<PAGE>   1

================================================================================

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

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

                                    FORM 10-Q

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

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

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2000
                         COMMISSION FILE NUMBER: 0-19512

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

                              READ-RITE CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>
               DELAWARE                                  94-277090
       (State of Incorporation)             (I.R.S. Employer Identification No.)

    44100 OSGOOD ROAD, FREMONT, CA                         94539
(Address of Principal Executive Officers)                (Zip Code)
</TABLE>

       Registrant's telephone number including area code: (510) 683-6100

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

                                 Yes [X] No [ ]

On February 2, 2001, 118,201,345 shares of the registrant's common stock were
issued and outstanding.

================================================================================

<PAGE>   2

                              READ-RITE CORPORATION
                                      INDEX
<TABLE>
<CAPTION>
                                                                           PAGE NO.
<S>  <C> <C>                                                                 <C>
PART I.  FINANCIAL INFORMATION

     ITEM 1. Financial Statements

          Consolidated Condensed Balance Sheets as of December 31, 2000
          and September 30, 2000...........................................    3

          Consolidated Condensed Statements of Operations for the
          three months ended December 31, 2000 and December 31, 1999........   4

          Consolidated Condensed Statements of Cash Flows for the
          three months ended December 31, 2000 and December 31, 1999........   5

          Notes to Consolidated Condensed 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.....  18

PART II.  OTHER INFORMATION

     ITEM 1. Legal Proceedings..............................................  18

     ITEM 6.  Exhibits and Reports on Form 8-K..............................  18

SIGNATURES..................................................................  19
</TABLE>

<PAGE>   3

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                              READ-RITE CORPORATION
                                 (in thousands)

<TABLE>
<CAPTION>
                                                   December 31,   September 30,
                                                      2000             2000
                                                   ------------   -------------
                                                   (unaudited)         (a)
<S>                                                 <C>             <C>
ASSETS
Current assets:
     Cash and cash equivalents                      $  79,252       $  64,462
     Short-term investments                            19,381            --
     Accounts receivable, net                          84,031          87,840
     Inventories                                       49,572          34,199
     Prepaid expenses and other current assets          6,154           5,603
                                                    ---------       ---------
       Total current assets                           238,390         192,104

Property, plant and equipment, net                    278,751         285,053
Other assets                                           11,377          16,191
                                                    ---------       ---------
       TOTAL ASSETS                                 $ 528,518       $ 493,348
                                                    =========       =========

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
   SUBSIDIARY AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                               $  89,447       $   2,995
     Accrued compensation and benefits                 23,364          24,797
     Accrued interest payable                           1,327          31,671
     Other accrued liabilities                         25,623          26,950
     Short-term borrowings                              4,843              --
     Current portion of long-term debt and
        capital lease obligations                      11,110          39,849
                                                    ---------       ---------
     Total current liabilities                        155,714         196,262

Convertible subordinated notes                         19,802         207,312
Other long-term debt                                   24,800          25,400
Other long-term liabilities                             5,060           5,102
                                                    ---------       ---------
       Total liabilities                              205,376         434,076

Minority interest in consolidated subsidiary           26,177          19,341

Stockholders' equity:
     Preferred stock, $0.0001 par value                    --              --
     Common stock, $0.0001 par value                       12               7
     Additional paid-in capital                       695,550         449,800
     Accumulated deficit                             (396,636)       (409,137)
     Accumulated other comprehensive loss              (1,961)           (739)
                                                    ---------       ---------
       Total stockholders' equity                     296,965          39,931

TOTAL LIABILITIES, MINORITY INTEREST IN
     CONSOLIDATED SUBSIDIARIES AND
     STOCKHOLDERS' EQUITY                           $ 528,518       $ 493,348
                                                    =========       =========
</TABLE>

(a)  The information in this column was derived from the Company's audited
     consolidated balance sheet included on Form 10-K as of September 30, 2000.

See accompanying notes to the consolidated condensed financial statements.

<PAGE>   4

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 (amounts in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                  December 31,    December 31,
                                                      2000            1999
                                                  ------------    ------------
<S>                                                <C>             <C>
Net sales                                          $ 189,956       $ 114,492
Cost of sales                                        151,723         145,619
                                                   ---------       ---------
     Gross margin (loss)                              38,233         (31,127)

Operating expenses:
     Research and development                         14,644          19,147
     Selling, general and administrative               7,767           6,581
                                                   ---------       ---------
     Total operating expenses                         22,411          25,728
                                                   ---------       ---------
     Operating income (loss)                          15,822         (56,855)

Interest expense                                       2,659           8,845

Interest income and other, net                          (350)          4,592
                                                   ---------       ---------
     Income (loss) before provision (benefit)
       for income taxes and minority interest         12,813         (61,108)

Provision (benefit) for income taxes                     291              --
                                                   ---------       ---------
     Income (loss) before minority interest           12,522         (61,108)

Minority interest in net loss of consolidated
   subsidiaries                                          (22)         (3,633)
                                                   ---------       ---------
      Net income (loss)                            $  12,500       $ (57,475)
                                                   =========       =========

Earnings (loss) per share
     Basic                                         $    0.12       $   (1.15)
     Diluted                                       $    0.11           (1.15)

Shares used in per share computations
     Basic                                           107,919          49,834
     Diluted                                         110,102          49,834
</TABLE>

   See accompanying notes to the consolidated condensed financial statements.

