forward-looking  statements
contained  herein  represent a good-faith  assessment  of the  Company's  future
performance  for which  management  believes  there is a reasonable  basis.  The
Company  disclaims any obligation to update  information on forecasts  contained
herein, except as may be otherwise required by law.

GENERAL
-------

The Company  reported a net loss for the first  quarter ended March 31, 2000, of
$39.5 million, or $0.39 per share, on revenue of $459.7 million, compared to net
income for the first  quarter of 1999 of $5.8  million,  or $0.06 per share,  on
revenue of $517.5 million.  The Company's reported results for the first quarter
of 2000 included  one-time pre-tax expenses  associated with  restructuring  and
other related charges of $26.3 million.  Excluding the one-time expense,  net of
tax, the Company  would have  reported a net loss of $22.5  million or $0.22 per
share for the quarter ended March 31, 2000.

Many of the Company's  customers  undertake detailed  procedures relating to the
evaluation, testing, implementation and acceptance of the Company's products and
services.  This evaluation  process results in a variable sales cycle, and makes
it  difficult  to predict if or when  revenue  will be  earned.  Further,  gross
margins may be adversely  impacted in an effort to complete the sales cycle. The
Company's  financial results may be adversely  impacted in future periods by its
variable   sales  cycle,   particularly   during  2000  as  it   completes   the
implementation  of changes to the sales  model in the United  States and Canada.
Future financial results are also dependent upon the Company's ability to manage
its costs and operating expenses in line with revenue;  the timely  development,
manufacture and introduction of new products and services; successfully managing
the development of new direct and indirect sales channels; the implementation of
its storage  area  network  (SAN)  strategy;  and the  execution  of its ongoing
restructuring  activities.  For the  discussion of these and other risk factors,
see "Factors That May Affect Future Results," below.

In April 1999, the Company first announced plans to restructure its business. In
October  1999,  the  Company  announced  further   restructuring   plans.  These
restructuring  activities  are intended to return the Company to  profitability.
The Company currently  anticipates it will incur an additional $5 million to $10
million in restructuring  costs in the second quarter of 2000, at which time the
majority of the Company's restructuring  activities are expected to be complete.
The Company's sales revenue in 2000 may be adversely  effected by disruptions to
its  sales  organizations  and  customers   associated  with  its  restructuring
activities.  The Company  estimates annual savings of approximately  $40 million
were realized in connection  with the April 1999  restructuring  and the October
1999 restructuring is expected to yield annualized savings of approximately $150
million when fully implemented. There can be no assurance that the restructuring
activities described above will be successful or sufficient to allow the Company
to
<PAGE>
                               Page 12, Form 10-Q


realize the  expected  annualized  savings or that  additional  restructuring
activities may not be required in future periods. See "Restructuring," below for
further discussion of the restructuring activities.

The Company's  operating  activities  provided cash of $137.9 million during the
first  quarter  of 2000  compared  to  cash  of  $69.4  million  generated  from
operations  during the same period in 1999.  The increase in cash generated from
operations  during the first  quarter of 2000,  compared  to the same  period in
1999,  was  primarily  the result of progress in the  Company's  efforts to more
effectively manage working capital. Benefits were realized during the quarter in
the form of reductions in accounts receivable days sales outstanding and reduced
spending on inventory.  See "Liquidity and Capital Resources -- Working Capital"
for additional  discussion of working capital. Cash used in investing activities
decreased  from $35.1 million  during the first quarter of 1999 to $28.5 million
during the first  quarter of 2000  primarily  due to efforts to control  capital
spending on property, plant and equipment.  Cash used in financing activities of
$93.2 million during the first quarter of 2000 reflects debt repayments of $93.4
million.

The  following  table,  stated  as  a  percentage  of  total  revenue,  presents
Consolidated Statement of Operations information and revenue by segment.

                                                    Quarter Ended
                                              --------------------------
                                              03/31/00          03/26/99
                                              --------------------------
Storage products:
  Tape products                                 50.8%             48.6%
  Disk products                                  6.9              17.0
  Network and other products                     7.8               3.4
                                               -----             -----
   Total storage products                       65.5              69.0
Storage services                                34.5              31.0
                                               -----             -----
      Total revenue                            100.0             100.0
Cost of revenue                                 66.4              56.8
                                               -----             -----
      Gross profit                              33.6              43.2
Research and product development costs          14.2              14.2
Selling, general, administrative and other
  income and expense, net                       29.1              26.7
Restructuring expense                            2.5
                                               -----             -----
      Operating profit (loss)                  (12.2)              2.3
Interest income (expense), net                  (1.0)             (0.5)
                                               -----             -----
      Income (loss) before income taxes        (13.2)              1.8
Benefit (provision) for income taxes             4.6              (0.7)
                                               -----             -----
      Net income (loss)                         (8.6)%             1.1%
                                               =====             =====

REVENUE
-------

STORAGE PRODUCTS

The Company's storage products revenue includes sales of tape, disk, and network
and other products for the enterprise and client-server markets, including SANs.
Revenue  generated from storage products  decreased 16% during the first quarter
of 2000, compared to the same period in 1999.
<PAGE>
                               Page 13, Form 10-Q



Tape Products

Tape product revenue decreased 7% during the first quarter of 2000,  compared to
the same period in 1999,  primarily due to decreased revenue from  TimberLine(R)
9490, a 36-track cartridge subsystem; PowderHorn(R) 9310, an automated cartridge
system  library;  and other earlier  generation  enterprise  tape products.  The
decrease in revenue for these  products  reflects both lower selling  prices and
decreases in the number of units sold.  These revenue  declines also reflect the
continued  shift  in the  marketplace  from  enterprise  to  client-server  tape
products.  These declines were partially  offset by increased  sales of the 9840
high-performance  tape drive and Virtual Storage Manager(R) (VSM). VSM is a data
storage  software  solution  designed for the enterprise  tape market to improve
performance,  cartridge  utilization,  and overall  management  of data storage.
Initial sales of the Company's recently introduced L-180 tape library during the
first  quarter  of  2000  offset  declines  in the  sale of  earlier  generation
Timberwolf automated tape products.

Future  revenue growth from tape products is dependent  upon  increasing  market
acceptance for VSM as well as the timely  introduction  of new tape products and
enhancements  which are in the design,  preliminary  engineering  or engineering
validation  testing phase.  Because VSM is a complex system,  it is difficult to
predict  the timing and extent  that VSM will gain  further  market  acceptance.
There can be no  assurances  that the Company will be  successful  in increasing
market  acceptance  for VSM. See "Factors That May Effect  Future  Results - New
Products  and  Services;  Emerging  Markets,"  for a  discussion  of  the  risks
associated with the introduction of new products.

Disk Products

Disk product revenue decreased 64% during the first quarter of 2000, compared to
the  same  period  in  1999,  primarily  due  to a  decrease  in  OEM  sales  to
International  Business Machines  Corporation (IBM) of disk storage products and
software designed for the enterprise market. The Company does not anticipate any
significant  sales revenue from IBM in 2000.  Sales of OPENstorage Disk products
also decreased during the first quarter of 2000 as the Company transitioned away
from  products  supplied by Data  General.  In the third  quarter of 1999,  Data
General was  acquired by EMC  Corporation,  a competitor  of the Company.  These
decreases were partially  offset by direct sales of the Company's Shared Virtual
Arrary (SVA) disk products, the next generation of SVA disk products that became
available in February 2000.  There can be no assurance that the Company will not
continue to experience decreased sales of disk products as it shifts emphasis to
direct  sales,  or that the  Company's  current  and future  products  will gain
additional market acceptance.

