<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 MARCH 31, 2002

                                      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 Offices)                   (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, 2002, 121,027,731 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 per share data)

<TABLE>
<CAPTION>
                                                                             March 31,        September 30,
                                                                               2002                2001
                                                                            ----------        -------------
<S>                                                                      <C>                <C>
                                                                            (unaudited)             (a)
ASSETS
Current assets:
     Cash and cash equivalents                                              $   53,976        $     126,646
     Short-term investments                                                     46,268               27,083
     Accounts receivable, net                                                   29,478               65,496
     Inventories                                                                28,883               35,251
     Prepaid expenses and other current assets                                   7,564                7,463
                                                                            ----------        -------------
         Total current assets                                                  166,169              261,939

Property, plant and equipment, net                                             260,266              268,031
Intangible and other assets                                                      7,523                7,397
                                                                            ----------        -------------
         TOTAL ASSETS                                                       $  433,958        $     537,367
                                                                            ==========        =============

LIABILITIES, MINORITY INTEREST IN CONSOLIDATED
     SUBSIDIARY AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                       $   49,162        $      69,353
     Accrued compensation and benefits                                          17,368               25,208
     Other accrued liabilities                                                  22,329               26,169
     Short-term borrowings                                                      13,761               15,142
     Current portion of long-term debt and capital lease obligations            20,981               15,852
                                                                            ----------        -------------
         Total current liabilities                                             123,601              151,724

Convertible subordinated notes                                                  19,151               19,801
Other long-term debt and capital lease obligations                              21,162               28,588
Other long-term liabilities                                                      4,577                4,785
                                                                            ----------        -------------
         Total liabilities                                                     168,491              204,898

Minority interest in consolidated subsidiary                                    14,049                4,791

Stockholders' equity
     Preferred stock, $0.0001 par value                                             --                   --
     Common stock, $0.0001 par value                                                12                   12
     Additional paid-in capital                                                705,925              700,763
     Accumulated deficit                                                      (454,359)            (373,232)
     Accumulated other comprehensive income (loss)                                (160)                 135
                                                                            ----------        -------------
         Total stockholders' equity                                            251,418              327,678

TOTAL LIABILITIES, MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY AND
     STOCKHOLDERS' EQUITY                                                   $  433,958        $     537,367
                                                                            ==========        =============

</TABLE>
(a)   The information in this column was derived from the Company's audited
      consolidated balance sheet included in its Annual Report on Form 10-K
      for the fiscal year ended September 30, 2001.

   See accompanying notes to the consolidated condensed financial statements.

                                       2

<PAGE>

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

<TABLE>
                                                 Three Months Ended                  Six Months Ended
                                             ----------------------------        --------------------------
                                              March 31,        April 1,           March 31,      April 1,
                                                 2002            2001               2002           2001
                                             ------------    ------------        -----------    -----------
                                                             (a)                                (a)
<S>                                          <C>             <C>                 <C>            <C>
Net sales                                    $     52,422    $    193,119        $   188,335    $   383,032
Cost of sales - on net sales                       88,533         159,259            202,768        310,933
Cost of sales - special charges                    19,997           5,416             19,997          5,416
                                             ------------    ------------        -----------    -----------

     Gross margin (loss)                          (56,108)         28,444            (34,430)        66,683

Operating expenses:
     Research and development                      12,129          14,217             24,493         27,360
     Selling, general and administrative            6,591           7,486             12,619         14,767
                                             ------------    ------------        -----------    ------------
     Total operating expenses                      18,720          21,703             37,112         42,127
                                             ------------    ------------        -----------    -----------

     Operating income (loss)                      (74,828)          6,741            (71,542)        24,556

Interest income (expense) and other, net               (3)             53              1,540         (3,201)
                                             ------------    ------------        -----------    -----------
     Income (loss) from continuing
       operations before income taxes and
       minority interest                          (74,831)          6,794            (70,002)        21,355

Provision (benefit) for income taxes                 (699)            135               (651)           426
Minority interest in net income of
     consolidated subsidiary                            -               -                  -             22
                                             ------------    ------------        -----------    -----------

     Income (loss) from continuing
       operations                                 (74,132)          6,659            (69,351)        20,907
Loss from discontinued operations                  (2,504)           (529)           (11,777)        (2,277)
                                             ------------    ------------        -----------    -----------

     Net income (loss)                       $    (76,636)   $      6,130        $   (81,128)   $    18,630
                                             ============    ============        ===========    ===========