<PAGE>   5

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                         December 31,    December 31,
                                                             2000            1999
                                                         ------------    ------------
<S>                                                       <C>             <C>
Cash flows from operating activities:
Net income (loss)                                         $  12,500       $ (57,475)
Adjustments to reconcile net income (loss)
  to cash provided by operations:
     Depreciation and amortization                           33,387          44,729
     Minority interest in net loss of
       consolidated subsidiary                                   22          (3,633)
     Other non-cash expenses                                 (1,202)             --
Changes in assets and liabilities:
     Accounts receivable                                      3,809         (31,013)
     Inventories                                            (15,373)        (11,239)
     Prepaid expenses and other current assets                 (551)           (518)
     Accounts payable and accrued liabilities                15,410          13,484
     Other assets and liabilities, net                       (1,905)            613
                                                          ---------       ---------
Net cash provided by (used in)
  operating activities                                       46,097         (45,052)
                                                          ---------       ---------

Cash flows from investing activities:
     Capital expenditures                                   (26,627)        (25,531)
     Maturities of available-for-sale investments            17,300         218,331
     Purchase of available-for-sale investments             (36,681)       (133,043)
                                                          ---------       ---------

Net cash provided by (used in) investing activities         (46,008)         59,757
                                                          ---------       ---------

Cash flows from financing activities:
     Payment of long-term debt and capital
       lease obligations                                    (29,339)        (42,491)
     Proceeds from short-term borrowing                       4,843              --
     Payment to joint venture partner upon final
       dissolution of RRSMI                                  (6,940)             --
     Proceeds from issuance of common stock, net             46,137             838
                                                          ---------       ---------
Net cash provided by (used in) financing activities:         14,701         (41,653)
                                                          ---------       ---------

Net increase (decrease) in cash and cash equivalents         14,790         (26,948)
Cash and cash equivalents:
     Beginning of period                                     64,462          80,547
                                                          ---------       ---------
     End of period                                        $  79,252       $  53,599
                                                          =========       =========

Supplemental disclosures of non-cash activities:
     Conversion of debt/interest to common stock            213,352              --
</TABLE>

   See accompanying notes to the consolidated condensed financial statements.

<PAGE>   6

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1: BASIS OF PRESENTATION

Read-Rite Corporation ("Read-Rite" or the "Company") maintains a
fifty-two/fifty-three week fiscal year ending on the Sunday closest to September
30. The first quarters of fiscal 2001 and 2000 ended on December 31, 2000 and
December 26, 1999 respectively. To conform to the Company's fiscal year ends,
the Company must add a fifty-third week to every fifth or sixth fiscal year.
Accordingly, fiscal 2000 was a fifty-three week fiscal year, with an additional
week added to the second fiscal quarter. Fiscal 2001 is a fifty-two week fiscal
year. For convenience, the accompanying financial statements have been shown as
ending on the last day of the calendar month.

The unaudited consolidated condensed financial statements included herein have
been prepared in accordance with principles generally accepted in the United
States for interim financial information and with the instructions for Form 10-Q
and Article 10 of Regulation S-X. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, all adjustments including
all normal recurring adjustments necessary for a fair presentation of the
interim periods presented have been included. The interim results are not
necessarily indicative of the operating results expected for the full fiscal
year ending on September 30, 2001.

The balance sheet at September 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.

The financial statements included herein should be read in conjunction with the
Company's audited financial statements included in its 2000 Annual Report on
Form 10-K.

NOTE 2. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting Policy for Derivative Instruments: At the beginning of fiscal year
2001, the Company adopted SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities". This standard requires the Company to recognize all of its
derivative instruments as either assets or liabilities in the statement of
financial position at fair value. The accounting for changes in the fair value
(i.e., gains or losses) of a derivative instrument depends on whether it has
been designated and qualifies as part of a hedging relationship and, further, on
the type of hedging relationship. Under the Company's hedging policy, certain
contracts have been designated as a cash flow hedge. For derivative instruments
that are designated and qualify as a cash flow hedge (i.e., hedging the exposure
to variability in expected future cash flows that is attributable to a
particular risk), the effective portion of the gain or loss on the derivative
instrument is reported as a component of other comprehensive income and
reclassified into earnings in the same period or periods during which the hedged
transaction affects earnings. The remaining gain or loss on the derivative
instrument in excess of the cumulative change in the present value of future
cash flows of the hedged item, if any, is recognized in current earnings during
the period of change. For derivative instruments not designated as hedging
instruments, the gain or loss is recognized in current earnings during the
period of change.

Cash Flow Hedging Strategy: To protect against the reduction in value of
forecasted foreign currency cash flows resulting from international
manufacturing expenses over the next quarter, the Company has a foreign currency
cash flow hedging program. The Company hedges portions of its forecasted
expenses denominated in foreign currencies with forward contracts. When the
dollar strengthens significantly

<PAGE>   7

against the foreign currencies, the decline in value of future foreign currency
expenses is offset by losses in the value of the forward contracts designated as
hedges. Conversely, when the dollar weakens, the increase in the value of future
foreign currency expenses is offset by gains in the value of the forward
contracts. During the quarter ended December 31, 2000, the Company recognized no
material net gain (loss) related to the ineffective portion of its hedging
instruments, and no material net gain (loss) related to the portion of the
hedging instrument excluded from the assessment of hedge effectiveness. The
Company recognized no gains or losses during the quarter ended December 31,
2000, for cash flow hedges that have been discontinued, because the forecasted
transaction did not occur. All amounts have been included in other income and
expense in the statement of operations. At December 31, 2000, the Company
expects to reclassify $1,961 thousand of net losses on derivative instruments
from accumulated other comprehensive income to earnings during the next quarter,
offset by an expected benefit from cash flows for the hedged international
manufacturing expenses.

NOTE 3: INVENTORIES

Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                           December 31,   September 30,
                               2000           2000
                           ------------   -------------
<S>                           <C>            <C>
     Raw materials            $ 4,938        $ 2,803
     Work-in-process           32,416         26,659
     Finished goods            12,218          4,737
                              -------        -------
                              $49,572        $34,199
                              =======        =======
</TABLE>


NOTE 4.  CALCULATION OF EARNINGS PER SHARE

The basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Dilutive common equivalent
shares consist of employee stock options and incremental common shares
attributable to the assumed conversion of the Company's convertible subordinated
debentures, unless they are antidilutive, and are calculated by applying the
treasury stock method.