Network and Other Products

Network and other  product  revenue  increased  105% during the first quarter of
2000,  compared to the same period in 1999,  primarily due to increased sales of
StorageTek and third-party  network products  designed for the SAN market.  This
increase was partially offset by decreased  revenue from the earlier  generation
connectivity products.

The Company's storage products revenue during 2000 may be adversely  impacted by
its  variable  sales  cycle and by  disruptions  to its sales  organization  and
customers associated with its restructuring activities. Future revenue growth in
the Company's  storage  products  segment is  significantly  dependent  upon the
continued demand for its client-server  tape automation  products,  successfully
replacing OEM sales of disk products to IBM with direct sales of disk  products,
and gaining  greater  market  acceptance of
<PAGE>
                               Page 14, Form 10-Q


the Company's SAN network  products. There  can be no  assurances  that  the
Company  will be  successful  in  these endeavors. See "Factors That May Affect
Future Results -- New Products,  Markets and  Distribution  Channels;  Emerging
Markets,"  for a discussion of the risks associated   with  the   introduction
and  manufacture  of  new  products  and distribution channels.

STORAGE SERVICES

The Company's  storage services revenue  primarily  includes revenue  associated
with the maintenance of the Company's and third party storage products,  as well
as storage consulting and integration services revenue. Storage services revenue
decreased  1% during the first  quarter of 2000,  compared to the same period in
1999, primarily due to reduced revenue from storage consulting services.

The Company anticipates  decreased revenue from storage services during 2000 due
to the Company's  exit from managed  storage  services and certain  lower-margin
consulting  and   integration   service   activities  in  connection   with  its
restructuring.  There can be no  assurance  that  maintenance  revenue  will not
decline  in  future  periods  as the  customer  base  continues  to shift to the
client-server  marketplace and the Company places increased emphasis on indirect
distribution  channels.  Maintenance  revenue may also be adversely  affected in
future  periods  to  the  extent  older  products  currently  under  maintenance
contracts are replaced by newer products with extended warranties.

GROSS PROFIT
------------

Gross profit margins decreased to 34% during the first quarter of 2000, compared
to 43% in the same period in 1999, as a result of declines in profit margins for
both the product and services segments. Gross margins for the Company's products
segment  decreased  from 44% in the  first  quarter  of 1999 to 35% in the first
quarter of 2000. This decline  reflects a decline in the selling prices for disk
products  and  earlier  generation  tape  products;   increased  sales  of  tape
cartridges  for use in the 9840;  and  third-party  network  products which have
lower  profit  margins;  a  decline  in sales of  software  to IBM;  unfavorable
manufacturing  variances  associated  with excess  manufacturing  capacity;  and
one-time  inventory   writedowns  incurred  in  connection  with  the  Company's
restructuring activities. Gross margins from the services segment decreased from
41% in the first  quarter of 1999 to 32% in the first  quarter of 2000.  Storage
service  margins  in the  first  quarter  of 2000  were  adversely  impacted  by
increased pricing pressures  associated with the maintenance of storage products
in the client-server market, increased maintenance costs associated with certain
tape products,  and losses  associated  with storage  consulting and integration
service activities.

The markets for the Company's products and services are subject to intense price
competition. The Company anticipates that price competition for its products and
services  will  continue to have a  significant  impact on the  Company's  gross
profit  margins.  The  Company's  ability to sustain or improve gross margins is
significantly dependent upon gaining operational efficiencies in connection with
the restructuring  activities,  achieving cost improvements  associated with the
sourcing of production  materials,  the  implementation  of pricing controls and
asset  management  disciplines,  and  driving  improved  profitability  from the
Company's  continuing  consulting services and integration  activities.  Storage
product  gross margins may be affected in future  periods by inventory  reserves
and writedowns  resulting from rapid technological  changes or delays in gaining
market acceptance for products.
<PAGE>
                               Page 15, Form 10-Q


RESEARCH AND PRODUCT DEVELOPMENT
--------------------------------

Research and product development expenses decreased 11% during the first quarter
of 2000,  compared to the same period in 1999, due to the elimination of several
lower priority research and product development  programs in connection with the
restructuring.  The Company is focusing  research and development  activities on
the  core  businesses  of tape and  automation,  virtual  technologies,  and SAN
implementations. See "Restructuring," below, for discussion of the restructuring
activities.

SELLING, GENERAL, ADMINISTRATIVE AND OTHER
------------------------------------------

Selling,  general,  administrative and other income and expense (SG&A) decreased
3% during  the  first  quarter  of 2000,  compared  to the same  period in 1999.
General and  Administrative  expenses decreased during the first quarter of 2000
due to reduced  headcount  and a reduction  in spending on internal  information
systems. Selling expenses decreased during the first quarter of 2000 as a result
of reduced spending on product  marketing  activities,  as well as reduced bonus
and commission expenses.  The decrease in bonus and commissions reflects reduced
U.S. sales revenue as well as benefits  associated with  modifications  in these
plans in connection  with the  restructuring.  These  decreases  were  partially
offset by increased  selling  expenses from  international  operations  due to a
shift  from OEM sales to IBM during  the first  quarter of 1999 to direct  sales
during the first quarter of 2000 which require  associated  bonus and commission
payments.

LITIGATION
----------

In January 1994,  Stuff Technology  Partners II, a Colorado Limited  Partnership
(Stuff),  filed suit in Boulder County,  Colorado,  District Court (the District
Court) against the Company and certain  subsidiaries.  The suit alleged that the
Company  breached  a  1990  settlement   agreement  that  had  resolved  earlier
litigation  between  the  parties  concerning  an  optical  disk  drive  storage
development  project entered into in 1981 which was  unsuccessful and terminated
in 1985.  The suit  sought  injunctive  relief and damages in the amount of $2.4
billion.  On December 28, 1995, the District Court granted the Company's  motion
for summary  judgment and dismissed the complaint.  Stuff appealed the dismissal
to the  Colorado  Court of Appeals (the Court of  Appeals).  In March 1997,  the
Court of Appeals reversed the District Court's judgment and remanded the case to
the District Court for further proceedings. On July 15, 1999, the District Court
again  dismissed,  with  prejudice,  all of Stuff's  material claims against the
Company.  On August 30,  1999,  Stuff  filed a notice of appeal with the Appeals
Court seeking to overturn the decision of the District Court. Subsequently,  the
parties have filed various appellate briefs. No oral argument date has been set.
The Company  continues to believe that Stuff's  claims are wholly  without merit
and  intends  to  defend  vigorously  any  further  actions  arising  from  this
complaint.

