<PAGE>

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


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

                                 _______________

                                    FORM 10-Q
                                 _______________

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

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 30, 2001

                                       OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
              FOR THE TRANSITION PERIOD FROM _________ TO _________


                         COMMISSION FILE NUMBER: 0-19512

                                 _______________

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



            DELAWARE                                 94-2770690
     (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 February 3, 2002, 120,413,342 shares of the registrant's common stock were
issued and outstanding.


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

<PAGE>

                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                              READ-RITE CORPORATION
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                    (in thousands, except for per share data)


                                                 December 30,    September 30,
                                                     2001            2001
                                                 ------------    ------------
                                                  (unaudited)         (a)
ASSETS
Current assets:
     Cash and cash equivalents                   $     73,288    $    126,646
     Short-term investments                            63,737          27,083
     Accounts receivable, net                          57,665          65,496
     Inventories                                       36,774          35,251
     Prepaid expenses and other current assets          7,333           7,463
                                                 ------------    ------------
         Total current assets                         238,797         261,939

Property, plant and equipment, net                    261,890         268,031
Intangible and other assets                             8,506           7,397
                                                 ------------    ------------
         TOTAL ASSETS                            $    509,193    $    537,367
                                                 ============    ============

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
     SUBSIDIARY AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                            $     54,023    $     69,353
     Accrued compensation and benefits                 12,624          25,208
     Other accrued liabilities                         21,854          26,169
     Short-term borrowings                             13,936          15,142
     Current portion of long-term debt                 15,944          15,852
                                                 ------------    ------------
         Total current liabilities                    118,381         151,724

Convertible subordinated notes                         19,151          19,801
Other long-term debt                                   26,440          28,588
Other long-term liabilities                             4,724           4,785
                                                 ------------    ------------
         Total liabilities                            168,696         204,898

Minority interest in consolidated subsidiary           14,054           4,791

Stockholders' equity:
     Preferred stock, $0.0001 par value                    --              --
     Common stock, $0.0001 par value                       12              12
     Additional paid-in capital                       704,055         700,763
     Accumulated deficit                             (377,724)       (373,232)
     Accumulated other comprehensive income               100             135
                                                 ------------    ------------
         Total stockholders' equity                   326,443         327,678
                                                 ------------    ------------

TOTAL LIABILITIES, MINORITY INTEREST IN
     CONSOLIDATED SUBSIDIARY AND
     STOCKHOLDERS' EQUITY                        $    509,193    $    537,367
                                                 ============    ============


(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, 2001.

   See accompanying notes to the consolidated condensed financial statements.

<PAGE>

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


                                                    Three Months Ended
                                                ----------------------------
                                                December 30,    December 31,
                                                    2001            2000
                                                ------------    ------------

Net sales                                       $    136,899    $    189,956
Cost of sales                                        114,511         151,723
                                                ------------    ------------

     Gross margin                                     22,388          38,233

Operating expenses:
     Research and development                         17,938          14,644
     Selling, general and administrative               7,627           7,767
                                                ------------    ------------

     Total operating expenses                         25,565          22,411
                                                ------------    ------------

     Operating income (loss)                          (3,177)         15,822

Interest expense                                       1,262           2,659

Interest income and other, net                         2,194            (350)
                                                ------------    ------------

     Income (loss) before income taxes
       and minority interest                          (2,245)         12,813

Provision for income taxes                                48             291

Minority interest in net loss of consolidated
     subsidiary                                       (2,199)            (22)
                                                ------------    ------------

     Net income (loss)                          $     (4,492)   $     12,500
                                                ============    ============

Earnings (loss) per share
     Basic                                      $      (0.04)   $       0.12
                                                ============    ============
     Diluted                                    $      (0.04)   $       0.11
                                                ============    ============

Shares used in per share computations
     Basic                                           119,414         107,919
     Diluted                                         119,414         110,102

     See accompanying notes to the consolidated condensed financial statements.