The following table presents the calculation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                       Three Months Ended
                                                  December 31,    December 31,
                                                      2000            1999
                                                  ------------    ------------
                                                          (in thousands,
                                                      except per share data)
<S>                                                 <C>             <C>
BASIC NET INCOME (LOSS) PER SHARE COMPUTATION
Numerator:
     Net income (loss)                              $ 12,500        $(57,475)
                                                    --------        --------

Denominator:
     Weighted average number of common shares
        outstanding during the period:               107,919          49,834
                                                    --------        --------

Basic net income (loss) per share                   $   0.12        $  (1.15)
                                                    ========        ========
</TABLE>

<PAGE>   8

<TABLE>
<S>                                                 <C>             <C>
DILUTED NET INCOME (LOSS) PER SHARE COMPUTATION
Numerator:
     Net income (loss)                              $ 12,500        $(57,475)
                                                    --------        --------
Denominator:
     Weighted average number of common shares
        outstanding during the period                107,919          49,834

     Incremental common shares issuable under
        stock option plans after applying
        treasury stock method, net of tax benefit      2,183              --
                                                    --------        --------
Denominator for diluted earnings per share           110,102          49,834

Diluted net income (loss) per share                 $   0.11        $  (1.15)
                                                    ========        ========
</TABLE>


For the three month period ended December 31, 2000, the weighted average number
of common shares attributable to the assumed conversion of the Company's 6.5%
convertible subordinated debentures, of 0.49 million shares, were not included
in the diluted earnings per share computation because the effect would be
antidilutive.

NOTE 5. FINANCING TRANSACTIONS

In October 2000, the Company completed the automatic conversion of its 10%
subordinated convertible notes to common stock. As of September 30, 2000,
approximately $187.5 million of the Company's 10% convertible subordinated notes
were outstanding. The automatic conversion called for the face value of the
notes to be converted to common stock at $4.51 per share, and it also included a
"make whole" provision that guaranteed interest for a minimum of two years,
which was also paid in common stock. The fair value of the make whole interest
paid to bondholders was approximately $29.3 million. Approximately 45.3 million
shares of common stock were issued in October 2000 in conjunction with the
conversion and "make whole" provision.

In November 2000, the Company received a cash investment of $18.9 million in a
private placement of approximately 2.7 million shares of common stock to the
State of Wisconsin Investment Board. During the first quarter ended December 31,
2000, the Company repaid the remaining balance of $28.8 million under the
secured term loan. Short-term borrowings as of December 31, 2000 consisted of a
six-month unsecured Thai baht denominated loan of approximately $4.8 million at
an interest rate of 4.09%.

NOTE 6.  RESTRUCTURING COSTS

During the second and third quarters of fiscal 2000, the Company recorded total
restructuring charges of $130.1 million. In the fourth quarter of fiscal year
2000, the Company revised the estimate for restructuring costs to approximately
$120.8 million. With continued productivity improvements and more efficient
capacity utilization at the Company's Fremont wafer fab, combined with the
Company's efforts to reduce fixed costs and to better focus its technical
resources in one wafer fab location, the Company dissolved its joint venture,
Read-Rite SMI ("RRSMI"), with Sumitomo Metals Industries, Ltd. ("SMI") in Japan.
The Company has established a product engineering, sales and procurement office
in Japan to continue to support its customers and suppliers in that area. The
transition to the Fremont wafer fab of the products previously designed and
manufactured in Japan was completed in the fourth quarter of fiscal 2000.

In addition, the Company closed its Philippine head stack operations and brought
all head gimbal assembly and head stack operations into the Company's Thailand
facility. This action has lowered the Company's fixed costs and provided a
faster response to customer changes by improving manufacturing cycle time. The
Company's tape head assembly operations remain in the Philippines.

<PAGE>   9

The following table reflects the total restructuring charge: (amounts in
thousands):

<TABLE>
<CAPTION>
                                  Facilities and                       Lease
                                     Equipment       Severance      Commitments        Other            Total
<S>                                  <C>             <C>             <C>             <C>             <C>
Restructuring charge                 $ 113,567       $   8,511       $   7,055       $     986       $ 130,119
Write off and write downs             (106,481)             --              --            (120)       (106,601)
Cash charges/adjustments                  (950)         (6,185)         (7,055)            737         (13,453)
Change in estimate                      (6,136)         (2,326)             --            (864)         (9,326)
                                     ---------       ---------       ---------       ---------       ---------
Reserve balance, Sept. 30, 2000      $      --       $      --       $      --       $     739       $     739
Write off and write downs                                                                 (739)           (739)
                                     ---------       ---------       ---------       ---------       ---------
Reserve balance, Dec. 31, 2000       $      --       $      --       $      --       $      --       $      --
                                     =========       =========       =========       =========       =========
</TABLE>


The total restructuring charge of $120.8 million comprised $107.4 million for
the write-off and disposition of equipment utilized in Japan and the
Philippines, $7.1 million for future lease commitments in Japan, $6.2 million
for severance in Japan and the Philippines, and $0.1 million for other expenses
associated with the restructuring in Japan and the Philippines. The fair value
of the assets written down was determined based upon salvage value as no further
uses of the assets were identified. Approximately 3,700 employees and 100
contractors were terminated. Of the 3,800 terminations, approximately 200 and
3,400 were engaged in manufacturing activities in Japan and the Philippines,
respectively. The net effect, after minority interest, for the total
restructuring charge was $88.6 million, of which $32.2 million was related to
the dissolution of RRSMI.

NOTE 7. COMPREHENSIVE INCOME (LOSS)

The components of comprehensive income (loss), net of related tax are as follows
(in thousands):

<TABLE>
<CAPTION>
                                                 Three Months Ended
                                             December 31,   December 31,
                                                 2000           1999
                                             ------------   ------------
<S>                                            <C>            <C>
Net income (loss)                              $ 12,500       $(57,475)
Gain (loss) on currency forward contracts
  hedging future cash flows                      (1,961)
Change in unrealized gain (loss) on
  available-for-sale investments                     --             24
                                               --------       --------
Comprehensive income (loss)                    $ 10,539       $(57,451)
</TABLE>


NOTE 8. SEGMENT INFORMATION

The Company operates and tracks its results in three operating segments, the
hard disk drive or HDD segment, tape drive segment and fiber optic components
segment. The Company designs, develops, manufactures and markets head gimbal
assemblies, head stack assemblies and tape heads for the hard disk drive and
tape drive markets. For reporting purposes, we have aggregated the HDD and tape
drive segments into Magnetic recording heads. The Company also is the majority
owner of Scion Photonics, Inc. which designs and manufactures high performance
optical components (see Note 9). The Chief Executive Officer ("CEO") has been
identified as the Chief Operating Decision Maker as defined by Statement of
Financial Accounting Standard No. 131 (SFAS 131), "Disclosures about Segments of
an Enterprise and Related Information." The Chief Executive Officer evaluates
performance and allocates resources based on revenue and gross profit from
operations. Gross profit from operations is defined as revenue less cost of
sales. The Company does not evaluate or allocate assets or depreciation by
operating segment, nor does the CEO evaluate segments on these criteria.

