<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 MARCH 31, 2001
                         COMMISSION FILE NUMBER: 0-19512
--------------------------------------------------------------------------------

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

              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)

        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 May 4, 2001, 119,035,926 shares of the registrant's common stock were issued
and outstanding.


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


<PAGE>   2

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                                   March 31,        September 30,
                                                                                     2001               2000
                                                                                   ---------          ---------
                                                                                  (unaudited)            (a)
<S>                                                                               <C>               <C>
ASSETS
Current assets:
    Cash and cash equivalents                                                      $  97,669          $  64,462
    Short-term investments                                                            16,500                 --
    Accounts receivable, net                                                          75,760             87,840
    Inventories                                                                       43,211             34,199
    Prepaid expenses and other current assets                                          5,564              5,603
                                                                                   ---------          ---------
       Total current assets                                                          238,704            192,104

Property, plant and equipment, net                                                   270,975            285,053
Intangible and other assets                                                           10,190             16,191
                                                                                   ---------          ---------
       TOTAL ASSETS                                                                $ 519,869          $ 493,348
                                                                                   =========          =========

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
    SUBSIDIARY AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                               $  83,969          $  72,995
    Accrued compensation and benefits                                                 25,612             24,797
    Accrued interest payable                                                             227             31,671
    Other accrued liabilities                                                         21,907             26,950
    Short-term borrowings                                                              4,444                 --
    Current portion of long-term debt
       obligations                                                                    11,099             39,849
                                                                                   ---------          ---------
       Total current liabilities                                                     147,258            196,262

Convertible subordinated notes                                                        19,801            207,312
Other long-term debt                                                                  19,847             25,400
Other long-term liabilities                                                            5,048              5,102
                                                                                   ---------          ---------
       Total liabilities                                                             191,954            434,076

Minority interest in consolidated subsidiary - Read-Rite SMI                              --             19,341
Minority interest in consolidated subsidiary - Scion Photonics, Inc.                  20,380                 --

Stockholders' equity
    Preferred stock, $0.0001 par value                                                    --                 --
    Common stock, $0.0001 par value                                                       12                  7
    Additional paid-in capital                                                       698,029            449,800
    Accumulated deficit                                                             (390,506)          (409,137)
    Accumulated other comprehensive loss                                                  --               (739)
                                                                                   ---------          ---------
       Total stockholders' equity                                                    307,535             39,931

TOTAL LIABILITIES, MINORITY INTEREST IN
    CONSOLIDATED SUBSIDIARY AND
    STOCKHOLDERS' EQUITY                                                           $ 519,869          $ 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.



                                       2
<PAGE>   3

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

<TABLE>
<CAPTION>
                                                            Three Months Ended March 31,           Six Months Ended March 31,
                                                            ----------------------------          ----------------------------
                                                              2001               2000                2001              2000
                                                            ---------          ---------          ---------          ---------
<S>                                                         <C>                <C>                <C>                <C>
Net sales                                                   $ 193,277          $ 154,487          $ 383,233          $ 268,979
Cost of sales - on net sales                                  159,292            172,731            311,015            318,350
Cost of sales - special charges                                 5,416              4,187              5,416              4,187
                                                            ---------          ---------          ---------          ---------

      Gross margin (loss)                                      28,569            (22,431)            66,802            (53,558)

Operating expenses:
      Research and development                                 19,853             19,122             34,498             38,269
      Selling, general and administrative                       8,468              7,110             16,234             13,691
      Restructuring costs                                          --            122,086                 --            122,086
                                                            ---------          ---------          ---------          ---------

      Total operating expenses                                 28,321            148,318             50,732            174,046
                                                            ---------          ---------          ---------          ---------

      Operating income (loss)                                     248           (170,749)            16,070           (227,604)

Interest expense                                                1,260              7,728              3,918             16,574

Interest income and other, net                                 (1,204)              (898)              (853)            (5,490)
                                                            ---------          ---------          ---------          ---------

      Income (loss) before income taxes, minority
        interest and extraordinary item                           192           (177,579)            13,005           (238,688)