<PAGE>

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

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                   -----------------------------
                                                                   December 30,    December 31,
                                                                       2001            2000
                                                                   ------------    ------------
<S>                                                                <C>             <C>
Cash flows from operating activities:
Net income (loss)                                                  $     (4,492)   $     12,500
Adjustments to reconcile net income (loss) to cash
      provided by operations:
        Depreciation and amortization                                    23,852          33,387
        Minority interest in net loss of consolidated subsidiary          2,199              22
        Other non-cash expenses                                            (402)         (1,202)
Changes in assets and liabilities:
      Accounts receivable                                                 7,831           3,809
      Inventories                                                        (1,523)        (15,373)
      Accounts payable and accrued liabilities                          (31,950)         15,410
      Other assets and liabilities, net                                  (1,420)         (2,456)
                                                                   ------------    ------------

Net cash provided by (used in) operating activities                      (5,905)         46,097
                                                                   ------------    ------------

Cash flows from investing activities:
      Capital expenditures                                              (17,270)        (26,627)
      Maturities of available-for-sale investments                       40,629          17,300
      Purchase of available-for-sale investments                        (77,283)        (36,681)
                                                                   ------------    ------------

Net cash used in investing activities                                   (53,924)        (46,008)
                                                                   ------------    ------------

Cash flows from financing activities
      Payment of long-term debt                                          (2,056)        (29,339)
      Proceeds from short-term borrowings                                 5,709           4,843
      Proceeds from issuance of common stock, net                         2,818          46,137
      Payment to joint venture partner upon final dissolution
        of RRSMI                                                             --          (6,940)
                                                                   ------------    ------------

Net cash provided by financing activities                                 6,471          14,701
                                                                   ------------    ------------

Net increase (decrease) in cash and cash equivalents                    (53,358)         14,790
Cash and cash equivalents
      Beginning of period                                               126,646          64,462
                                                                   ------------    ------------

      End of period                                                $     73,288    $     79,252
                                                                   ============    ============

Supplemental disclosures of non-cash activities
      Conversion of debt and accrued interest to common stock      $        465    $    213,352
</TABLE>

   See accompanying notes to the consolidated condensed financial statements.

<PAGE>

              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 2002 and 2001 ended on December 30, 2001 and
December 31, 2000, respectively.

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 29, 2002.

The balance sheet at September 30, 2001 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 2001 Annual Report on
Form 10-K.

NOTE 2. INVENTORIES

Inventories are stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out method) or market. It is the Company's policy to
write-off inventory on hand in excess of six months forecasted sales volumes.
Adjustments may be made to take into account the product life cycles, which can
range from 6 to 12 months, the maturity of the product (whether newly introduced
products or products approaching end of life), and the impact of competitors'
product announcements. The Company believes that six months is an appropriate
period for sales forecasts and inventory exposure calculations because it is
difficult to accurately forecast for a specific product beyond this time frame
due to potential introduction of new products by competitors, technology
obsolescence or fluctuations in demand for the Company's products.

Inventories consisted of the following (in thousands):

                                  December 30,   September 30,
                                      2001           2001
                                  ------------   -------------

                Raw materials     $      3,813   $       3,137
                Work-in-process         24,804          23,826
                Finished goods           8,157           8,288
                                  ------------   -------------

                                  $     36,774   $      35,251
                                  ============   =============

<PAGE>

NOTE 3.  CALCULATION OF EARNINGS PER SHARE

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 shares outstanding during the period
and includes the incremental shares issuable upon the assumed exercise of stock
options and other potentially dilutive securities. The number of incremental
shares from stock options and other dilutive securities is calculated by
applying the treasury stock method.

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

                                                       Three months ended,
                                                  ------------------------------
                                                  December 30,      December 31,
                                                     2001               2000
                                                  ------------      ------------
                                                 (in thousands, except per share
                                                             amounts)
BASIC NET INCOME (LOSS) PER SHARE COMPUTATION
Numerator:
     Net income (loss)                            $     (4,492)     $     12,500

Denominator
     Weighted average number of common shares
       outstanding during the period                   119,414           107,919
                                                  ------------      ------------

Basic net income (loss) per share                 $      (0.04)     $       0.12
                                                  ============      ============

DILUTED NET INCOME (LOSS) PER SHARE COMPUTATION

Numerator
     Net income (loss)                            $     (4,492)     $     12,500

Denominator
     Weighted average number of common shares
       outstanding during the period                   119,414           107,919
     Incremental common shares
     issuable:
       Company stock option plans after applying
       treasury stock method, net of tax benefits           --             2,183
                                                  ------------      ------------

Denominator for diluted earnings per share             119,414           110,102

Diluted net income (loss) per share               $      (0.04)     $       0.11
                                                  ============      ============

For the three-month period ended December 30, 2001, incremental shares
attributable for the assumed exercise of stock options, of 2.2 million shares,
were not included in the diluted earnings per share computation because the
effect would be antidilutive.