Earnings (loss) per share
     Basic and diluted income (loss) per
       share from continuing operations      $      (0.62)   $       0.05        $     (0.58)   $      0.18
     Basic and diluted income (loss) per
       share from discontinued operations    $      (0.02)   $          -        $     (0.10)   $     (0.02)
                                             ------------    ------------        -----------    -----------

     Basic and diluted net income (loss)
       per share                             $      (0.64)   $       0.05        $     (0.68)   $      0.16
                                             ============    ============        ===========    ===========

Shares used in per share computations
     Basic                                        120,363         118,224            119,889        113,071
     Diluted                                      120,363         121,285            119,889        115,693
</TABLE>

(a)  Reclassified to reflect Scion Phontonics, Inc. as discontinued operations.
     See Notes 7 and 9.

   See accompanying notes to the consolidated condensed financial statements.

                                       3

<PAGE>


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

<TABLE>
<CAPTION>
                                                                         Six Months Ended
                                                                  -------------------------------
                                                                   March 31,           April 1,
                                                                     2002                2001
                                                                  ----------        -------------
Cash flows from operating activities:

<S>                                                               <C>               <C>
Net income (loss)                                                 $  (81,128)       $      18,630
Adjustments to reconcile net income (loss) to cash
  provided by operations:
      Depreciation and amortization                                   47,327               65,977
      Minority interest in net loss of consolidated subsidiary        (2,767)              (6,051)
      Other non-cash expenses                                           (783)                   -
Changes in assets and liabilities
      Accounts receivable                                             36,018               12,080
      Inventories                                                      6,368               (9,012)
      Accounts payable and accrued liabilities                       (31,477)               6,542
      Other assets and liabilities, net                               (1,559)                  84
                                                                  ----------        -------------
Net cash provided by (used in) operating activities                  (28,001)              88,250
                                                                  ----------        -------------
Cash flows from investing activities:
      Capital expenditures                                           (37,175)             (51,010)
      Maturities of available-for-sale investments                    69,242               84,581
      Purchase of available-for-sale investments                     (88,427)            (101,081)
                                                                  ----------        -------------
Net cash used in investing activities                                (56,360)             (67,510)
                                                                  ----------        -------------

Cash flows from financing activities
      Payment of long-term debt                                       (3,675)             (34,304)
      Proceeds from short-term borrowings                              5,739                4,843
      Proceeds from issuance of Scion stock                            4,936                   --
      Proceeds from issuance of common stock, net                      4,691               48,868
      Payment to joint venture partner upon final dissolution
        of RRSMI                                                           -               (6,940)
                                                                  ----------        -------------
Net cash provided by financing activities                             11,691               12,467
                                                                  ----------        -------------

Net increase (decrease) in cash and cash equivalents                 (72,670)              33,207
Cash and cash equivalents
      Beginning of period                                            126,646               64,462
                                                                  ----------        -------------

      End of period                                               $   53,976        $      97,669
                                                                  ==========        =============

Supplemental disclosures of non-cash activities
      Equipment acquired under capital lease                           1,378                   --
      Conversion of debt and accrued interest to common stock            465              213,352
      Conversion of Scion debt to minority interest                    7,224                   --

</TABLE>
   See accompanying notes to the consolidated condensed financial statements.

                                       4

<PAGE>

                              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 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 consolidated financial statements include the accounts of the Company and
its wholly owned and majority-owned subsidiaries. The majority-owned
subsidiaries are Scion Photonics, Inc. ("Scion") and Read-Rite SMI ("RRSMI").
RRSMI was liquidated in fiscal 2001 and the Company's interest in Scion was sold
in April 2002 (see Note 9).

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 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 assessing inventory write-off requirements because it is difficult to
accurately forecast for a specific product beyond this time frame due to the
potential introduction of new products by competitors, technology obsolescence
and fluctuations in demand for the Company's products.

Inventories consisted of the following (in thousands):

                                      March 31,           September 30,
                                        2002                 2001
                                   -------------        ---------------

      Raw materials                $    3,662           $      3,137
      Work-in-process                  20,138                 23,826
      Finished goods                    5,083                  8,288
                                   -------------        ---------------

                                   $   28,883           $     35,251
                                   =============        ===============


                                       5

<PAGE>

Inventories for March 31, 2002 and September 30, 2001 include $1.9 million and
$1.8 million, respectively, for the inventories of the Company's discontinued
operations of Scion Photonics, Inc. ("Scion").