Net sales to unaffiliated customers by operating segments were as follows
(amounts in thousands):

<PAGE>   10

<TABLE>
<CAPTION>
                                                 Three Months Ended
                                             December 31,   December 31,
                                                 2000           1999
                                             ------------   ------------
<S>                                            <C>            <C>
Magnetic recording heads                       $189,913       $114,492
Fiber optics                                         43             --
                                               --------       --------
Total net sales                                $189,956       $114,492
</TABLE>


Profit (loss) from unaffiliated customers by operating segments were as follows
(amounts in thousands):

<TABLE>
<CAPTION>
                                                 Three Months Ended
                                             December 31,   December 31,
                                                 2000           1999
                                             ------------   ------------
<S>                                            <C>            <C>
Magnetic recording heads                       $ 14,247       $(57,475)
Fiber optics                                     (1,747)            --
                                               --------       --------
Total net income                               $ 12,500       $(57,475)
</TABLE>


NOTE 9. SCION PHOTONICS, INC.

The Company announced the formation of Scion Photonics, Inc. ("Scion") in
September 2000. The business charter of Scion is to design, manufacture and
market high-performance optical components to the fiber optics communications
market. In October 2000, Scion received a $25 million cash investment from Tyco
Ventures, a subsidiary of Tyco International Ltd., and Integral Partners, in
exchange for 25 million shares of preferred stock. These funds are restricted
for the operations and capital requirements of Scion and as of December 31,
2000, Scion had cash balances totaling $23.6 million. Read-Rite Corporation owns
65 million shares of common stock with an additional 35 million shares of common
stock reserved for Scion's stock option plan. In December, Scion acquired
Optical Systems Corporation ("OSC") for cash and stock. OSC is a maker of
precision automated tooling for the fiber optics component manufacturing
industry and is located in Valencia, California.

NOTE 10. CUSTOMER CONCENTRATION

The Company's four largest hard disk drive, Maxtor, Quantum-HDD, Samsung and
Western Digital accounted for 95% of net sales during the three-month period
ended December 31, 2000. Given the small number of disk drive manufacturers, the
Company will continue to be dependent upon a limited number of customers. The
loss of any large customer, or a significant decrease in sales orders from one
or more large customers, will have a material adverse effect on the Company's
business, financial condition, and results of operations.

NOTE 11. LEGAL PROCEEDINGS

On December 11, 1996, a purported class action complaint was filed in the
Superior Court of the State of California, Santa Clara County, by Joan D.
Ferrari and Mark S. Goldman against the Company and certain of its officers and
directors (the "Ferrari State Action"). The complaint in the Ferrari State
Action alleges that during a purported class period of April 19, 1995 to January
22, 1996, defendants made false and misleading statements concerning the
Company's business condition and prospects. The plaintiffs in the Ferrari State
Action seek damages of an unspecified amount. By Order dated May 16, 1997, the
court sustained the demurrer of certain defendants to the entire complaint, and
sustained the demurrer of the remaining defendants to certain causes of action.
The remaining causes of action in the Ferrari State Action allege violation of
the California Corporations Code. On July 7, 1997, the remaining defendants
answered the complaint. On November 14, 2000, defendants filed a motion for
judgment on the pleadings seeking to use the federal action's final judgment
(see below) to extinguish the state claims under the

<PAGE>   11

doctrine of res judicata. A hearing on that motion occurred on January 22, 2001
but no date was set for a ruling by the court on this motion.

On January 16, 1997, a purported class action complaint was also filed in the
United States District Court for the Northern District of California by Ferrari
and Goldman against the Company and certain of its officers and directors (the
"Ferrari Federal Action"). The complaint in the Ferrari Federal Action alleged
that during a purported class period of April 19, 1995 to January 22, 1996,
defendants made false and misleading statements concerning the Company's
business condition and prospects. The Ferrari Federal Action contains similar
factual allegations as the Ferrari State Action, and alleged violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule
10b-5. The plaintiffs in the Ferrari Federal Action ("Ferrari Plaintiffs") also
sought damages of an unspecified amount.

On May 19, 1997, another purported class action complaint was filed in the
United States District Court for the Northern District of California by James C.
Nevius and William Molair against the Company and certain of its officers and
directors (the "Nevius Federal Action"). The Nevius Federal Action alleged that
defendants made false and misleading statements about the Company's business
condition and prospects during a purported class period of March 2 to June 19,
1996, and alleged violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and SEC Rule 10b-5. The plaintiffs in the Nevius Federal
Action ("Nevius Plaintiffs") also sought damages of an unspecified amount.

On December 22, 1997, the Court consolidated the Ferrari Federal Action and the
Nevius Federal Action (the "Consolidated Federal Action"). On March 2, 2000, the
court dismissed the Ferrari Plaintiffs' claims without leave to amend, and
dismissed the Nevius Plaintiffs' claims with leave to amend. On October 13,
2000, the court ordered that the Ferrari Plaintiffs' and Nevius Plaintiffs'
complaints be dismissed without leave to amend and that both actions be
dismissed with prejudice. The Nevius Plaintiffs and Ferrari Plaintiffs filed
notices of appeal on October 27, 2000 and November 9, 2000, respectively.

There has been no discovery to date in the federal actions and no trial is
scheduled in any of these actions. The Company believes that the Company and the
individual defendants have meritorious defenses in the above-described actions.
Accordingly, both on its own behalf and pursuant to indemnification agreements
between the Company and the named individual defendants, the Company intends to
continue to defend each of these actions vigorously. The Company believes that
the final disposition of the claims set forth in these actions will not have a
material adverse effect on the Company's business, results of operations and
financial condition.