For the three-month periods ended December 30, 2001 and December 31, 2000
respectively, the weighted average number of common shares attributable to the
assumed conversion of the Company's 6.5% convertible subordinated debentures
(0.5 million shares) was not included in the diluted earnings per share
computation because the effect would be antidilutive.

NOTE 4. FINANCING TRANSACTIONS

Short-term borrowings as of December 30, 2001 consist primarily of three 200
million Thai baht notes, totaling approximately $13.6 million. During the first
quarter of fiscal year 2002, the Company's Thailand subsidiary rolled

<PAGE>

over two 200 million Thai baht notes and entered into a third loan for 200
million baht. These three notes are unsecured and bear interest at 3.0%, 3.0%
and 3.15%, respectively. Two of the notes mature in May 2002 and the third note
matures in June 2002.

NOTE 5. COMPREHENSIVE INCOME

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

                                                       Three months ended
                                                   ----------------------------
                                                   December 30,    December 31,
                                                       2001            2000
                                                   ------------    ------------

Net income (loss)                                  $     (4,492)   $     12,500
Change in unrecognized loss on currency forward
     contracts hedging future cash flows                     --          (1,961)
Change in unrealized gain (loss) on
     available-for-sale investments                         100              --
                                                   ------------    ------------

Comprehensive income (loss):                       $     (4,392)   $     10,539
                                                   ============    ============


NOTE 6. SEGMENT INFORMATION

The Company operates and tracks its results in two operating segments, the
magnetic recording head segment and the fiber optic components segment. The
Company designs, develops, manufactures and markets head gimbal assemblies
("HGAs"), head stack assemblies ("HSAs") and tape heads for the hard disk drive
and tape drive markets. The Company also is the majority owner of Scion
Photonics, Inc., which designs and manufactures high performance optical
components.

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

                                                        Three months ended
                                                   ----------------------------
                                                   December 30,    December 31,
                                                       2001            2000
                                                   ------------    ------------

Magnetic recording heads                           $    135,913    $    189,913
Fiber optic components                                      996              43
Less intercompany fiber optic sales                         (10)             --
                                                   ------------    ------------
Total net sales                                    $    136,899    $    189,956
                                                   ============    ============

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

                                                        Three months ended
                                                   ----------------------------
                                                   December 30,    December 31,
                                                       2001             2000
                                                   ------------    ------------

Magnetic recording heads                           $      4,264    $     14,247
Fiber optic components                                   (6,557)         (1,747)
Adjustment for minority interest                         (2,199)             --
                                                   ------------    ------------
  Total profit (loss)                              $     (4,492)   $     12,500
                                                   ============    ============

<PAGE>

NOTE 7. CUSTOMER CONCENTRATION AND CREDIT RISK

The Company's three largest hard disk drive customers, Maxtor, Samsung and
Western Digital, accounted for a total of 93% of net sales during the
three-month period ended December 30, 2001. Included as Western Digital product
sales are HGAs shipped and billed directly to two third party subcontractors,
who assemble head stack assemblies for Western Digital. During the first quarter
of fiscal 2002 one subcontractor represented 32% of total net sales and the
other subcontractor represented 24% of total net sales. 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 8.  MINORITY INTEREST - SCION PHOTONICS

Through December 30, 2001, the Company's majority-owned subsidiary, Scion
Photonics, Inc. ("Scion"), received $25 million in funding resulting from the
conversion to equity of bridge loans from the original investors, Read-Rite,
Tyco Ventures and Integral Capital Partners in connection with Scion's Series B
preferred stock financing round. The funding from Tyco Ventures and Integral
Capital Partners, and its related accrued interest, has been reflected as
minority interest as of December 30, 2001 in the Company's consolidated
condensed financial statements. Read-Rite's consolidated net loss for the
quarter ended December 30, 2001, includes a $9.3 million charge representing the
Company's portion of the Scion loss for the quarter and a charge to reflect
changes in certain rights and preferences as a result of the Company's recent
Series B investment in Scion.