Provision (benefit) for income taxes                              135                 --                426                 --

Minority interest in net loss of consolidated
      subsidiary                                               (6,073)           (44,567)            (6,051)           (48,200)
                                                            ---------          ---------          ---------          ---------

Income (loss) before extraordinary item                         6,130           (133,012)            18,630           (190,488)

Extraordinary item - gain on debt conversion,
      net of no taxes                                              --            158,720                 --            158,720
                                                            ---------          ---------          ---------          ---------

      Net income (loss)                                     $   6,130          $  25,708          $  18,630          $ (31,768)
                                                            =========          =========          =========          =========

Earnings (loss) per share before extraordinary item         $    0.05          $   (2.65)         $    0.16          $   (3.81)
                                                            =========          =========          =========          =========

      Extraordinary income per share                               --               3.16                 --               3.17
                                                            ---------          ---------          ---------          ---------

Earnings (loss) per share
      Basic and Diluted                                     $    0.05          $    0.51          $    0.16          $   (0.64)
                                                            =========          =========          =========          =========

Shares used in per share computations
      Basic                                                   118,224             50,224            113,071             50,036
      Diluted                                                 121,285             50,224            115,693             50,036
</TABLE>


   See accompanying notes to the consolidated condensed financial statements.


                                       3
<PAGE>   4

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                              READ-RITE CORPORATION
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        Six Months Ended March 31,
                                                                          2001              2000
                                                                       ---------          ---------
<S>                                                                    <C>                <C>
Cash flows from operating activities:
Net income (loss)                                                      $  18,630          $ (31,767)
Adjustments to reconcile net income (loss) to cash
    provided by operations:
      Depreciation and amortization                                       65,977             86,932
      Extraordinary gain from debt conversion                                              (158,720)
      Cash payment related to prior restructuring charge                                       (436)
      Non-cash portion of restructuring costs                                               114,874
      Minority interest in net loss of consolidated subsidiary            (6,051)           (48,200)
Changes in assets and liabilities
    Accounts receivable                                                   12,080            (28,644)
    Inventories (net of write-off related to restructuring)               (9,012)           (16,513)
    Accounts payable and accrued liabilities                               6,542             32,113
    Other assets and liabilities, net                                         84               (540)
                                                                       ---------          ---------

Net cash provided by (used in) operating activities                       88,250            (50,901)
                                                                       ---------          ---------

Cash flows from investing activities:
    Capital expenditures                                                 (51,010)           (51,170)
    Maturities of available-for-sale investments                          84,581            323,759
    Purchase of available -for-sale investments                         (101,081)          (214,529)
                                                                       ---------          ---------

Net cash provided by (used in) investing activities                      (67,510)            58,060
                                                                       ---------          ---------

Cash flows from financing activities
    Payment of long-term debt and capital lease obligations              (34,304)           (94,309)
    Proceeds from long-term debt                                              --             63,677
    Proceeds from short-term borrowing                                     4,843              2,546
    Proceeds from issuance of common stock, net                           48,868                839
    Payment to joint venture partner upon final
      dissolution of RRSMI                                                (6,940)                --
                                                                       ---------          ---------

Net cash provided by (used in) financing activities                       12,467            (27,247)
                                                                       ---------          ---------

Net increase (decrease) in cash and cash equivalents                      33,207            (20,088)
Cash and cash equivalents
    Beginning of period                                                   64,462             80,547
                                                                       ---------          ---------

    End of period                                                      $  97,669          $  60,459
                                                                       =========          =========
</TABLE>



                                       4
<PAGE>   5

<TABLE>
<S>                                                                    <C>                <C>
Supplemental disclosures of non-cash activities
    Conversion of debt to common stock                                   213,353               5,595

    Conversion of debt and accrued interest to common stock                   --               9,033

    Conversion of joint venture debt to minority interest                     --              13,873

Supplemental disclosures of cash flow information
    Interest paid                                                          3,301              19,425
    Taxes paid                                                               467                 107
</TABLE>