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:


<TABLE>
<CAPTION>
                                                       Three months ended                Six months ended
                                                 ---------------------------       ----------------------------
                                                  March 31,       April 1,           March 31,       April 1,
                                                    2002           2001                2002            2001
                                                 -----------    ------------       -----------     ------------
                                                            (in thousands, except per share amounts)
<S>                                              <C>            <C>               <C>              <C>
Numerator - basic and diluted
     Net income (loss)                           $   (76,636)   $      6,130       $   (81,128)    $     18,630
                                                 ===========    ============       ===========     ============

Denominator: basic
     Weighted number of common shares
     outstanding during the period                   120,363         118,224           119,889          113,071



     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:  diluted earnings per share             120,363         121,285           119,889          115,693

Net income (loss) per share
       Basic                                     $     (0.64)   $       0.05       $     (0.68)    $       0.16
                                                 ===========    ============       ===========     ============

       Diluted                                   $     (0.64)   $       0.05       $     (0.68)    $       0.16
                                                 ===========    ============       ===========     ============
</TABLE>

As of March 31, 2002, 6.2 million shares relating to the possible exercise of
outstanding stock options were not included in the computation of diluted loss
per share. Approximately 0.5 million of the weighted average number of common
shares attributable to the assumed conversion of the Company's 6.5% convertible
subordinated debentures were also not included in the diluted earnings per share
computation for the three and six-month periods ending March 31, 2002 and April
1, 2001. The effects of these items were not included in the computation of
diluted income (loss) per share as their effect would have been anti-dilutive.

NOTE 4.   FINANCING TRANSACTIONS

Short-term borrowings as of March 31, 2002 consist primarily of three 200
million Thai baht notes, totaling approximately $13.8 million. These three notes
are unsecured and bear interest at 3.0% - 3.15%.


                                       6

<PAGE>

NOTE 5.   SPECIAL CHARGES

During the three-month period ended March 31, 2002, the Company took a $20.0
million charge primarily resulting from inventory write-offs relating to
technical issues on its 40 gigabyte per platter programs and for severance costs
related to a 11% reduction in force, or approximately 1,250 employees at the
Company's U.S. and Thailand facilities.

During the three-month period ended April 1, 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.

NOTE 6.  COMPREHENSIVE INCOME (LOSS)

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

<TABLE>
<CAPTION>

                                                          Three months ended                Six months ended
                                                      ---------------------------      ----------------------------
                                                         March 31,      April 1,          March 31,      April 1,
                                                           2002           2001             2002            2001
                                                      -------------    ----------      -------------    -----------
<S>                                                   <C>               <C>            <C>             <C>
Net income (loss)                                     $    (76,636)    $    6,130      $    (81,128)    $    18,630
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
                                                              (260)             -              (295)              -
                                                      -------------    ----------      -------------    -----------

Comprehensive income (loss):                          $    (76,896)    $    8,091      $    (81,423)    $    19,369
                                                      =============    ==========      =============    ===========

</TABLE>

NOTE 7.   SEGMENT INFORMATION

The Company's primary operation is the magnetic recording head 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 fiber optic
components. In April 2002, the Company announced the sale of its majority owned
subsidiary, Scion Photonics, Inc. , which operated as the Company's fiber optic
segment, to JDS Uniphase (See Note 9). Accordingly, Scion is presented as a
discontinued operation in the statement of operations. Scion's sales, including
intercompany sales for the three-month and six-month periods ending April 1,
2002 and March 31, 2001 were as follows:


<TABLE>
<CAPTION>
                                           Three months ended               Six months ended
                                      ------------------------------------------------------------
                                        March 31,      April 1,          March 31,       April 1,
                                          2002           2001              2002            2001
                                      -----------    -----------      ------------      ----------
<S>                                   <C>            <C>              <C>               <C>
Scion net sales                       $       581    $       231      $      1,577      $      275
Less:  intercompany sales                      25             73                35              74
                                      -----------    -----------      ------------      ----------
Total                                 $       556    $       158      $      1,542      $      201
                                      ===========    ===========      ============      ==========
</TABLE>

                                       7

<PAGE>

NOTE 8.   CUSTOMER CONCENTRATION AND CREDIT RISK

The Company's three largest hard disk drive customers, Maxtor, Samsung and
Western Digital, accounted for a total of 92% of net sales during the six-month
period ended March 31, 2002. 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 six-month period ending March
31, 2002, one subcontractor represented 26% of total net sales, and the other
subcontractor represented 22% 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 9.   DISCONTINUED OPERATIONS

During the first two quarters of fiscal 2002, the Company's majority-owned
subsidiary, Scion Photonics, Inc. ("Scion"), received $31 million in funding
from the conversion of $25 million of debt to equity plus accrued interest from
the original investors, Read-Rite, Tyco Ventures and Integral Capital Partners,
and $5 million of funding from JDS Uniphase Corporation. In April 2002, JDS
Uniphase acquired Scion Photonics in a cash transaction. As such, Scion has been
accounted for as discontinued operations and, accordingly, the consolidated
statement of operations for the periods presented have been reclassified. As a
result of this transaction, the Company will receive net cash proceeds of $17
million and expects to record a gain of approximately $8 - 9 million in the
third fiscal quarter ending June 30, 2002.