The Company is also involved in various other less  significant  legal  actions.
While the Company currently  believes that the amount of any ultimate  potential
loss would not be material to the Company's financial  position,  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  position 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.
<PAGE>
                               Page 16, Form 10-Q


RESTRUCTURING
-------------

On October  28,  1999,  the  Company  announced  a broad  restructuring  program
intended  to  return  the  Company  to   profitability.   Key  elements  of  the
restructuring plan include:

o  an anticipated  reduction of  approximately  1,200 to 1,400  positions,  with
   approximately  550  positions  eliminated  during  fiscal  year  1999 and the
   majority of the remaining  reductions projected to be completed by the end of
   the second quarter of 2000;

o  a reduction in investment in certain businesses,  including  consulting and
   integration services and managed storage services;

o  a recommitment  to the Company's core strengths of tape  automation,  virtual
   storage and open storage area networks  (including  related  maintenance  and
   professional services);

o  modifications to the sales model for the United States and Canada intended to
   improve productivity and increase account coverage and growth;

o  other   organizational   and  operational   changes   intended  to  improve
   efficiency and competitiveness.

The  elements  of  the  restructuring   included  an  involuntary  reduction  in
headcount,  the  elimination  of a  significant  number  of  temporary  employee
positions,  and managing the replacement of terminating  employees due to normal
attrition. The headcount reductions were targeted in all areas of the Company.

The following table summarizes the reserves in connection with the first quarter
of 2000 restructuring activities (in thousands of dollars):

                                Employee     Asset    Other Exit
                               Severance   Writedowns    Costs        Total
                               ---------------------------------------------

  Balances, December 31, 1999  $  3,917                             $  3,917
  Restructuring expense          10,429       $ 760      $   253      11,442
  Cash payments                 (10,142)                             (10,142)
  Asset writedowns                             (760)                    (760)
                                -------        ----       ------     -------
  Balances, March 31, 2000     $  4,204       $   0      $   253    $  4,457
                                =======        ====       ======     =======

Employee  severance  expense of $10.4  million was  recognized  during the first
quarter of 2000 in connection with the October 1999 restructuring.  This expense
is  comprised  of  separation  charges  related  to the fixed  and  determinable
severance  payments owed to approximately  550 employees who were  involuntarily
terminated   during  the  first   quarter  of  2000  in   connection   with  the
restructuring.  Substantially  all of the  $4.2  million  of  severance  charges
incurred,  but not paid,  as of March 31,  2000,  relate to  severance  payments
associated  with the  October  1999  restructuring  and are  expected to be paid
within the next three months.

On March 30, 2000, the Company spun off its managed storage  services  business.
The  Company  contributed  various  assets  into a company,  including  accounts
receivable,  storage hardware and software products,  intellectual property, and
fixed  assets.  In  consideration  for its  contribution,  the Company  received
redeemable  preferred  stock and a minority  interest in the common stock of the
new company.  The common stock  investment  will be accounted for using the cost
method of accounting.  An asset  writedown of $760,000 was recognized as part of
the restructuring  charges in the first quarter of 2000 to

<PAGE>
                               Page 17, Form 10-Q


reflect the excess of the  carrying  value  of the  assets  contributed  over
carrying  value  of the investment received by the Company.

Other exit costs of $253,000  were  recognized  during the first quarter of 2000
associated  with legal expenses  incurred in connection with the spin-off of the
managed storage services business.

The Company currently  anticipates it will incur an additional $5 million to $10
million in restructuring charges during the second quarter of 2000 at which time
the  majority  of the  Company's  restructuring  activities  are  expected to be
complete.  The  majority  of these  charges  are  expected to relate to employee
severance payments to approximately 300 employees.

The Company has now reached its goal of reducing 1,200 to 1,400 positions. A net
reduction of approximately 1,250 positions was achieved through a combination of
involuntary severances, limiting the replacement of terminating employees due to
normal attrition,  and eliminating certain contractors,  temporary employees and
other  non-permanent  positions.  In the first  quarter of 2000 the Company also
completed  modifications  to its bonus and commission  plans to better align the
sales organization in order to drive operating profits. Restructuring activities
which remain to be completed as of the end of the first quarter of 2000 in order
to achieve the anticipated savings include implementing  operating  improvements
which emphasize the efficient management of working capital.

The Company  estimates annual savings of approximately $40 million were realized
in connection with the April 1999 restructuring.  The Company anticipates annual
savings  of  approximately  $150  million  will  result  from the  restructuring
activities initiated in October 1999. Because the restructuring  activities will
be ongoing throughout the year, the Company anticipates the realized savings for
the  year  2000  will be  slightly  in  excess  of $100  million.  Based  on the
restructuring  activities  completed  to date  and the  remaining  restructuring
activities,  the Company does not anticipate any material incremental  operating
expenses will be incurred on an on-going basis.

The  complexity  of the  Company's  restructuring  activities  and  the  rapidly
changing business environment in which the Company operates make it difficult to
predict the amount and timing of  restructuring  charges which will be incurred,
and the amount and timing of anticipated  benefits  which will be realized.  The
Company's sales revenue in 2000 may be adversely  effected by disruptions to its
sales   organization  and  customers  as  it  completes  the  implementation  of
restructuring activities.

The Company has  restructured  its business in the past in order to re-align its
business  with its  products  and market  strategies,  or  establish a more cost
efficient business  structure.  There can be no assurance that the restructuring
activities described above will be successful or sufficient to allow the Company
to generate improved  operating  results in future periods.  It is possible that
additional  changes in the Company's business or in its industry may necessitate
additional  restructuring  expense in the future.  The necessity for  additional
restructuring  activities may result in expenses that adversely  affect reported
results of  operations  in the period the  restructuring  plan is  adopted,  and
require incremental cash payments.

INTEREST INCOME AND EXPENSE
---------------------------

Interest  expense  increased  $2.4  million  during  the first  quarter of 2000,
compared  to the same  period  in 1999,  due to  higher  interest  rates  and an
increase in outstanding  debt.  Interest  income  increased  $746,000 during the
first  quarter of 2000,  compared  to the same  period in 1999,  primarily  as a
result of an increase in cash available for investment.
<PAGE>
                               Page 18, Form 10-Q


INCOME TAXES
------------

The Company's  effective tax rate  decreased from 36% the first quarter of 1999,
to 35% for the first quarter of 2000.

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,
management  has  determined  that the Company  will more likely than not realize
$165.1 million of deferred income tax assets as of March 31, 2000. The Company's
valuation allowance of approximately $14.5 million as of March 31, 2000, relates
principally to net deductible  temporary  differences,  tax credit carryforwards
and net operating  loss  carryforwards  associated  with the  Company's  foreign
subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Working Capital

The Company's  operating  activities  provided cash of $137.9 million during the
first  quarter  of 2000  compared  to  cash  of  $69.4  million  generated  from
operations  during the same period in 1999.  The increase in cash generated from
operations  during the first  quarter of 2000,  compared  to the same  period in
1999,  was  primarily  the result of progress in the  Company's  efforts to more
effectively manage working capital. Benefits were realized during the quarter in
the form of reductions in accounts receivable days sales outstanding and reduced
spending on inventory.  See "Liquidity and Capital Resources -- Working Capital"
for additional  discussion of working capital. Cash used in investing activities
decreased  from $35.1 million  during the first quarter of 1999 to $28.5 million
during the first  quarter of 2000  primarily  due to efforts to control  capital
spending on property, plant and equipment.  Cash used in financing activities of
$93.2 million during the first quarter of 2000 reflects debt repayments of $93.4
million.