                                       5
<PAGE>   6

         READ-RITE CORPORATION NOTES TO UNAUDITED CONSOLIDATED CONDENSED
                              FINANCIAL STATEMENTS


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 second quarters of fiscal 2001 and 2000 ended on April 1, 2001 and April
2, 2000, respectively. To conform to the Company's fiscal year end, 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 ended on April 2, 2000. 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 may be 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 against the foreign currencies, the decline in
value of future foreign currency expenses is offset by losses in



                                       6
<PAGE>   7

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 three and six
month periods ended March 31, 2001, 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 instruments
excluded from the assessment of hedge effectiveness. The Company recognized no
gains or losses during the three and six-month periods ended March 31, 2001, 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.


NOTE 3:         INVENTORIES

Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
                        March 31,     September 30,
                         2001            2000
                        ---------     -------------
<S>                     <C>           <C>
Raw materials           $ 4,247         $ 2,803
Work-in-process          25,587          26,659
Finished goods           13,377           4,737
                        -------         -------
                        $43,211         $34,199
                        =======         =======
</TABLE>



                                       7
<PAGE>   8

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 March 31,       Six months ended March 31,
                                                   -------------------------         -------------------------
                                                     2001             2000             2001            2000
                                                   --------         --------         --------         --------
                                                        (amounts in thousands, except per share amounts)
<S>                                               <C>               <C>              <C>              <C>
BASIC NET INCOME (LOSS) PER SHARE
      COMPUTATION
Numerator:
      Net income (loss)                            $  6,130         $ 25,708         $ 18,630         $(31,768)

Denominator
      Weighted average number of common
         shares outstanding during
          the period                                118,224           50,224          113,071           50,036
                                                   --------         --------         --------         --------

Basic net income (loss) per share                  $   0.05         $   0.51             0.16         $  (0.64)

DILUTED NET INCOME (LOSS) PER SHARE
      COMPUTATION
Numerator
      Net income (loss)                            $  6,130         $ 25,708         $ 18,630         $(31,768)

Denominator
      Weighted average number of common
         shares outstanding during
         the period                                 118,224           50,224          113,071           50,036
      Incremental common shares issuable:
         Warrants                                       188               --               94               --
         Company stock option plans after
          applying treasury stock
          method, net of tax benefits                 2,873               --            2,528               --
                                                   --------         --------         --------         --------

Denominator for diluted earnings per share          121,285           50,224          115,693           50,036

Diluted net income (loss) per share                $   0.05         $   0.51         $   0.16         $  (0.64)
</TABLE>


For the three and six month periods ended March 31, 2001, the weighted average
number of common shares attributable to the assumed conversion of the Company's
6.5% convertible subordinated debentures, of 490 thousand shares, were not
included in the diluted earnings per share computation because the effect would
be antidilutive.


NOTE 5. FINANCING TRANSACTIONS


In February 2000, the Company filed a Registration Statement on Form S-4 to
offer to exchange $172.5 million of 10% convertible subordinated notes for its
outstanding $345 million of 6.5% convertible



                                       8
<PAGE>   9

subordinated notes. The Company also offered additional 10% convertible
subordinated notes for cash. The exchange offering was completed on March 15,
2000. Approximately $325.2 million in aggregate principal value of the Company's
6.5% convertible subordinated notes were tendered in the exchange offer, and the
Company received approximately $54.2 million in cash from the issuance of new
10% convertible subordinated notes. As a result of this debt conversion, the
Company recognized $158.7 million of extraordinary gain, net of no taxes, in the
fiscal quarter ended March 31, 2000.

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 a secured
term loan.

Short-term borrowings as of March 31, 2001 consisted of an unsecured Thai baht
denominated loan, which matures in June 2001, of approximately $4.4 million at
an interest rate of 4.09%.

NOTE 6.  SPECIAL CHARGES

During the three months ended March 31, 2001, the Company took a $5.4 million
charge primarily related to fixed assets for the obsolescence of equipment, and
the consolidation of its slider fabrication, head gimbal assembly ("HGA"), and
head stack assembly ("HSA") prototype and development operations from its
facilities in California to its operations in Thailand.