Except as so noted, the Company is not a party, nor is its property subject, to
any material pending legal proceedings other than ordinary routine litigation
incidental to the Company's business. The Company does not believe such routine
litigation, taken individually or in the aggregate, will have a material adverse
effect on the Company's business, financial condition or results of operations.


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

This information should be read in conjunction with the unaudited consolidated
condensed financial statements and the notes thereto included in Part I, Item 1
of this Quarterly Report; and Item 1, Business, Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations, and Item 8,
Financial Statements and Supplementary Data and notes thereto, in the Annual
Report for the fiscal year 2000 as filed on Form 10-K.

FORWARD LOOKING INFORMATION

Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations include forward-looking information within
the meaning of Section 27A of the Securities Act of

<PAGE>   12

1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the "safe harbor" created by those sections. These
statements include but are not limited to, the Company's belief that its
restructuring efforts will provide a faster response to customer changes through
improvement in manufacturing cycle time; that the Company expects continued
productivity improvements and better capacity utilization at its Fremont wafer
fab; that the Company expects Scion Photonics, Inc. to incur start-up losses
throughout the fiscal year; that the Company believes that they and the
individual defendants have meritorious defenses in the purported class actions
(collectively, the "Actions") described in Note 11 "Legal Proceedings"; that the
Company expects the investment in R&D for its head gimbal assembly, head stack
assembly and tape drive business to grow slightly during fiscal 2001; that the
Company anticipates Scion's investment in R&D will increase throughout the
fiscal year; that the Company anticipates increased sales and volume during the
first half of fiscal 2001; that the Company expects capital expenditures for its
head gimbal assembly, head stack assembly and tape head operations will be
approximately $90 - $100 million during the fiscal year and expects that capital
expenditures for Scion Photonics, Inc. will be approximately $15 - 20 million
during the fiscal year.

Some factors that could cause future actual results to materially differ from
the Company's recent results or those projected in the forward-looking
statements include, but are not limited to: failure by the Company to timely,
effectively and continuously execute on current and future GMR products; failure
to obtain necessary customer qualifications on new programs; failure to timely
and cost-effectively introduce those programs into volume manufacturing; failure
to achieve and maintain acceptable production yields on those programs;
introduction of competitors' new products more quickly or cost effectively than
the Company; constraints on supplies of raw materials or components limiting the
Company's ability to maintain or increase production; Scion's ability to quickly
and successfully develop, design, manufacture, ramp production and sustain
volume production of its optical products; Scion's ability to achieve
anticipated acquisition related operational efficiencies; Scion's ability to
effectively manage and distribute products and compete in the highly competitive
and rapidly changing marketplace; significant increases or decreases in demand
for the Company's products, cancellation or rescheduling of customer orders,
changes to the Company's product mix, and changes in business conditions
affecting the Company's financial position or results of operations which
significantly increases the Company's working capital needs; or failure by the
Company to obtain favorable resolution of the claims set forth in the Actions.
For a more detailed discussion of certain risks associated with the Company's
business, see "Certain Additional Business Risks" and other risk factors
described in the Company's filings with the Securities and Exchange Commission,
in particular its Annual Report on Form 10-K for fiscal year 2000.

All forward-looking statements included in this document are made as of the date
hereof, based on the information available to the Company as of the date hereof,
and the Company assumes no obligation to update any forward-looking statement,
whether as a result of new information relating to existing conditions, future
events or otherwise.

RESULTS OF OPERATIONS

NET SALES

Net sales for the three months ended December 31, 2000 increased 65.9% to $189.9
million compared to $114.5 million for the same period last year. The increase
is attributable to higher unit shipments, as the Company shipped in volume head
gimbal assemblies and head stack assemblies supporting its customer's 20
gigabyte per platter disk drive programs. During the quarter ended December 31,
1999, the Company shipped recording heads supporting its customers 9.1 and 10.2
gigabyte per platter disk drive programs. During the quarter ended December 31,
2000, the Company shipped 23.0 million head gimbal assemblies (including head
gimbal assemblies shipped in the form of head stack assemblies) as compared to
11.1 million head gimbal assemblies shipped during the quarter ended December
31, 1999.

Head gimbal assemblies accounted for 51% of product shipped during the quarter
versus 17% for the same period last year. Head stack assemblies accounted for
45% of product shipped versus 75% for the same period last year. However, head
stack assemblies shipped this quarter increased as a percentage of product
shipped from the fourth quarter of fiscal year 2000, in which head stack
assemblies accounted for 32% of

<PAGE>   13

product shipped. The Company expects the product mix reflected in this quarter's
numbers will not materially change during the fiscal year.

The Company's average selling prices for head gimbal assemblies remained
relatively flat as compared to the same period last year. Average selling prices
for head stack assemblies decreased during the quarter as compared to the same
period last year as the average number of heads per head stack decreased by
approximately 0.5 heads as compared to the same period last year. During the
first quarter of fiscal 2001, the Company shipped products to customers
supporting their current mainstream 20 gigabyte per platter programs.

The Company's customer base remains highly concentrated as its four hard disk
drive customers, Maxtor, Quantum - HDD, Samsung and Western Digital accounted
for over 95% of net sales for the three month period ended December 31, 2000
compared to 84% for the comparable period last year.

GROSS MARGIN

The Company's gross margins are primarily influenced by the level of unit sales
in relation to fixed costs, average selling prices, manufacturing yields and
product mix. The relative impact of these factors fluctuates from time to time.
Head stack assemblies typically have a lower gross margin, as a percentage of
sales, than head gimbal assemblies. Head stack assemblies typically consists of
one or more head gimbal assemblies and a variety of purchased components, which
the Company assembles into a single unit. The cost of the purchased components
comprises a significant percentage of the total cost of the head stack assembly
and the gross margin on such purchased components is substantially lower than
the gross margin on head gimbal assemblies produced by the Company.

The gross margin was 20.1% for the first quarter of fiscal 2001 as compared to a
gross margin loss of 27.2% for the first quarter of fiscal 2000. The improvement
in gross margin is attributed to higher unit volumes, improved manufacturing
yields and cost savings realized from the restructuring efforts initiated during
the second half of fiscal year 2000.