Available Financing Lines

The Company has a revolving credit facility (the Primary Revolver) which expires
in October 2001.  The credit limit  available  under the Primary  Revolver ($275
million as of March 31,  2000) is  reduced  by $12.5  million on the last day of
each calendar quarter. The terms of the Primary Revolver were amended in January
2000 to be secured by the Company's U.S. accounts receivable and U.S. inventory.
The interest rates under the Primary  Revolver depend upon the repayment  period
of the advance  selected and the  Company's  rolling four quarter  Total Debt to
Earnings before Interest,  Taxes,  Depreciation and Amortization (EBITDA) ratio.
The rate may range from LIBOR  plus 2.0% to 2.5% or the agent  bank's  base rate
plus 0% to .5%. The weighted  average  interest rate on the advances as of March
31,  2000,  was 8.39%.  The Company had  borrowings  of $145  million and issued
letters of credit for  approximately  $50,000  under the Primary  Revolver as of
March 31, 2000. The remaining  available credit under the Primary Revolver as of
March 31, 2000, was  approximately  $130 million.  The Primary Revolver contains
certain financial and other covenants, including restrictions on payment of cash
dividends on the Company's common stock.

In January 2000, the Company  entered into a new $150 million  revolving  credit
facility  (the  Supplemental  Revolver)  which  expires  in  January  2001.  The
Supplemental  Revolver  replaced a $150 million  revolving credit facility which
expired in January 2000. The  Supplemental  Revolver is secured
<PAGE>
                               Page 19, Form 10-Q


by the Company's U.S. accounts receivable and U.S. inventory.  The Supplemental
Revolver contains certain financial and other covenants,  including restrictions
on the payment of cash  dividends on the  Company's  common  stock.  The
interest  rates under the Supplemental  Revolver depend upon the repayment
period of the advance selected and the Company's  EBITDA ratio. The rate may
range from LIBOR plus 2.0% to 2.5% or the agent  bank's base rate plus 0% to
 .5%.  The  Company  had no  borrowings outstanding  under the  Supplemental
Revolver as of March 31,  2000.  Available credit under the Supplemental
Revolver as of March 31, 2000, was $150 million.

The Company has a financing  agreement with a bank that provides for the sale of
promissory  notes in the principal amount of up to $120 million at any one time.
The agreement,  which expires in January 2001,  provides for  commitments by the
bank to purchase  the  Company's  promissory  notes  denominated  in a number of
foreign  currencies.  As of March 31, 2000, the Company had promissory  notes of
$49.5 million  outstanding  under this financing  agreement and had committed to
borrowings  between  April 2000 and  January  2001 in the  cumulative  principal
amount of  approximately  $276.9  million.  The notes must be repaid only to the
extent of future revenue.  Obligations under the agreement are not cancelable by
the  Company  or the bank.  Gains and  losses  associated  with  changes  in the
underlying  foreign  currencies are deferred  during the  commitment  period and
recognized as an adjustment to the revenue  supporting the note repayment at the
time the bank purchases the promissory  notes.  The promissory  notes,  together
with accrued interest,  are payable in U.S. dollars within 40 days from the date
of issuance.  The weighted  average interest rate associated with the promissory
notes  outstanding  as of March  31,  2000,  was  8.47%.  Under the terms of the
agreement,  the Company is required to comply with certain  covenants and, under
certain  circumstances,  may be  required  to  maintain  a  collateral  account,
including cash and qualifying  investments,  in an amount up to the  outstanding
balance of the promissory notes.

The Company believes it has adequate working capital and financing  capabilities
to meet its  anticipated  operating  and  capital  requirements  for the next 12
months.  Over the longer term,  the Company may choose to fund these  activities
through the issuance of  additional  equity or debt  financing.  The issuance of
equity or convertible  debt securities could result in dilution to the Company's
stockholders. There can be no assurance that any additional long-term financing,
if required, can be completed on terms acceptable to the Company.

Total Debt-to-Total Capitalization

The  Company's  total  debt-to-capitalization  ratio  decreased  from  26% as of
December 31, 1999, to 21% as of March 31, 2000,  primarily due to a net decrease
in  borrowings  of $91.7 million  under the  Company's  credit  facilities.  See
"Working Capital," above, for discussion of cash sources and uses.

INTERNATIONAL OPERATIONS
------------------------

During  the  first  quarter  of  2000  and  1999,  approximately  49%  and  40%,
respectively,  of the  Company's  revenue  was  generated  by its  international
operations.   The  Company  also  sells  products  through   domestic   indirect
distribution  channels that have end-user  customers  located outside the United
States.  The Company  expects  that it will  continue to generate a  significant
portion of its revenue from international operations in the future. The majority
of the Company's  international  operations involve transactions  denominated in
the local  currencies of countries within Western Europe,  principally  Germany,
France and the United Kingdom;  Japan; Canada and Australia.  An increase in the
exchange  value of the U.S.  dollar  reduces  the value of revenue  and  profits
generated by the Company's international  operations. As a result, the Company's
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,  the
<PAGE>
                               Page 20, Form 10-Q


Company employs a foreign currency hedging program. See "Market Risk
Management/Foreign Currency Exchange Risk," below.

The  Company's  international  business  may be  affected  by  changes in demand
resulting from global and localized economic, business and political conditions.
The Company is subject to the risks of  conducting  business  outside the United
States,  including  changes in, or  impositions  of,  legislative  or regulatory
requirements,   tariffs,  quotas,   difficulty  in  obtaining  export  licenses,
potentially  adverse  taxes,  the burdens of complying with a variety of foreign
laws,  and  other  factors  outside  the  Company's  control.  There  can  be no
assurances  these  factors  will  not  have a  material  adverse  effect  on the
Company's business or financial results in the future.

MARKET RISK MANAGEMENT/FOREIGN CURRENCY EXCHANGE RISK
-----------------------------------------------------

The  market  risk  inherent  in  the  Company's  financial  instruments  relates
primarily to changes in foreign currency  exchange rates. To mitigate the impact
of foreign  currency  fluctuations,  the Company seeks  opportunities  to reduce
exposures  through  financing  activities.  Foreign currency options and forward
exchange  contracts  are also used to reduce  foreign  currency  exposures.  All
foreign  currency  options and forward  exchange  contracts are  authorized  and
executed  pursuant  to the  Company's  policies.  Foreign  currency  options and
forward  exchange  contracts  that are  designated  as and  qualify  as  hedging
transactions  are subject to hedge  accounting  treatment.  The Company does not
hold or  issue  derivatives  or any  other  financial  instruments  for  trading
purposes.

The Company has a financing  agreement with a bank that provides for commitments
by the bank to  purchase  promissory  notes  denominated  in a number of foreign
currencies.  Gains and losses associated with changes in the underlying  foreign
currencies  are  deferred  during the  commitment  period and  recognized  as an
adjustment  to the revenue  supporting  the note  repayment at the time the bank
purchases  the  promissory  notes.  See  "Liquidity  and  Capital  Resources  --
Available Financing Lines" for a description of the financing agreement.