In January 2002, Scion received an additional $5 million of funding from a new
outside investor. Together with the conversion of the existing investor funding
to Series B preferred stock, including accrued interest, the aggregate funding
Scion has received for the Series B preferred stock financing round is $31
million. As of January 2002, there are six members on Scion's board of
directors, with Read-Rite directly electing two of the six board members.

NOTE 9.  SUBSEQUENT EVENTS

In late January 2002, the Company announced that it would incur a charge in the
second fiscal quarter consisting primarily of the severance costs associated
with a worldwide headcount reduction.


ITEM 2. 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 2001 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 the safe harbor created by those sections. These statements include, but are
not limited to: the Company's expectation that the industry trend toward fewer
average head gimbal assemblies per head stack assembly and competitive pricing
pressures will continue; the Company's expectation of lower revenue and units
for the second quarter of fiscal 2002 and that the Company will incur a loss in
the second fiscal quarter; the Company's expectation that it will achieve and
maintain acceptable yields on its GMR programs; the Company's plan to acquire
$80-90 million in capital equipment during fiscal 2002, including the potential
acquisition of certain assets through operating leases; the Company's belief it
has sufficient resources to fund the requirements of its operations for the next
twelve months; the Company's plans to pursue opportunities to continue to
improve the efficiency of its operations; and the Company's belief that the
Company and the individual defendants in the purported class actions
(collectively, the

<PAGE>

Actions) described in Part II, Item 1, Legal Proceedings, have meritorious
defenses in such Actions. Actual results for future periods could differ
materially from those projected in such forward-looking statements.

Some factors that could cause future actual results to differ materially 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 GMR product development; failure to
obtain necessary customer qualifications on new programs; failure to timely and
cost-effectively introduce those programs into manufacturing, and failure to
achieve and maintain acceptable production yields on those programs;
introduction of competitors' products more quickly or more cost effectively than
the Company's introduction or sale of its products; constraints on supplies of
raw materials or components limiting the Company's ability to maintain or
increase production; the anticipated trend of increases in areal density may not
occur; 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 that significantly increase the
Company's working capital needs; the Company's inability to obtain or generate
sufficient capital to fund its research and development expenses, capital
expenditures and other 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 2001. 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

                                                       Three Months Ended
                                                   --------------------------
                                                   December 30,  December 31,
                                                       2001         2000
                                                   -----------   ------------
Net sales:
   Magnetic recording heads                               99.3%         100.0%
   Fiber optic components                                  0.7             --
                                                   -----------   ------------
Total net sales                                          100.0          100.0
Cost of sales                                             83.6           79.9
                                                   -----------   ------------

     Gross margin                                         16.4           20.1
Operating expenses:
     Research and development                             13.1            7.7
     Selling, general and administrative                   5.6            4.1
                                                   -----------   ------------
     Total operating expenses                             18.7           11.8
                                                   -----------   ------------

     Operating income                                     (2.3)           8.3

Interest expense                                           0.9            1.4
Interest income and other, net                             1.6           (0.2)
                                                   -----------   ------------
     Income before income taxes and minority
        interest                                          (1.6)           6.7

Provision for income taxes                                  --            0.1
Minority interest in net loss of consolidated
     subsidiary                                           (1.6)            --
                                                   -----------   ------------

     Net income (loss)                                    (3.2)%           6.6%
                                                   ===========   ============


NET SALES

<PAGE>

Net sales for the three-month period ended December 30, 2001 decreased 28% to
$136.9 million compared to $189.9 million for the same period last year. The
decrease in sales is attributed to lower unit shipments, a higher mix of head
gimbal assemblies versus head stack assemblies, and significant pricing
pressures for the quarter ended December 30, 2001 as compared to the quarter
ended December 31, 2000. During the first fiscal quarter of 2002, the Company
shipped 21.6 million heads (including HGAs shipped as HSAs) compared to 23.1
million heads shipped during the first quarter of fiscal 2001. Head gimbal
assemblies accounted for 62% of net sales during the first fiscal quarter of
2002 versus 51% during the first quarter of fiscal 2001. Head stack assemblies
accounted for 31% of net sales during the first quarter of fiscal 2002 versus
45% during the first quarter of fiscal 2001. Pricing declines during the first
quarter of fiscal 2002 versus the first quarter of fiscal 2001 were the result
of shipments of HGAs for customers' near end-of-life 20 and 30 gigabyte per
platter programs.