During the three months ended March 31, 2000, the Company wrote-off $4.2 million
of excess inventories as part of the restructuring plan to consolidate the
Company's wafer fab in Japan to the U.S.



NOTE 7. RESTRUCTURING COSTS

During the second quarter ended March 31, 2000, the Company incurred
restructuring costs of $122.1 million. The Company incurred an additional
restructuring charge during the third quarter of fiscal year 2000 of $7.8
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
combined 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.



                                       9
<PAGE>   10

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          $     987          $ 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 8. COMPREHENSIVE INCOME (LOSS)

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

<TABLE>
<CAPTION>
                                                       Three months ended March 31,       Six months ended March 31,
                                                        -------------------------         -------------------------
                                                          2001             2000             2001             2000
                                                        --------         --------         --------         --------
<S>                                                    <C>               <C>              <C>              <C>
Net income (loss)                                       $  6,130         $ 25,708         $ 18,630         $(31,768)
Change in unrecognized loss on currency forward
      contracts hedging future cash flows                  1,961               --               --               --
Adjustment for recognition of accumulated
      translation loss of liquidated subsidiary               --               --              739               --
Change in unrealized gain/(loss) on
      available-for-sale investments                          --              250               --              274
                                                        --------         --------         --------         --------

Comprehensive income/(loss):                            $  8,091         $ 25,958         $ 19,369         $(31,494)
                                                        ========         ========         ========         ========
</TABLE>

NOTE 9.  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, the Company has 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 10). 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



                                       10
<PAGE>   11

on revenue and gross profit from operations. Gross profit from operations is
defined as revenue less cost of sales. The Company does not allocate assets or
depreciation by operating segment.

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

<TABLE>
<CAPTION>
                                Three months ended March 31,       Six months ended March 31,
                                 -------------------------         -------------------------
                                   2001             2000             2001             2000
                                 --------         --------         --------         --------
<S>                             <C>               <C>              <C>              <C>
Magnetic recording heads         $193,119         $154,487         $383,032         $268,979
Fiber optics                          158               --              201               --
                                 --------         --------         --------         --------
Total net sales                  $193,277         $154,487         $383,233         $268,979
</TABLE>

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

<TABLE>
<CAPTION>
                                        Three months ended March 31,           Six months ended March 31,
                                        ----------------------------          ----------------------------
                                          2001               2000               2001               2000
                                        ---------          ---------          ---------          ---------
<S>                                     <C>                <C>                <C>                <C>
Magnetic recording heads                $   6,632          $(133,012)         $  20,880          $(190,488)
Fiber optics                                 (502)                --             (2,250)                --
                                        ---------          ---------          ---------          ---------
Total net income/(loss)  before
  extraordinary item                    $   6,130          $(133,012)         $  18,630          $(190,488)
</TABLE>


NOTE 10.  SCION PHOTONICS, INC.

The Company announced the formation of Scion Photonics, Inc. ("Scion") in
September 2000. In December, Scion acquired Optical Systems Corporation ("OSC")
for cash and stock. OSC is a maker of precision automated tooling equipment and
is located in Valencia, California. Scion Photonic's mission is to become the
preeminent supplier of Application Specific Photonic Components (ASPC TM) and
subsystems.

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 March 31, 2001,
Scion had cash balances totaling $3.7 million. Scion is in the process of
obtaining its second round of financing and anticipates closing the financing
during the second half of fiscal 2001. 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. Read-Rite contributed approximately $2.7
million in tangible assets to the joint venture. As a common shareholder,
Read-Rite is allocated 100% of the losses incurred by Scion up to the amount of
tangible assets contributed. Tyco Ventures and Integral Partners, as preferred
shareholders, have preferential liquidation rights such that they will receive
100% of their $25 million contributed capital before any distribution to common
shareholders, and will assume the losses Scion incurs beyond the tangible assets
contributed by Read-Rite and any other common shareholders. Scion has incurred
losses since inception of $8.8 million. For the three and six month periods
ended March 31, 2001, $6.1 million of Scion's loss was allocated to minority
interest.