The Company  periodically  utilizes  foreign  currency  options,  generally with
maturities  of less  than  one  year,  to hedge a  portion  of its  exposure  to
exchange-rate  fluctuations  in  connection  with  anticipated  revenue from its
international  operations.  Gains and losses  associated  with the  options  are
deferred and recognized as an adjustment to the underlying revenue transactions.
To the extent an option is terminated or ceases to be effective as a hedge,  any
gains and losses as of that date are deferred and recognized as an adjustment to
the underlying revenue transaction.

The Company also utilizes forward exchange contracts,  generally with maturities
of less than two months,  to hedge its  exposure to  exchange-rate  fluctuations
associated with monetary assets and liabilities  held in foreign  currencies and
anticipated revenue from its international  operations.  The carrying amounts of
these forward  exchange  contracts  equal their fair values as the contracts are
adjusted at each  balance  sheet date for changes in exchange  rates.  Gains and
losses on the  forward  exchange  contracts  used to hedge  monetary  assets and
liabilities are recognized as incurred within SG&A on the Consolidated Statement
of Operations as  adjustments  to the foreign  exchange  gains and losses on the
translation of net monetary  assets.  Gains and losses on the forward  contracts
used to hedge  anticipated  revenue are recognized as incurred as adjustments to
revenue.

A  hypothetical  10% adverse  movement in foreign  exchange rates applied to the
Company's foreign currency exchange rate sensitive  instruments held as of March
31, 2000, and as of December 31, 1999,  would result in a  hypothetical  loss of
approximately $53.8 million and $54.9 million, respectively. The
<PAGE>
                               Page 21, Form 10-Q


decrease in the hypothetical  loss for the first  quarter of 2000 is primarily
due to a decrease in outstanding  commitments under the financing  agreement.
These  hypothetical losses do not take into  consideration  the Company's
underlying  international operations.  The Company  anticipates that any
hypothetical loss associated with the Company's  foreign  currency  exchange
rate sensitive  instruments  would be offset by gains associated with its
underlying international operations.

The  Company  had  outstanding  borrowings  under its  Primary  Revolver of $145
million as of March 31, 2000. The interest rate on these borrowings is dependent
on the LIBOR,  which is sensitive to interest rate changes.  A hypothetical  10%
adverse  movement  in the  LIBOR  applied  to the  borrowings  would  not have a
material adverse effect on the Company's  results of operations,  cash flows, or
financial position in 2000.

FACTORS THAT MAY AFFECT FUTURE RESULTS
--------------------------------------

New Products and Services; Emerging Markets

The Company's  results of operations and  competitive  strength  depend upon its
ability to successfully develop,  manufacture and market innovative new products
and  services.  Short  product life cycles are  inherent in the  high-technology
market.  The Company must devote  significant  resources to research and product
development  projects and  effectively  manage the risks inherent in new product
transitions.  Developing  new  technology,  products and services is complex and
involves  uncertainties.  Delays in product  development,  manufacturing,  or in
customer  evaluation  and  purchasing  decisions  may make  product  transitions
difficult.  The manufacture of new products involves integrating complex designs
and processes,  collaborating with sole source suppliers for key components, and
increasing  manufacturing  capacities to accommodate  demand. A design flaw, the
failure to obtain  sufficient  quantities of key  components,  or  manufacturing
constraints  could  adversely  affect  the  Company's  operating  and  financial
results. The Company has experienced product development delays in the past that
adversely  affected the Company's  financial  results and competitive  position.
There can be no assurances that the Company will be able to manage  successfully
the development and introduction of new products and services in the future.

The  Company's  future  financial  results  are  significantly   dependent  upon
successfully  competing in the rapidly growing emerging  client-server  and SANs
markets  and  replacing  its  earlier  generation  products  in  the  enterprise
environment with new technologies.  The Company currently is making  significant
investments  in  developing  new products  for these  markets,  particularly  in
products directed towards the internet and e-commerce  businesses.  There can be
no assurances that the Company will be successful in these activities.  The SANs
market is new and  rapidly  evolving.  The  Company's  operating  and  financial
results may be adversely  impacted in the event the SANs market  develops slower
than expected or the Company's  products fail to gain acceptance in this market.
The Company's traditional  maintenance revenue base may be adversely impacted as
a result of the shift from the enterprise to the client-server marketplace.

Competition

The markets for the Company's  products and services are  intensely  competitive
and are subject to continuous,  rapid  technological  change,  frequent  product
performance improvements, short product life cycles, and aggressive pricing. The
Company believes that its ability to remain competitive involves factors such as
price and cost of the  Company's and its  competitors'  product  offerings,  the
timing and success of new products and offerings,  new product  introductions by
competitors,  and the ability to

<PAGE>
                               Page 22, Form 10-Q


establish more effective distribution channels. This competitive  environment
gives rise to aggressive  pricing  strategies and puts pressure on gross profit
margins. The Company's competitors include,  among others, Compaq Computer
Corporation,  EMC Corporation,  Hewlett-Packard Company, Hitachi Ltd., IBM,
Quantum Corporation,  and Sun Microsystems,  Inc. A number of the  Company's
competitors  have  significantly  greater name  recognition  and financial
resources than the Company.  In the highly competitive  client-server market,
a number of the  Company's  competitors  are able to offer  customers a bundled
server and storage  product,  which may provide them with a competitive
advantage.  The Company expects to address these  competitive  issues,  in part,
through its SAN strategy.

From  time-to-time,  two or more of the Company's  competitors may form business
alliances that compete with the Company.  For example,  during the third quarter
of 1999 EMC  Corporation  acquired  Data  General,  a supplier of the  Company's
OPENstorage  Disk  products.   The  alliance  of  two  of  the  Company's  major
competitors could adversely affect the Company's ability to compete. A number of
the Company's  competitors  have formed  alliances with the stated  objective of
developing  interoperable SAN solutions.  In addition, the Company competes with
vendors with which it has established  relationships,  including Legato Systems,
Inc. and VERITAS Software Corporation. The Company also anticipates that it will
continue to establish distribution alliances with other equipment manufacturers,
software vendors and service providers to address competitive factors. There can
be no assurances that the Company will be able to compete  successfully  against
other companies in these markets.

Significant Personnel Changes

During  1999  and the  first  quarter  of  2000,  the  Company  has  experienced
significant  changes in its management team,  including the hiring,  resignation
and retirement of members of its executive sales and marketing  management.  The
Company  announced in February 2000 that David E. Weiss, the Company's  Chairman
of the Board of Directors,  President and Chief Executive  Officer,  recommended
that the Board ask him to resign  from all  positions.  The Board  accepted  Mr.
Weiss's  proposal  and  asked  him to resign  from all such  positions  upon the
election of a successor or at such earlier date as the Board deems  appropriate.
The search for a successor to Mr. Weiss is currently underway and the Company is
unable to predict  when a successor  will be  elected.  In  February  2000,  the
Company  also  announced   significant  changes  to  its  operating  management,
including the planned  departure of Victor Perez,  the Company's Chief Operating
Officer.  Further,  the  Company  may  experience  a delay  between the time the
management team is formed and the time the team becomes fully productive.