GROSS MARGIN

The Company's gross margins are primarily influenced by four factors: the level
of unit sales in relation to fixed costs, average selling prices ("ASPs"),
manufacturing yields and product mix. The gross margin during the first quarter
of fiscal 2002 was negatively impacted by lower ASPs and lower unit volume
compared to the first quarter of fiscal 2001. Improved yields on products
supporting customers' 20 and 30 gigabyte per platter programs during the
December 2001 quarter as compared to the December 2000 quarter partially offset
the impact of the reduction in unit sales and reduced ASPs. These factors caused
a year-over-year reduction in gross margin of 3.7% with the Company achieving a
gross margin of 16.4% for the first quarter of fiscal 2002 as compared to a
gross margin of 20.1% for the first quarter of fiscal 2001.

In addition, the Company's gross margins are affected by inventory write-offs.
Inventories are stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out method) or market. It is the Company's policy to
write-off inventory on hand in excess of six months forecasted sales volumes.
Adjustments may be made to take into account the product life cycles, which can
range from 6 to 12 months, the maturity of the product (whether newly introduced
products or products approaching end of life), and the impact of competitors'
product announcements. The Company believes that six months is an appropriate
period for sales forecasts and inventory exposure calculations because it is
difficult to accurately forecast for a specific product beyond this time frame
due to potential introduction of new products by competitors, technology
obsolescence or fluctuations in demand for the Company's products.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT:
Research and development expenses were $17.9 million for the three-month period
ended December 30, 2001 as compared to $14.6 million for the three-month period
ended December 31, 2000. The increase in expenditures is attributed to the $4.1
million increase in R&D expenditures for the company's majority-owned
subsidiary, Scion Photonics, Inc. ("Scion").

SELLING, GENERAL & ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses were $7.6 million for the
three-month period ended December 30, 2001 as compared to $7.8 million for the
three-month period ended December 31, 2000. SG&A as a percentage of net sales
increased from 4.1% in the first quarter of fiscal 2001 to 5.6% in the first
quarter of fiscal 2002, primarily due to the decrease in net sales.

NON-OPERATING EXPENSES

INTEREST EXPENSE: Interest expense was $1.3 million for the quarter ended
December 30, 2001 as compared to $2.7 million for the same period last year. The
decrease in interest expense is due to lower interest rates for the quarter
ended December 30, 2001 compared to the quarter ended December 31, 2000, coupled
with the elimination in interest expense attributed to both the 10% convertible
notes, which were converted to equity in October 2000, and the $28.8 million
secured loan, which was paid off during the first quarter of fiscal 2001.

INTEREST INCOME AND OTHER, NET: Interest income and other, net for the quarter
ended December 30, 2001 was $2.2 million as compared to a $0.4 million expense
for the quarter ended December 31, 2000. The improvement in interest income and
other, net is the result of interest income of $1.0 million during the first
quarter of fiscal 2002 compared to $0.7 million for the first quarter of fiscal
2001 due to higher average cash investments during the first fiscal quarter of
2002, offset by lower average interest rates. The increase in interest income
and other, net for first fiscal quarter of 2002 compared to the first fiscal
quarter of 2001 is also attributed to rental income of $0.8 million on the
Company's excess space in the Philippines during the first quarter of fiscal
2002 and a foreign exchange gain of $0.2 million during the first quarter of
fiscal 2002 compared to a foreign exchange loss of $1.4 million for the first
fiscal quarter of 2001. The Company also converted $0.7 million of 6.5%
convertible bonds to equity, realizing a gain of $0.2 million during the quarter
ended December 30, 2001.

INCOME TAXES: The Company recorded a tax expense of $0.05 million for the first
fiscal quarter of 2002, compared to a tax expense of $0.3 million for the same
period last year. The tax provisions in both years reflect no benefit for net
operating losses until realized, federal alternative minimum taxes, and foreign
taxes.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

As of the end of the first quarter of fiscal 2002, the Company had cash and
investments of $137.0 million, total assets of $509.2 million and total
liabilities of $168.7 million.