NOTE 11.  CUSTOMER CONCENTRATION

The Company's four largest HDD customers, Maxtor, Quantum-HDD, Samsung and
Western Digital accounted for 92% of net sales during the six-month period ended
March 31, 2001. Quantum-HDD merged with Maxtor in April 2001 and as such will no
longer be separately reported. 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.



                                       11
<PAGE>   12

NOTE 12.  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"), alleging that the defendants made false
and misleading statements concerning the Company's business condition and
prospects and seeking an unspecified amount of damages. On 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, the remaining 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 doctrine of res
judicata. A hearing on that motion occurred on January 22, 2001 and on April 20,
2001, the court entered an order granting that motion. Given that order, the
plaintiffs have 30 days to appeal this decision.

On January 16, 1997 and May 19, 1997, two supposed class action complaints were
filed in the United States District Court for the Northern District of
California against the Company and certain of its officers and directors by
Ferrari and Goldman (the "Ferrari Federal Action") and by James C. Nevius and
William Molair (the "Nevius Federal Action"), respectively. Both complaints
alleged that the defendants made false and misleading statements concerning the
Company's business condition and prospects and alleged violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 and
sought an unspecified amount of damages. On December 22, 1997, the Court
consolidated the Ferrari Federal Action and the Nevius Federal Action (the
"Consolidated Federal Action"). 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.

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, and believes 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 pending legal proceedings other than ordinary routine litigation incidental
and not material 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 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and are subject
to



                                       12
<PAGE>   13
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 12 "Legal Proceedings"; that the Company expects the investment in R&D
for its head gimbal assembly, head stack assembly, tape drive business and
diversification efforts 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 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 $20 million during the fiscal year; and
that the Company expects the second round of financing for Scion Photonics to be
completed in the second half of 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 may be unable to
obtain financing in the second half of the fiscal year or may not obtain the
sufficient financing required; 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 were $193.3 million and $383.2 million for the three and six-month
periods ended March 31, 2001, respectively, compared to net sales of $154.5
million and $269.0 million for the comparable periods in fiscal 2000. The
increase is attributable to higher unit shipments, as the Company shipped in
volume head gimbal assemblies and head stack assemblies supporting its
customers' 20 gigabyte per platter disk drive programs and began ramping
production for its customers' 30 gigabyte per platter disk drive programs during
the six-month period ended March 31, 2001. During the six-month period ended
March 31, 2000, the Company shipped recording heads supporting its customers 9.1
and 10.2 gigabyte per platter disk drive programs.

The Company shipped 22.9 million and 46 million recording heads for the hard
disk drive and tape drive markets, including head gimbal assemblies shipped in
the form of head stack assemblies, for the three and six-month periods ended
March 31, 2001 compared to 17.2 million and 28.0 million head gimbal



                                       13
<PAGE>   14

assemblies shipped during the three and six-month periods ended March 31, 2000.
The increase in shipments during the three and six-month periods ended March 31,
2001 compared to the same periods last year is the result of the Company's
participation during 2001 on its customers 20 gigabyte per platter programs and
the Company's introduction of the 30 gigabyte per platter programs, compared to
the Company's limited participation on its customers' first generation GMR
products during the first half of fiscal 2000.

Head gimbal assemblies accounted for 51% and 50% of net sales during the three
and six-month periods ended March 31, 2001 versus 23% and 21% for the comparable
periods last year. Head stack assemblies accounted for 43% and 44% of net sales
versus 71% and 73% for the same periods last year.

The Company's average selling prices for head gimbal assemblies for the second
fiscal quarter of 2001 remained relatively flat compared to the first fiscal
quarter of 2001 and were approximately 7% higher compared to the second fiscal
quarter of 2000. Average selling prices for head stack assemblies for the
three-month period ended March 31, 2001 decreased by 8% compared to the same
period last year as the average number of heads per head stack shipped during
the quarter ended March 31, 2001 decreased by approximately one-third of a head
as compared to the same period last year. Average selling prices for head stack
assemblies for the second fiscal quarter of 2001 were 9% higher than the first
fiscal quarter of 2001 as the average number of heads per head stack shipped
increased by approximately 0.3 heads, to 2.6 heads per head stack assembly, from
the first to second quarter of fiscal 2001.