The Company has also  experienced  changes in the remainder of its employee base
during  1999 and the  first  quarter  of 2000 as a result of the  voluntary  and
involuntary  severance programs implemented in connection with its restructuring
activities,  as well as  increased  levels of  employee  attrition.  The  future
success of the Company  depends in large part on its ability to attract,  retain
and motivate highly skilled employees. The Company faces significant competition
for  individuals  with the skills  required to deliver the products and services
offered to its  customers.  An inability to  successfully  deliver  products and
services   required  by  its  customers,   or  an  inability  to  implement  the
restructuring  activities while the Company completes the significant  personnel
changes  currently  underway,  could have an adverse effect on future  operating
results.

Changes in Sales Model for the United States and Canada

The Company historically has emphasized the use of its direct sales force in the
United States and Canada,  complemented by indirect distribution channels,  such
as OEMs, value-added resellers and value-added distributors.  In connection with
its current restructuring activities, the Company is implementing

<PAGE>
                               Page 23, Form 10-Q


changes to its sales  model for the United  States and Canada  that the  Company
expects  will improve market penetration, increase sales profitability,  reduce
sales expense, and  expand  the use of the  indirect  sales  channel.  This new
sales  model is intended to provide better coverage for new and existing end
user customers,  as well as  enhancing  reseller,  distributor  and OEM
alliances.  The  Company is currently reorganizing its field sales organization
with the objective of better serving  Fortune  500  customers  with  enterprise-
level   product  and  service requirements.  A new sales  organization was also
formed to address the needs of small and  medium-sized  customers  with
particular  emphasis on  internet  and e-commerce businesses. There is no
assurance that the Company will not encounter short term  disruptions  to its
sales as it  implements  this new sales model or that the new emphasis on
indirect sales channels will result in increased  sales or  productivity  over
the  long-term.  The  Company's  operating  and financial results  may be
adversely  affected  by  reduced  margins  on  sales  typically experienced in
indirect sales channels.

Decline in Enterprise Revenue; Variable Sales Cycle

The Company  historically has generated a significant portion of its revenue and
operating  profits from the enterprise  market.  The Company's  revenue from the
enterprise  market  continued  to  decline  during  the first  quarter  of 2000,
primarily  due  to  the  transition  of  customers'  purchase  patterns  to  the
client-server  environment,  the decline in disk product sales to IBM, and price
competition.  In  addition,  the Company  believes  its revenue  during 1999 was
adversely impacted as some customers delayed testing and purchasing decisions in
anticipation  of the year  2000,  particularly  with  respect  to tape  products
targeted for the enterprise market.  Because of the multiple dynamics within the
enterprise  marketplace,  it is  difficult  to  predict  future  demand  for the
Company's   enterprise   products.   The  demand  for  the  Company's  products,
particularly in the enterprise market,  will be adversely affected to the extent
these patterns continue.

Many of the Company's customers undertake significant procedures relating to the
evaluation, testing, implementation and acceptance of the Company's products and
services.  This evaluation  process results in a variable sales cycle, and makes
it difficult to predict if or when revenue will be earned.

Ability to Develop and Protect Intellectual Property Rights

The Company relies heavily upon its ability to develop new intellectual property
rights  that do not  infringe  upon the  rights  of  others  in order to  remain
competitive and develop and  manufacture  products that are competitive in terms
of technology and cost.  There is no assurance that the Company will continue to
be able to develop such new intellectual property.

The Company relies upon a combination of U.S. patent,  copyright,  trademark and
trade secret laws to protect its intellectual  property rights.  With respect to
certain of the Company's international operations,  the Company does file patent
applications  with foreign  government.  However,  many foreign countries do not
have as  well-developed  laws as the United  States in  protecting  intellectual
property.  The Company enters into  confidentiality  agreements  relating to its
intellectual  property  with its  employees and  consultants.  In addition,  the
Company includes  confidentiality  provisions in license and non-exclusive sales
agreements with its indirect distributors and its customers.

Despite  all of the  Company's  efforts to  protect  its  intellectual  property
rights,  unauthorized parties may attempt to copy or otherwise obtain or use the
Company's  intellectual  property.   Monitoring  the  unauthorized  use  of  the
Company's  intellectual  property  rights is difficult,  particularly in foreign
countries.  There is no  assurance  that the Company will be able to protect its
intellectual property rights, particularly in foreign countries.
<PAGE>
                               Page 24, Form 10-Q


Sole Source Suppliers

The Company  generally  uses standard  parts and components for its products and
believes  that,  in most  cases,  there are a number of  alternative,  competent
vendors  for most of those parts and  components.  Many  non-standard  parts are
obtained from a single source or a limited  group of suppliers;  however,  there
are other vendors who could produce these parts in satisfactory quantities after
a period of  pre-qualification  and product ramping.  Certain key components and
products are purchased from single source  suppliers  that the Company  believes
are currently the only manufacturers of the particular  components that meet the
Company's  qualification  requirements  and  other  specifications  or for which
alternative sources of supply are not readily available.  Imation Corporation is
a single  source  supplier  for the 9840  tape  cartridges  and the  Company  is
dependent on Imation to economically  produce large volumes of high-quality tape
cartridges  for the 9840  product at a cost  acceptable  to the  Company and its
customers.  IBM is a single  source  supplier  for the disk  drives  used in the
Company's SVA disk product.

Certain  suppliers have  experienced  occasional  technical,  financial or other
problems  in the past that have  delayed  deliveries,  but  without  significant
effect on the Company.  An unanticipated  failure of any sole source supplier to
meet the  Company's  requirements  for an extended  period,  or the inability to
secure comparable  components in a timely manner,  could result in a shortage of
key  components,  longer lead times,  and reduced  control over  production  and
delivery  schedules.  These  factors  could  have a material  adverse  effect on
revenue and operating results. In the event a sole source supplier was unable or
unwilling to continue to supply  components,  the Company would need to identify
and qualify  other  acceptable  suppliers.  This process  could take an extended
period,  and no assurance can be given that any  additional  source would become
available or would be able to satisfy production  requirements on a timely basis
or at a price acceptable to the Company.

The Company is dependent  upon a sole sub  contractor,  Herald  Datanetics  LTD.
(HDL),  to  manufacture a key component  used in certain tape  products.  HDL is
located in the People's  Republic of China (PRC).  To date,  the Company has not
experienced  any  material  problems  with  HDL,  however,  HDL  is  subject  to
additional  risks beyond those  associated with other sole 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,  such as whether the PRC is admitted to
the World Trade Organization.

Manufacturing

A significant  portion of the Company's  products are manufactured in facilities
located in Puerto Rico.  The  Company's  ability to  manufacture  product may be
impacted by weather  related  risks  beyond the control of the  Company.  If the
Puerto Rico  manufacturing  facility were impacted by such an event, the Company
may not have an alternative  source to meet the demand for its products  without
substantial  delays  and  disruption  to its  operations.  The  Company  carries
interruption  insurance to mitigate some of the risk. There is no assurance that
the Company could obtain sufficient  alternate  manufacturing  sources or repair
the  facilities  in a timely  manner to satisfy  the  demand  for its  products.
Failure to fulfill  manufacture  demands  could  adversely  affect the Company's
operating and financial results in the future.
<PAGE>
                               Page 25, Form 10-Q


Information Systems and Business Process Transitions

The Company replaced many of its internal information systems outside the United
States during 1999 with new, integrated  information  systems.  The Company also
introduced  significant  new business  processes in  conjunction  with these new
systems,  particularly  within its European  operations.  The  implementation of
these  information  systems  and  business  processes  has been  complex and has
affected  numerous   operational,   transactional,   financial,   and  reporting
processes.  The  establishment  of processes and training  associated with these
information   systems  are   continuing  and  involve  a  number  of  risks  and
uncertainties. The Company must successfully manage the business process changes
and employee training programs. There can be no assurance that the transition to
the new  information  systems and  business  processes  will not cause delays or
interruptions  in the Company's  business.  Failure to  successfully  manage the
transition could adversely affect the Company's  operating and financial results
in the future.