Cash used in operating activities was $5.9 million. Cash flow provided by
operating activities was primarily attributed to depreciation and amortization
of $23.9 million and a reduction in accounts receivable of $7.8 million, as
sales were down $17.6 million from the fourth fiscal quarter of 2001. Cash
utilized by operating activities was the result of the loss of $4.5 million
combined with the increase in inventory and reduction in accounts payables and
accrued liabilities balances of $32.0 million. The reduction in accounts payable
balances of $15.3 million was due to lower shipments of head stack assemblies
during the first fiscal quarter of 2002 combined with capital equipment payments
being made in the first month of the first fiscal quarter of 2002. The reduction
of $16.7 million in accrued liabilities was primarily due to a reduction in
accrued compensation and benefits resulting from payment of bonuses earned
during fiscal 2001 but not paid until the first quarter of fiscal 2002 and a
reduction in warranty reserve during the quarter.

Cash utilized by investing activities totaled $53.9 million. During the quarter,
the Company incurred capital expenditures of $17.3 million. The Company's plan
for capital equipment purchases during fiscal 2002 is approximately $80 - 90
million. As of December 30, 2001, total commitments for construction or purchase
of capital equipment for the Company, including commitments of $0.3 million for
Scion, was approximately $29.3 million.

Cash provided by financing activities was $6.5 million, the result of stock
proceeds from employee stock option exercises and the employee stock purchase
plan totaling $2.8 million and proceeds from short-term borrowings of $5.7
million including an incremental Thai baht denominated short-term borrowing at
the Company's Thailand subsidiary of $4.5 million. The Company ended the quarter
with total Thai baht denominated short-term borrowings of $13.6 million. The
Thai baht borrowings mature in the third fiscal quarter of 2002.

The Company's business is highly capital intensive with demand for the Company's
products highly variable and difficult to predict. This can lead to
under-utilization of assets and potential asset impairment charges as well as
not having enough assets to meet the demand for the Company's products. During
the upcoming second fiscal quarter, the Company is transitioning to 40 GB per
platter 3.5-inch hard disk drive products but has limited customer participation
on these programs due to technical issues the Company is experiencing with its
HGAs for these programs. As a result, the Company expects sales for the second
fiscal quarter of 2002 to decline approximately 40-50% from the first fiscal
quarter of 2002 and the Company will incur a loss in the second fiscal quarter
of 2002. The Company expects to use $10 million to $15 million in cash to
support operating activities in the March 2002 quarter. In addition, the Company
expects to continue to make investments in new manufacturing technologies of
approximately $15 - 20 million in the March 2002 quarter. The Company expects
improved operating results in subsequent quarters and believes that it has
adequate capital resources for the next twelve months. However, if the Company
does not consistently achieve timely customer qualifications on new product
programs, or the Company is unsuccessful at ramping up volume production on new
products at acceptable yields, the Company's working capital and other capital
needs may increase. Conversely, if industry demand increases significantly such
that the Company's capital requirements exceed management's current estimates,
the Company may likewise need to raise additional capital. The Company could
seek to raise such capital through bank facilities, debt or equity offerings, or
other sources. There can be no assurance, however, that any such required
financing will be available when needed on terms and conditions acceptable or
favorable to the Company, if at all.

Scion is continuing to incur expenses for the design, development and
manufacturing of high-performance optical components. Scion is unprofitable at
this time and will continue to use cash for its operating activities. As a
result, Scion is actively pursuing additional sources of capital. If Scion's
fundraising activities are successful, the Company's holdings in Scion could
fall below 50% voting control. At that point, the Company would no longer
consolidate Scion but would account for its investment on the equity basis.
However, there can be no guarantee that Scion will be successful in securing
additional funding necessary to allow it to complete the design, development and
manufacturing of its high-performance optical components.

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.

                           Rapid Technological Change

<PAGE>

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 MR to GMR technology.
In January 2002, the Company announced that it was forecasting a loss for the
second fiscal quarter as a result of technical issues with its HGAs for
customers' new 40 gigabyte per platter 7200 rpm hard disk drive programs.

During fiscal 2001, the Company shipped 89.1 million GMR heads (including heads
in head stack assemblies), accounting for approximately 93% 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.

       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, frequent delivery schedule changes 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 GMR than anticipated and the Company had limited design-in
wins for its early GMR products with its customers. Demand variations such as
these, as well as the demand for personal computers, can materially and
adversely affect the Company's business, financial condition and results of
operations.