The Company's customer base remains highly concentrated as its four HDD
customers, Maxtor, Quantum - HDD, Samsung and Western Digital accounted for over
92% and 94% of net sales for the three and six-month periods ended March 31,
2001, compared to 92% and 89% for the comparable periods last year. Quantum-HDD
merged with Maxtor in April 2001 and as such will no longer be separately
reported.

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 14.8% and 17.4% for the three and six-month periods ended
March 31, 2001, as compared to a gross margin loss of 14.5% and 19.9% for the
same periods last year. The improvement in gross margin during the first half of
fiscal year 2001 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. Gross margin decreased from 20.1% in the
first quarter of fiscal year 2001 to 14.8% during the second quarter of fiscal
year 2001. During the quarter ended March 31, 2001, the Company took a special
charge of $5.4 million primarily for the obsolescence of equipment, and the
consolidation of its slider fabrication, head gimbal assembly and head stack
assembly prototype and development operations to its operations in Thailand.
Excluding this charge, the gross margin was 17.6%. The Company also experienced
higher manufacturing costs as a result of lower yields as it began the ramp of
heads for customers' 30 gigabyte per platter programs.

OPERATING EXPENSES:

RESEARCH AND DEVELOPMENT: Research and development expenses were $19.9 million
and $34.5 million for the three and six-month periods ended March 31, 2001 as
compared to $19.1 and $38.3 million for the same periods last year. Scion
Photonics, Inc., incurred $5.6 million and $7.1 million respectively, of the
$19.9 million and $34.5 million in research and development costs during the
three and six-month periods ended March 31, 2001. The Company expects Scion's
investment in R&D will continue



                                       14
<PAGE>   15

throughout the fiscal year. The Company also expects the investment in R&D for
its head gimbal assembly, tape drive business and further diversification
efforts to grow slightly during fiscal 2001.

SELLING, GENERAL & ADMINISTRATIVE: Selling, general and administrative ("SG&A")
expenses were $8.5 million and $16.2 million for the three and six-month periods
ended March 31, 2001 compared to $7.1 million and $13.7 million for the same
periods last year. The increase in expense for the three and six-month periods
ended March 31, 2001, was the result of increased recruiting and staffing,
reclassification of certain personnel into SG&A and the establishment of
Read-Rite Japan.

RESTRUCTURING COSTS: During the quarter ended March 31, 2000, the Company
incurred restructuring costs of $122.1 million. The Company incurred an
additional restructuring charge during the third quarter of $7.8 million, and 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 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.

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.

NON-OPERATING EXPENSES:

INTEREST EXPENSE: Interest expense for the quarter ended March 31, 2001 was $1.3
million compared to $7.7 million for the same period last year. Interest expense
for the first six months of fiscal 2001 was $3.9 million compared to $16.6
million for the same period last year. The decrease in interest expense was due
to the significantly lower debt balance for the three and six-month periods
ended March 31, 2001. Debt balances as of March 31, 2000 totaled $317.5 million,
decreasing by $262.3 million to $55.2 million as of March 31, 2001.

INTEREST INCOME AND OTHER, NET: Interest income and other, net for the three and
six month periods ended March 31, 2001 was $1.2 million and $.9 million
respectively, compared to income of $0.9 million and $5.5 million for the same
periods last year. The reduction in income for the six month period ended March
31, 2001 compared to the same period last year is primarily related to a gain
recognized in the first quarter of fiscal year 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 $1.8 million for the six-month period ended March
31, 2001 as compared to a $0.7 million loss for the same period last year. In
addition, interest income for the six-month period ended March 31, 2001 was $1.9
million compared to $3.5 million for the same period last year.