Volatility of Stock Price/Earnings Fluctuations

The Company's  common stock is subject to  significant  fluctuations  in trading
price.  The Company's  stock price may be impacted if the  Company's  revenue or
earnings  fail  to  meet  the  expectations  of the  investment  community.  The
Company's  stock price may also be affected by broad economic and market trends,
which are unrelated to the Company's performance.

The  Company's  financial and  operating  results may fluctuate  from quarter to
quarter due to a number of reasons.  In the past,  the  Company's  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  portion  of the total  product  sales is
recognized  in the last weeks and days of the  quarter.  These  factors make the
forecasting  of revenue  inherently  difficult.  Because the  Company  plans its
operating  expenses  on  expected  revenue,  a  shortfall  in revenue  may cause
earnings to be below  expectations in that period. A number of factors may cause
revenue to fall below expectations,  such as product and technology  transitions
announced by the Company or its  competitors;  delays in the availability of new
products;  changes in the  purchasing  patterns of the  Company's  customers and
distribution  partners;  the timing of customers' acceptance of products;  rapid
price erosion; or adverse global economic conditions. The mix of sales among the
Company's  business  segments and sales  concentration in particular  geographic
regions may carry  different  gross profit  margins and may cause the  Company's
operating margins to fluctuate and impact earnings.

Risks Associated with the Year 2000

The Company's product lines include  information storage products which collect,
move,  store,  share,  and protect data. In order to process data properly,  the
Company's  products must  successfully  manage and manipulate data that includes
both 20th and 21st century dates (Year 2000 Issue).  As of this date,  there has
not been any  significant  product  warranty  claims,  business  disruptions  or
internal  information  system  failures  as a  result  of the Year  2000  Issue.
Additionally,  to the best of the Company's  knowledge,  none of its significant
suppliers or business partners experienced any serious problems.
<PAGE>
                               Page 26, Form 10-Q


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 / Foreign Currency Exchange Rate."
<PAGE>
                               Page 27, Form 10-Q





               STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
                         PART II - OTHER INFORMATION


ITEM 1 - LEGAL PROCEEDINGS
--------------------------

See Part I,  Item 3 - Legal  Proceedings,  of the  Company's  Form  10-K for the
fiscal year ended  December 31,  1999,  filed with the  Commission  on March 10,
2000.

In January 1994,  Stuff Technology  Partners II, a Colorado Limited  Partnership
(Stuff),  filed suit in Boulder County,  Colorado,  District Court (the District
Court) against the Company and certain  subsidiaries.  The suit alleged that the
Company  breached  a  1990  settlement   agreement  that  had  resolved  earlier
litigation  between  the  parties  concerning  an  optical  disk  drive  storage
development  project entered into in 1981 which was  unsuccessful and terminated
in 1985.  The suit  sought  injunctive  relief and damages in the amount of $2.4
billion.  On December 28, 1995, the District Court granted the Company's  motion
for summary  judgment and dismissed the complaint.  Stuff appealed the dismissal
to the  Colorado  Court of Appeals (the Court of  Appeals).  In March 1997,  the
Court of Appeals reversed the District Court's judgment and remanded the case to
the District Court for further proceedings. On July 15, 1999, the District Court
again  dismissed,  with  prejudice,  all of Stuff's  material claims against the
Company.  On August 30,  1999,  Stuff  filed a notice of appeal with the Appeals
Court seeking to overturn the decision of the District Court. Subsequently,  the
parties have filed various appellate briefs. No oral argument date has been set.
The Company  continues to believe that Stuff's  claims are wholly  without merit
and  intends  to  defend  vigorously  any  further  actions  arising  from  this
complaint.

Certain  former  employees of the Company sued the Company in the United  States
District Court for the District of Colorado (the "Federal Court"), alleging that
the Company had violated the Age  Discrimination  in Employment  Act of 1967, as
amended (ADEA) and the Employee  Retirement Income Security Act of 1974 (ERISA),
regarding  there  involuntary  terminations  between  the  period of April  1993
through  December 1996. The plaintiffs and the Company  entered into  settlement
discussions,  which  led to a  settlement  agreement,  which  was  signed by the
parties on December 3, 1999. The Federal Court gave its preliminary  approval of
the proposed settlement agreement on December 15, 1999 and final approval of the
proposed  settlement  agreement  on March 8, 2000.  Pursuant  to the  settlement
agreement, the Company agreed to pay $5 million for the settlement of all claims
arising out of litigation.  The settlement agreement states that it shall not be
construed  as an  admission by the Company that it violated any law. The Company
funded  the  settlement  with a $5  million  payment  into an escrow  account in
December 1999. A pre-tax expense of $5 million was recognized in connection with
the proposed settlement during 1999.

In December  1999,  the Company  filed suit in the U.S.  District  Court for the
Western District of Wisconsin against Cisco Systems, Inc. (Cisco), alleging that
Cisco  infringed  upon a certain  patent of the  Company  that Cisco used in its
products.  The Company filed an amended complaint on December 30, 1999, in which
the Company alleged that Cisco had infringed upon a second patent of the Company
used in its  products.  Cisco  filed an  answer  in  January  2000  denying  the
Company's claims,  alleging that the Company's patents are invalid and asserting
that  a  microchip  used  in  one of the  Company's  network  security  products
infringed upon one of Cisco's patents. Cisco is seeking unspecified compensatory
damages that it asserts should be trebled,  along with  injunctive  relief.  The
Company purchases the alleged infringing  microchip from Level One, a subsidiary
of Intel  Corporation.  In March  2000,  the  case was  transferred  to the U.S.
District  Court for the Northern  District of California.  The Company  believes
that it has  valid  claims  against  Cisco and valid  defenses  against  Cisco's
counterclaim.
<PAGE>
                               Page 28, Form 10-Q


The Company is also involved in various other less  significant  legal  actions.
While the Company currently  believes that the amount of any ultimate  potential
loss would not be material to the Company's financial  position,  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  position 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.

<PAGE>
                               Page 29, Form 10-Q




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 (filed as Exhibit 3 to the Company's
            Quarterly  Report on Form 10-Q for the quarter  ended  September 25,
            1987, and as Exhibit  3.1(ii) to the Company's  Quarterly  Report on
            Form 10-Q,  for the  quarter  ended  September  29,  1995,  filed on
            November 13, 1995, and incorporated herein by reference).

 3.2        Certificate  of  Amendment  dated  May  22,  1989,  to the  Restated
            Certificate of  Incorporation  dated July 28, 1987 (filed as Exhibit
            (c)(1) to the  Company's  Current  Report on Form 8-K dated  June 2,
            1989, and incorporated herein by reference).