OPERATING EXPENSES:

RESEARCH AND DEVELOPMENT: Research and development expenses were $14.6 million
for the three months ended December 31, 2000 as compared to $19.1 million for
the three-month period ended December 31, 1999. The decrease in expenses can be
attributed to the Company's decision to terminate its wafer fabrication
operations in Japan during the later half of fiscal 2000, and continued cost
containment efforts. The Company expects the investment in R&D for its head
gimbal assembly, head stack assembly, tape drive business and further
diversification efforts to grow slightly during fiscal 2001. Scion Photonics,
Inc., incurred $1.5 million of the $14.6 million in research and development
costs during the first fiscal quarter of 2001. The Company expects Scion's
investment in R&D will increase throughout the fiscal year.

SELLING, GENERAL & ADMINISTRATIVE: Selling, general and administrative ("SG&A")
expenses were $7.8 million for the three months ended December 31, 2000 as
compared to $6.6 million for the three month period ended December 31, 1999.
SG&A expenses, as a percentage of sales, were 4% for the quarter ended December
31, 2000 as compared to 5.7% for the same period last year. The increase in
expense was the result of increased recruiting and staffing, reclassification of
certain personnel into SG&A and the establishment of Read-Rite Japan.

NON-OPERATING EXPENSES:

INTEREST EXPENSE: Interest expense was $2.7 million for the quarter ended
December 31, 2000 as compared to $8.8 million for the same period last year. The
decrease in interest expense was due to the significantly lower debt balance for
the three month period ended December 31, 2000.

INTEREST INCOME AND OTHER, NET: Interest income and other, net for the quarter
ended December 31, 2000 was a loss of $0.4 million compared to income of $4.6
million for the quarter ended December 31, 1999. The reduction in income is
primarily related to a gain recognized in the first quarter of fiscal year

<PAGE>   14

2000 on the sale of certain real estate in the United States and the sale of an
option on certain real estate, and foreign exchange losses of $1.4 million for
the three-month period ended December 31, 2000 as compared to a $0.4 million
loss for the same period last year. In addition, interest income for the
three-month period ended December 31, 2000 was $0.7 million compared to $2.5
million for the same period last year. The reduction in interest income is the
result of lower average investment balances during the quarter ended December
31, 2000.

INCOME TAXES: The effective income tax rate for the three months ended December
31, 2000, was 2% consisting primarily of a calculation based on US alternative
minimum tax requirements, compared to a zero rate in the same period last year
due to operating losses.

LIQUIDITY AND CAPITAL RESOURCES

As of the end of the first three months of fiscal 2001, the Company had cash and
investments of $98.6 million, total assets of $528.5 million and total
liabilities of $205.4 million.

Cash provided by operating activities was $46.1 million. The positive cash flow
from operating activities was primarily attributed to net income from operations
of $12.5 million, depreciation and amortization of $33.4 million, an increase in
accounts payable and other accrued liabilities of $15.4 million, offset by an
increase in inventory balances of $15.4 million. The increase in accounts
payable and accruals of $15.4 million was primarily related to a growth in
accounts payable due to the increased demand for head gimbal assemblies and head
stack assemblies. The growth in inventory of $15.4 million was primarily due to
higher manufacturing activity (work-in-process) and a planned increase in
finished goods in anticipation of the year-end holidays to meet upcoming demand
in the first part of the second quarter of fiscal year 2001.

The Company's business is highly capital intensive. During the quarter, the
Company incurred capital expenditures of $26.6 million. The Company's plan for
capital equipment purchases during fiscal 2001 for its head gimbal assembly,
head stack assembly and tape head business is approximately $90 - $100 million.
The Company estimates that capital expenditures during fiscal 2001 for its
majority owned subsidiary, Scion Photonics, Inc., will be approximately $15 -
$20 million. As of December 31, 2000, total commitments for construction or
purchase of capital equipment for the Company, including commitments of $6.6
million for Scion, totaled approximately $46.5 million.

Cash provided by financing activities was $14.7 million, the result of several
financing transactions occurring during the first quarter of fiscal year 2001.
These transactions significantly improved the Company's financial position and
liquidity. During the first fiscal quarter of fiscal 2001, the debt balances of
the Company were reduced from $272.6 million at the beginning of the quarter to
$60.5 million as of the end of the first fiscal quarter of 2001.

During the first quarter of fiscal 2001, the Company completed the automatic
conversion of its 10% subordinated convertible notes to common stock, with the
face value of the notes converted to common stock at a price of $4.51 per share.
The automatic conversion included a "make whole" provision that guaranteed
interest for two years, the fair value of which was approximately $29.3 million
and which was also paid in stock. Approximately 45.3 million shares of common
stock were issued in October in conjunction with the conversion and the "make
whole" provision. During the quarter the Company received a cash investment of
$18.9 million in a private placement of approximately 2.7 million shares of
common stock to the State of Wisconsin Investment Board. Also, during the
quarter the Company repaid the remaining balance of $28.8 million under the
secured term loan. Short-term borrowings as of December 31, 2000 consisted of a
six-month unsecured Thai baht denominated loan of approximately $4.8 million, at
an interest rate of 4.09%.

In addition, in October 2000, Scion Photonics, Inc., a subsidiary of Read-Rite,
received $25 million cash investment from Tyco Ventures, a subsidiary of Tyco
International, Ltd. and Integral Partners, in exchange for in exchange for 25
million shares of preferred stock. These funds are restricted for the operations
and capital requirements of Scion and as of December 31, 2000, Scion had cash
balances totaling $23.6 million.

<PAGE>   15

The Company does not pay cash dividends on its capital stock and does not
anticipate paying cash dividends in the foreseeable future.

CERTAIN ADDITIONAL BUSINESS RISKS

The Company's business, financial condition and operating results can be
affected by a number of factors, including but not limited to those set forth
below, any one of which could cause the Company's actual results to vary
materially from recent results or from the Company's anticipated future results.

FLUCTUATIONS IN OPERATING RESULTS

The Company has experienced substantial fluctuations in its quarterly and annual
operating results in the past, and the Company's future operating results could
vary substantially from quarter to quarter. The Company's operating results for
a particular quarter or longer periods can be materially and adversely affected
by numerous factors, such as increased competition or execution issues leading
to a failure by the Company to obtain "design-in wins" on one or more customer
programs; delayed product introductions or capacity constraints on certain
technologies; decreased demand for or decreased average selling prices for the
Company's products; low product manufacturing yields; changes in product mix and
increased operating costs associated with the ramp-up of production as capacity
is added or under-utilization of capacity if demand is less than anticipated;
increased material costs or material or equipment unavailability; and
disruptions in domestic or foreign operations.