EXTRAORDINARY ITEM: In February 2000, the Company filed a Registration Statement
on Form S-4 to offer to exchange $172.5 million of 10% convertible subordinated
notes for its outstanding $345 million of 6.5% convertible subordinated notes.
The Company also offered additional 10% convertible



                                       15
<PAGE>   16

subordinated notes for cash. The exchange offering was completed on March 15,
2000. Approximately $325.2 million in aggregate principal value of the Company's
6.5% convertible subordinated notes were tendered in the exchange offer, and the
Company received approximately $54.2 million in cash from the issuance of new
10% convertible subordinated notes. As a result of this debt conversion, the
Company recognized $158.7 million of extraordinary gain, net of no taxes, in the
fiscal quarter ended March 31, 2000.

INCOME TAXES: The effective income tax rate for the three and six-month period
ended March 31, 2001, was 2% consisting primarily of a calculation based on US
alternative minimum tax requirements, compared to a zero rate in the same
periods last year due to operating losses.

MINORITY INTEREST: During the three and six month period ended March 31, 2001,
Scion incurred losses of $6.6 million and $8.3 million respectively. Read-Rite
contributed approximately $2.7 million in tangible assets to the joint venture.
As a common shareholder, Read-Rite is allocated 100% of the losses incurred by
Scion up to the amount of tangible assets contributed. Tyco Ventures and
Integral Partners, as preferred shareholders, have preferential liquidation
rights such that they will receive 100% of their $25 million contributed capital
before any distribution to common shareholders, and will assume the losses Scion
incurs beyond the tangible assets contributed by Read-Rite and any other common
shareholders. For the three and six month periods ended March 31, 2001, $6.1
million of Scion's loss was allocated to minority interest.


LIQUIDITY AND CAPITAL RESOURCES

As of the end of the first six months of fiscal 2001, the Company had cash and
investments of $114.2 million, total assets of $519.9 million and total
liabilities of $192.0 million.

Cash provided by operating activities for the six-month period ending March 31,
2001 was $88.3 million. The positive cash flow from operating activities was
primarily attributed to net income from operations of $18.6 million,
depreciation and amortization of $66.0 million, a decrease in account receivable
balances of $12.1 million, offset by an increase in inventory balances of $9.0
million.

The Company's business is highly capital intensive. During the six-month period
ended March 31, 2001, the Company incurred capital expenditures of $51.0
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 $20 million. As of March 31, 2001, total
commitments for construction or purchase of capital equipment for the Company,
including commitments of $7.2 million for Scion, totaled approximately $66.2
million.

Cash provided by financing activities was $12.5 million, the result of several
financing transactions occurring during the first six months of fiscal year
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 first quarter the Company also
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 first quarter the Company repaid the remaining
balance of $28.8 million under the secured term loan. Short-term borrowings as
of March 31, 2001 consisted of a six-month unsecured Thai baht denominated loan
of approximately $4.4 million, at an interest rate of 4.09%. These transactions
significantly improved the Company's financial position and liquidity. The debt
balances of the Company were reduced from $272.6 as of September 30, 2000 to
$55.2 million as of March 31, 2001.

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



                                       16
<PAGE>   17

for 25 million shares of preferred stock. These funds are restricted for the
operations and capital requirements of Scion and as of March 31, 2001, Scion had
cash balances totaling $3.7 million. Scion is in the process of obtaining its
second round of financing and anticipates closing the financing during the
second half of 2001.

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; increased returns or
rework; 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; disruptions in domestic or foreign operations; and
general economic conditions.

 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-HDD, representing 40%, 20%, 19% and 12%, respectively, of the Company's
net sales during fiscal 2000. In October 2000, Quantum announced the merger of
its HDD unit into Maxtor. The merger was completed in April 2001. Quantum
Corporation currently purchases tape head products from the Company. 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.
Acquisitions



                                       17
<PAGE>   18

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

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 an additional $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 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



                                       18
<PAGE>   19

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

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 State of California has implemented, and
may in the future implement, rolling blackouts. Read-Rite was impacted by
rolling blackouts during the quarter ended March 31, 2001 and may in the future
be impacted by rolling blackouts. Interruptions in power at its wafer
fabrication facility may have a negative impact on its manufacturing yields and
output. Pacific Gas and Electric, the utility company for the Company's U.S.
facilities, has recently filed for bankruptcy. Prices for electricity and gas
have increased in 2001 and there may be further increases in electricity and gas
prices. Increases in the electricity and gas prices may have an impact on the
Company's operating expenses and cost of goods sold.