The Company's largest customers are Maxtor, Western Digital and Samsung,
representing 41%, 36%, and 16%, respectively, of the Company's net sales during
fiscal 2001. In October 2000, Quantum announced the merger of its HDD unit into
Maxtor. The merger was completed in April 2001. 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 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.

                   Dependence on a 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. Limitations
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, 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.

           Dependence on Single Manufacturing and Assembly Facilities

The Company has one wafer fabrication facility in Fremont, California and
operates in one location in Thailand for its head gimbal and head stack assembly
operations. In addition, the Company uses one wafer fabrication facility in
Milpitas, California for its tape head operations and operations of Scion, and
one location in the Philippines for its

<PAGE>

tape head assembly operations. The Company's wafer fabrication facilities, and a
majority of its administration and data processing functions, are located in a
seismically active area that has experienced major earthquakes in the past. A
fire, flood, earthquake or other disaster to these locations may have an adverse
effect on the Company's business, financial condition and results of operations.

                         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. During fiscal 2002, the Company will be
transitioning its wafer facility from six-inch square to six-inch round wafers,
which may have an impact on the Company's yields and costs. 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 more conducive to higher manufacturing yields and declining
costs.

In addition, the HSA business carries certain risks and demands in addition to
those of the HGA business. Among those risks are lower gross margins as a
percentage of sales, increased exposure to inventory obsolescence due to the
larger number of parts required for an HSA and the fact that each HSA program
requires unique components with long lead-time purchasing cycles and varying
product life spans between different HSA models.

                            International Operations

The Company's production process is 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, a union does not represent any of the Company's
employees. 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.

                        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, could have a material adverse effect on the Company's business,
financial condition and results of operations. Fluctuations in demand can also
lead to under-utilization of assets and the consideration of impairment charges.
The carrying value of property, plant and equipment is reviewed if the facts and
circumstances suggest that property, plant and

<PAGE>

equipment may be permanently impaired. An impairment review requires management
to make certain estimates and judgments regarding future cash flows that
management expects to be generated by groups of assets. These assumptions
include forecasts regarding revenue, gross margins, and other operating
expenditures. Because the Company operates in a volatile industry, characterized
by rapid technological change, these assumptions are inherently subject to
change in the near term and may result in an adverse impact on earnings.

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 2001 of $104
million, including $20.0 million for Scion Photonics, compared to $93.6 million
during fiscal 2000. The Company expects capital expenditures between $80 -90
million during fiscal 2002.

                                 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,
the Company is dependent 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 is very large and the Company has
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.
This in turn, could materially and adversely affect the Company's business,
financial condition and results of operations. The Company may 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, some of
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
its end customer, the customer 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.

                           Dependence on Key Personnel

The Company's future performance depends on the continued service of key members
of management, and its highly skilled research and development and manufacturing
personnel. If the Company is unable to retain the existing employees or hire and
integrate new employees, it may have an adverse effect on the Company's
business, financial condition and results of operations.

   Scion's Ability to Develop, Design, Manufacture, Ramp, Achieve and Sustain
                    Volume Production of Optical Components

Scion Photonics, Inc., is incurring expenses for the design, development and
manufacturing of high-performance optical components. There can be no guarantee
that Scion will achieve market acceptance on its current products, or that it
will successfully develop, design, manufacture, or achieve acceptable yields on
the products currently under development or that it will be successful in the
highly competitive and rapidly changing optical marketplace. There can be no
guarantee that the Company will recover its investment in Scion. Scion Photonics
is currently in the process of raising additional capital. There can be no
guarantee that Scion will be successful in receiving additional funding
necessary to allow it to complete the design, development and manufacturing of
high-performance optical components. As a result of Scion's fundraising
activities, the Company's holdings could fall below 50% voting control. At that
point, the Company will no longer consolidate Scion, but will account for its
investment on the equity basis.

<PAGE>

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.

                        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.

                            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,
general economic conditions 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
2001 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 Part I, Item 3, Legal
Proceedings in the Company's Annual Report on Form 10-K for the year ended
September 30, 2001.

<PAGE>

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 first quarter of
fiscal 2002.

                                    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.

                                             READ-RITE CORPORATION




Date: February 13, 2002                  By: /s/ John T. Kurtzweil
                                             ----------------------------------
                                             Senior Vice President, Finance and
                                             Chief Financial Officer