The Company's net sales are generally made pursuant to individual purchase
orders that may be changed or canceled by customers on short notice, often
without material penalties. Changes or cancellations of product orders could
result in under-utilization of production capacity and inventory write-offs. For
example, in the last three quarters of fiscal 1999, the Company experienced
delays and cancellation of orders, reduced average selling prices, inventory and
equipment write-offs, and increased unit costs due to under-utilization of
production capacity. As a consequence, the Company experienced a significant
reduction in net sales, negative gross margin and incurred significant losses.

DEPENDENCE ON A LIMITED NUMBER OF CUSTOMERS; RISK OF REDUCED ORDERS

The Company is a component supplier dependent upon a limited number of customers
in a volatile industry characterized by rapid technological change, short
product life cycles, intense competition and steady price erosion. In addition,
demand for the Company's products is highly variable and thus difficult to
predict accurately. This variability was demonstrated in the last three quarters
of fiscal 1999, when the industry made a faster transition to giant
magnetoresistive ("GMR") than anticipated and the Company had limited "design-in
wins" for its early GMR products with its customers. Demand variations such as
these can materially and adversely affect the Company's business, financial
condition and results of operations.

The Company's largest customers are Maxtor, Western Digital, Samsung and
Quantum, representing 40%, 20%, 19% and 12%, respectively, of the Company's net
sales during fiscal 2000. The Company produced head gimbal assemblies in volume
for six customers head stack assemblies in volume for four customers and tape
drive products in volume for three customers during fiscal 2000. Given the small
number of high performance disk drive and tape drive manufacturers who require
an independent source of head gimbal assemblies, head stack assemblies or tape
head supply, the Company will continue to be dependent upon a limited number of
customers. The loss of any large customer, or a significant decrease in orders
from one or more large customers, will have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
this dependence upon a limited number of customers means that acquisitions,
consolidations or other material agreements affecting such customers could also
have a material adverse effect on the Company's business, financial condition
and operating results. For example, in October 2000, Quantum announced a merger
of its HDD unit into Maxtor. Other acquisitions or significant transactions by
the Company's customers leading to further consolidation, vertical integration
or other material agreements could also materially and adversely affect the
Company's business, financial condition and results of operations.

RAPID TECHNOLOGICAL CHANGE

<PAGE>   16

Technology changes rapidly in the Company's industry. These rapid changes
require the Company both to address obsolescence of old technologies and to
anticipate new technologies. Failure to smoothly transition from old
technologies or to anticipate and execute on new technologies can have a
material adverse effect on the Company's business, financial condition and
results of operations. For example, in the third quarter of fiscal year 1999,
the Company incurred a restructuring charge of $37.7 million for the write-off
of equipment associated with the Company's transition from magnetoresistive
("MR") to GMR technology.

During fiscal 2000, the Company shipped 60.6 million GMR heads (including heads
in head stack assemblies) for 22 disk drive programs to five customers,
accounting for approximately 87% of net sales during the period. Therefore, the
Company expects to continue investing significant resources in GMR and in other
thin film magnetic product development and manufacturing equipment. There can be
no assurance, however, that the Company will be successful in timely and cost
effectively developing and manufacturing new GMR heads at acceptable
manufacturing yields as is needed to achieve consistent design-in wins on
customers' new product programs.

SUBSTANTIAL CAPITAL EXPENDITURES

The Company's business is highly capital intensive. To maintain its market
position, the Company must anticipate demand for its products and the path of
new technologies so that production capacity, both in terms of amount and the
proper technologies, will be in place to meet customers' needs. Accurate
capacity planning is complicated by the pace of technological change,
unpredictable demand variations, the effects of variable manufacturing yields,
and the fact that most of the Company's plant and equipment expenditures have
long lead times, requiring major commitments well in advance of actual
requirements. The Company's underestimation or overestimation of its capacity
requirements, or failure to successfully and timely put in place the proper
technologies, would have a material adverse effect on the Company's business,
financial condition and results of operations.

The Company has made substantial capital expenditures and installed significant
production capacity to support new technologies and increased demand for its
products. The Company made capital expenditures during fiscal 2000 of $93.6
million, compared to $101.0 million during fiscal 1999. The Company expects
capital expenditures of $90 - $100 million during fiscal 2001 for its head
gimbal assembly, head stack assembly and tape head operations , and Scion plans
to spend $15 - 20 million in capital expenditures during fiscal 2001.

INTERNATIONAL OPERATIONS

The Company's production process is also labor intensive. As a result, the
Company conducts substantially all of its head gimbal assembly machining,
assembly and test operations, head stack assembly and tape head assembly
operations offshore, and is thus subject to the many risks associated with
contracting with foreign vendors and suppliers and with the ownership and
operation of foreign manufacturing facilities, including obtaining requisite
governmental permits and approvals, currency exchange fluctuations and
restrictions, variable or higher tax rates, expiration of tax holidays,
political instability, changes in government policies relating to foreign
investment and operations, cultural issues, labor problems, trade restrictions,
transportation delays and interruptions, and changes in tariff and freight
rates. The Company has from time to time experienced labor organization
activities at certain of its foreign operations. At this time, none of the
Company's employees are currently represented by a union. There can be no
assurance, however, that the Company will continue to be successful in avoiding
work stoppages or other labor issues in the future.

In addition, several Asian countries, including Thailand and the Philippines,
experience fluctuations in the value of their currencies relative to the U.S.
dollar. The Company is unable to predict what effect, if any, these factors will
have on its ability to manufacture products in these markets. The Company enters
into foreign currency forward and option contracts in an effort to manage
exposure related to certain foreign currency commitments, certain foreign
currency denominated balance sheet positions and anticipated foreign currency
denominated expenditures.