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.



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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 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.

SCION PHOTONIC'S INC. ABILITY TO DEVELOP, DESIGN, MANUFACTURE, RAMP AND SUSTAIN
VOLUME PRODUCTION OF OPTICAL COMPONENTS

Scion Photonics, Inc., is incurring expenses relating to the design and
development and future manufacturing of high-performance optical components.
There can be no guarantee that Scion will successfully develop, design,
manufacture, or achieve acceptable yields on the products currently under
development. Scion may also, in the future, require additional funding. There
can be no guarantee that Scion will receive additional funding necessary to
allow it to complete the design, development and manufacturing of
high-performance optical components. In addition, as Scion develops the products
and processes, it may be subject to claims that it is impairing the intellectual
property rights of others which could cause Scion to have to redesign products
or processes that use the disputed intellectual property, cease to develop the
products or processes that use the disputed intellectual property or obtain, if
available, third party licenses to use the disputed intellectual property which
may have an adverse impact on its ability to develop, design and manufacture
high-performance optical components.

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 Form 10-K for fiscal year
2000 under the heading "Quantitative and Qualitative Disclosures About Market
Risk".


PART II. OTHER INFORMATION



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Item 1. Legal Proceedings

For information on Legal Proceedings please see Note 12 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 4.  SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

The Company's 2001 Annual Meeting of Stockholders was held on Tuesday, February
20, 2001 at the Company's Fremont, California manufacturing facility. At the
meeting 117,927,523 shares were entitled to vote and 104,760,026 shares were
presented by proxy.

        Proposal 1. ELECTION OF THE BOARD OF DIRECTORS. A Board of Directors
        consisting of six directors to serve for the ensuing year or until their
        successors are duly elected and qualified. The following nominees for
        Board of Directors were elected:

<TABLE>
<CAPTION>
          NAME OF NOMINEE              VOTES CAST FOR        VOTES WITHHELD
          <S>                          <C>                   <C>
          Cyril J. Yansouni            102,785,693           1,974,333
          William J. Almon             102,871,655           1,888,371
          Matthew J. O'Rourke          102,865,483           1,894,543
          Robert M. White              102,866,410           1,893,616
          Michael L. Hackworth         102,866,563           1,893,463
          Alan S. Lowe                 102,867,476           1,892,550
</TABLE>

        Proposal 2. AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION TO
        AUTHORIZE 40 MILLION ADDITIONAL SHARES OF COMMON STOCK. The amendment of
        restated certificate of incorporation as noted above was ratified and
        approved with 102,753,029 votes in favor, 1,853,595 against and 153,402
        abstentions.

        Proposal 3. AMENDMENT TO THE COMPANY'S 1995 STOCK PLAN TO INCREASE THE
        NUMBER OF SHARES RESERVED FOR ISSUANCE BY 3,000,000. The amendment to
        increase the number of shares under the Company's 1995 Stock Plan as
        noted above was ratified and approved with 95,222,909 votes in favor,
        9,340,006 against and 197,111 abstentions.

        Proposal 4. RATIFICATION OF INDEPENDENT AUDITORS. The ratification of
        independent auditors provides for the appointment of Ernst & Young LLP
        as independent auditors for the 2001 fiscal year. The stockholders
        approved the ratification of independent auditors with 104,571,985
        voting in favor, 100,775 voting against and 87,266 abstentions.

Item 6. Exhibits and Reports on Form 8-K

         (a) Exhibits
             None

         (b) Reports on Form 8-K
             There were no Reports on Form 8-K filed during the second quarter
of fiscal 2001.



                                    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.



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Date: May 15, 2001                          /s/ John T. Kurtzweil
                                            ------------------------------------
                                            Sr. Vice President, Finance and
                                            Chief Financial Officer




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