 3.3        Certificate of Second  Amendment dated June 2, 1992, to the Restated
            Certificate of Incorporation dated July 28, 1987 (filed as Exhibit 3
            to the Company's Quarterly Report on Form 10-Q for the quarter ended
            June 26, 1992, and incorporated herein by reference).

 3.4        Restated  Bylaws  of  Storage  Technology  Corporation,  as  amended
            through  November  11, 998 (filed as  Exhibit  3.1 to the  Company's
            Current Report on Form 8-K dated November 19, 1998, and incorporated
            herein by reference).

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

 4.2        Rights  Agreement  dated as of  August  20,  1990,  between  Storage
            Technology  Corporation  and First Fidelity Bank,  N.A., New Jersey,
            Rights Agent (filed as Exhibit 4.1 to the Company's  Current  Report
            on Form 8-K  dated  August  20,  1990,  and  incorporated  herein by
            reference).

 4.3        Certificate  of  Designations  of  Series  B  Junior   Participating
            Preferred  Stock (filed as Exhibit A to Exhibit 4.1 to the Company's
            Current  Report on Form 8-K dated August 8, 1990,  and  incorporated
            herein by reference).

10.1(1)(2)  Retention  Agreement,  dated as of January 18, 2000,  by and
            between the Company and Gary Anderson.

10.2 (1)(2) Offer Letter,  dated  January 24, 2000,  from the Company to Alain
            Andreoli.

10.3 (1)(2) Corporate Officer Employment  Agreement,  dated as of January
            1, 2000, by and between the Company and Alain Andreoli.
<PAGE>
                               Page 30, Form 10-Q


10.4 (1)(2) Offer  Letter,  dated  January 17, 2000 from the Company to Pierre
            Cousin.

10.5 (1)(2) Retention and Separation  Agreement,  dated as of January 27,
            2000, by and between the Company and Robert Kocol.

10.6 (1)(2) Separation  Agreement,  dated  as of  January  22,  2000,  by  and
            between the Company and Victor Perez.

10.7 (1)(2) Separation and Mutual Release, dated as of March 22, 2000, by
            and between the Company and Jean Reiczyk.

10.8 (1)(2) Amendment  No. 1,  dated  March 9,  2000,  to the  Company's  1995
            Equity Participation Plan, as amended through March 5, 1999.

10.9 (1)(2) Amendment No. 2, dated March 9, 2000 to the Company's  1995 Equity
            Participation Plan.

27.0 (2)    Financial Data Schedule.


(b) Reports on Form 8-K.
    --------------------

The Company  filed on February  3, 2000,  a Report on Form 8-K  relating to an
Item 5, Other Matter,  consisting of two press  releases,  one relating to the
Board of  Directors  of the Company  commencing  the search  process for a new
Chairman,  President and Chief Executive Officer, and the other relating to an
update of the Company's restructuring and a pre-announcement of earnings for the
Company's Fiscal Quarter ending December 31, 1999.


----------------------------------------------------------------------------
(1)         Contract or  compensatory  plan or  arrangement  in which  directors
            and/or officers participate.

(2)         Indicates exhibits filed with this Quarterly Report on Form 10-Q.




<PAGE>
                               Page 31, Form 10-Q

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.


                                           STORAGE TECHNOLOGY CORPORATION
                                                    (Registrant)




         May 12, 2000                           /s/ ROBERT S. KOCOL
-------------------------------      -------------------------------------------
            (Date)                                   Robert S. Kocol
                                                 Corporate Vice President
                                               and Chief Financial Officer
                                              (Principal Financial Officer)






         May 12, 2000                          /s/ THOMAS G. ARNOLD
-------------------------------      -------------------------------------------
            (Date)                                   Thomas G. Arnold
                                         Vice President and Corporate Controller
                                              (Principal Accounting Officer)


<PAGE>
                               Page 32, Form 10-Q





                                EXHIBIT INDEX
                                -------------

Exhibit No.    Description
----------     ------------

3.1         Restated   Certificate  of  Incorporation   of  Storage   Technology
            Corporation dated July 28, 1987 (filed as Exhibit 3 to the Company's
            Quarterly  Report on Form 10-Q for the quarter  ended  September 25,
            1987, and as Exhibit  3.1(ii) to the Company's  Quarterly  Report on
            Form 10-Q,  for the  quarter  ended  September  29,  1995,  filed on
            November 13, 1995, and incorporated herein by reference).

3.2         Certificate  of  Amendment  dated  May  22,  1989,  to the  Restated
            Certificate of  Incorporation  dated July 28, 1987 (filed as Exhibit
            (c)(1) to the  Company's  Current  Report on Form 8-K dated  June 2,
            1989, and incorporated herein by reference).

3.3         Certificate of Second  Amendment dated June 2, 1992, to the Restated
            Certificate of Incorporation dated July 28, 1987 (filed as Exhibit 3
            to the Company's Quarterly Report on Form 10-Q for the quarter ended
            June 26, 1992, and incorporated herein by reference).

 3.4        Restated  Bylaws  of  Storage  Technology  Corporation,  as  amended
            through  November  11, 998 (filed as  Exhibit  3.1 to the  Company's
            Current Report on Form 8-K dated November 19, 1998, and incorporated
            herein by reference).

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

 4.2        Rights  Agreement  dated as of  August  20,  1990,  between  Storage
            Technology  Corporation  and First Fidelity Bank,  N.A., New Jersey,
            Rights Agent (filed as Exhibit 4.1 to the Company's  Current  Report
            on Form 8-K  dated  August  20,  1990,  and  incorporated  herein by
            reference).

 4.3        Certificate  of  Designations  of  Series  B  Junior   Participating
            Preferred  Stock (filed as Exhibit A to Exhibit 4.1 to the Company's
            Current  Report on Form 8-K dated August 8, 1990,  and  incorporated
            herein by reference).

10.1(1)(2)  Retention  Agreement,  dated as of January 18, 2000,  by and
            between the Company and Gary Anderson.

10.2 (1)(2) Offer Letter,  dated  January 24, 2000,  from the Company to Alain
            Andreoli.

10.3(1)(2) Corporate Officer Employment  Agreement,  dated as of January
            1, 2000, by and between the Company and Alain Andreoli.

10.4 (1)(2) Offer  Letter,  dated  January 17, 2000 from the Company to Pierre
            Cousin.
<PAGE>
                               Page 33, Form 10-Q


10.5 (1)(2) Retention and Separation  Agreement,  dated as of January 27,
            2000, by and between the Company and Robert Kocol.

10.6 (1)(2) Separation  Agreement,  dated  as of  January  22,  2000,  by  and
            between the Company and Victor Perez.

10.7 (1)(2) Separation and Mutual Release, dated as of March 22, 2000, by
            and between the Company and Jean Reiczyk.

10.8 (1)(2) Amendment  No. 1,  dated  March 9,  2000,  to the  Company's  1995
            Equity Participation Plan, as amended through March 5, 1999.

10.9 (1)(2) Amendment No. 2, dated March 9, 2000 to the Company's  1995 Equity
            Participation Plan.

27.0 (2)    Financial Data Schedule.


-------------------------------------------------------------------------------
(1)         Contract or  compensatory  plan or  arrangement  in which  directors
            and/or officers participate.

(2)         Indicates exhibits filed with this Quarterly Report on Form 10-Q.