COMPLEX MANUFACTURING PROCESSES

<PAGE>   17

The Company's manufacturing processes involve numerous complex steps. Minor
deviations can cause substantial manufacturing yield loss and, in some cases,
cause production to be suspended. Manufacturing yields for new products
initially tend to be lower as the Company completes product development and
commences volume manufacturing, and thereafter yields typically increase as the
Company ramps to full production. The Company's forward product pricing reflects
this assumption of improving manufacturing yields and, as a result, material
variances between projected and actual manufacturing yields have a direct effect
on the Company's gross margin and profitability. The difficulty of forecasting
manufacturing yields accurately and maintaining cost competitiveness through
improving manufacturing yields will continue to be magnified by the
ever-increasing process complexity of manufacturing GMR products. Further, the
shortening of product life cycles requires the Company to produce new products
at higher volume and acceptable manufacturing yields without, in many cases,
reaching the longer-term, higher volume manufacturing cycle, which is conducive
to higher manufacturing yields and declining costs.

DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS

As a high technology Company in a narrowly defined industry, the Company is
often dependent upon a limited number of suppliers and subcontractors, and in
some cases on single sources, for critical components or supplies. Limitation on
or interruption in the supply of certain components or supplies can severely and
adversely affect the Company's production and results of operations. The Company
has limited alternative sources of certain key materials such as wafer
substrates, photo resist, wires and suspensions and frequently must rely on a
single equipment supplier for a given equipment type due to lack of viable
alternatives or to insure process consistency. Furthermore, the Company's
customers generally determine the suppliers in advance. Accordingly, capacity
constraints, production failures or restricted allocations by the Company's
suppliers could have a material adverse effect on the Company's own production,
and its business, financial condition and results of operations.

In addition, California, the state in which the Company maintains its wafer
facility, is currently experiencing demands for electricity and gas creating a
significant increase in the costs and a reduction in the surplus of power
available to California customers. The public utility company, Pacific Gas &
Electric, is also experiencing financial difficulties and may not be able to
procure power in the near future. If the utility cannot procure the electricity
and natural gas for its customers, the Company may experience interruptions in
power at its wafer fabrication facility, which may have a negative impact on its
manufacturing yields and output.

INVENTORY RISKS

Due to the cyclical nature of and rapid technological change in the hard disk
drive industry, the Company's inventory is subject to substantial risk. To
address these risks, the Company monitors its inventories on a periodic basis
and provides inventory write-downs intended to cover inventory risks. However,
given the Company's dependence on a few customers and a limited number of
product programs for each customer, the magnitude of the commitments the Company
must make to support its customers' programs and the Company's limited remedies
in the event of program cancellations, if a customer cancels or materially
reduces one or more product programs, or experiences financial difficulties, the
Company may be required to take significant inventory charges, which, in turn,
could materially and adversely affect the Company's business, financial
condition and results of operations. While the Company in the past has taken
certain charges and provided inventory write-downs, there can be no assurance
that the Company will not be required to take additional inventory write-downs
in the future due to the Company's inability to obtain necessary product
qualifications, or due to further cancellations by customers.

The Company manufactures custom products for a limited number of customers.
Because its products are custom-built, the Company typically cannot shift raw
materials, work-in-process or finished goods from customer to customer, or from
one product program to another for a particular customer. However, to enable its
customers to get products to market quickly and to address its customers' demand
requirements, the Company must invest substantial resources and make significant
materials commitments, often before obtaining formal customer qualifications and
generally before the market prospects for its customers' products are clear.
Moreover, given the rapid pace of technology advancement in the disk drive
industry, the disk drive products that do succeed typically have very short life
cycles. Finally, in response to rapidly shifting business conditions, the
Company's customers have generally sought to limit purchase order

<PAGE>   18

commitments to the Company, and have done so by employing what is known in the
industry as JIT (Just-in-Time) hubs. If the customer does not have demand from
their end customer, they will not pull the inventory from the JIT hub and thus
the Company may be left with excess and or obsolete inventory, which increases
inventory risk.

LOCATION OF FACILITIES IS SUBJECTS TO THE RISK OF EARTHQUAKES

The Company's wafer fabrication facilities, and a majority of its administration
and data processing function are located in a seismically active area that has
experienced major earthquakes in the past. In the event of a major earthquake or
other disaster affecting the Company's facilities, operations and operating
results could be adversely affected.

VOLATILITY OF STOCK PRICE

The trading price of the Company's common stock is expected to continue to be
subject to wide fluctuations in response to quarter-to-quarter variations in
operating results, announcements of technological innovations or new products by
the Company or its competitors, qualifications on volume shipment programs from
major customers, general conditions in the disk drive and computer industries,
and other events or factors. In addition, stock markets have experienced extreme
price volatility in recent years. This volatility has had a substantial effect
on the market price of securities issued by many high technology companies, in
many cases for reasons unrelated to the operating performance of the specific
companies, and the Company's common stock has experienced volatility not
necessarily related to announcements of Company performance. Broad market
fluctuations may adversely affect the market price of the Company's common
stock.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's market risk has not changed significantly from the risks disclosed
in Part II, Item 7A of the Company's Annual Report on From 10-K for fiscal year
2000 under the heading "Quantitative and Qualitative Disclosures About Market
Risk".


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For information on Legal Proceedings please see Note 11 to the Company's
Consolidated Condensed Financial Statements in Part I of this report on Form
10-Q, which information is incorporated herein by reference.

Item 6. Exhibits and Reports on Form 8-K

     (a)  Exhibits

<TABLE>
<S>                <C>
          10.65    Scion Photonics, Inc. Preferred Stock Purchase Agreement

          10.66    Scion Photonics, Inc. 2000 Stock Option Plan
</TABLE>

     (b)  Reports on Form 8-K

          There were no Reports on Form 8-K filed during the first quarter of
fiscal 2001.


<PAGE>   19

                                    SIGNATURE

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

Date: February 8, 2001                  /s/ John T. Kurtzweil
                                        -------------------------------
                                        Sr. Vice President, Finance and
                                        Chief Financial Officer

<PAGE>   20

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS            DESCRIPTION
<S>                 <C>
10.65               Scion Photonics, Inc. Preferred Stock Purchase Agreement
10.66               Scion Photonics, Inc. 2000 Stock Option Plan
</TABLE>