The following represents the assets and liabilities of Scion. Intercompany
transactions have been eliminated.

                                                 March 31,        September 30,
                                                    2002              2001
                                                 ---------        -------------

Cash                                             $     866        $       2,706
Other current assets                                 2,769                3,419
Property, plant and equipment, net                  19,985               21,660
Other                                                1,138                1,586
                                                 ---------        -------------
Total assets                                     $  24,758        $      29,371

Current liabilities                              $   3,032        $      24,558

Minority interest for Scion on the consolidated balance sheet totaled $14.0
million and $4.8 million as of March 31, 2002 and September 30, 2001,
respectively.

NOTE 10.  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.


                                       8

<PAGE>

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. Plaintiffs served a
notice of appeal on July 20, 2001.

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. No briefs have been filed and no hearings
have been scheduled in either action.

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.

In September 2001, the Bay Area Air Quality Management District ("BAAQMD) filed
a complaint in the Superior Court of the State of California, Alameda County,
alleging violations of permit conditions and district regulations relating
primarily to breakdowns of the Company's Thermal Oxidizer in its Fremont plant
over a three-year period. The Company promptly notified the BAAQMD of all such
breakdowns but had not been assessed any fines or received any further
correspondence relating to these incidents by the BAAMQD prior to receiving the
complaint. The Company answered the complaint in October of 2001. The parties
have been referred to mediation that is expected to occur in late May 2002. The
Company believes that it has meritorious defenses to the action. Accordingly,
the Company intends to defend this action vigorously, and believes the final
disposition of the claims set forth in this action will not have a material
adverse effect on the Company's business, results of operations or 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 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


                                       9

<PAGE>

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 fiscal 2002 as compared to fiscal
2001, and that the Company will incur a loss for fiscal 2002; the Company's
expectation that it will achieve and maintain acceptable yields on its programs;
the Company's plan to acquire $60 - 70 million in capital equipment during
fiscal 2002, including financing these potential acquisitions through leases;
the Company's expectation that fiscal 2003 operating results will improve; 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 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 cost effectively than the
Company's 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.

Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires the
Company to make estimates and judgments that affect the reported amounts of
assets and liabilities and expenses, and related disclosures. The Company bases
the estimates on historical experience, knowledge of economic and market factors
and various other assumptions that it believes to be reasonable under the
circumstances. Actual results may differ materially from these estimates if the
assumptions or conditions turn out to be incorrect. The Company believes the
following critical accounting policies are affected by significant estimates,
assumptions and judgments used in the preparation of our consolidated financial
statements:

Allowance for bad debt. The Company is dependent on a limited number of
----------------------
customers. As a result, the Company's trade accounts receivable is highly
concentrated. While the Company performs ongoing credit reviews of its customers
and has established an allowance for bad debt, a significant deterioration in
the credit-worthiness of any significant customer may result in charges to
increase the allowance for bad debt.

Long-lived assets. The Company evaluates the carrying value of long-lived
-----------------
assets, consisting primarily of property, plant and equipment, whenever certain
events or changes in circumstances indicate that the carrying amount of these
assets may not be recoverable. Such events or circumstances include, but are not

                                       10

<PAGE>

limited to, a prolonged industry downturn, a current period operating cash flow
loss combined with a history of operating cash flow losses, or significant
reductions in projected future cash flows. The Company's business is highly
capital intensive, with demand for products highly variable and difficult to
predict. During fiscal 2002, the Company is transitioning to 40 GB per platter
3.5-inch hard disk drive products, but currently has limited participation on a
number of these customer programs. As a result, the Company expects lower sales
for the second half of fiscal 2002 as compared to the second half of 2001 and
expects to incur a loss for fiscal year 2002. In assessing the recoverability of
long-lived assets, the Company compares the carrying value to the undiscounted
future cash flows the assets are expected to generate. If the total of the
undiscounted future cash flows is less than the carrying amount of the assets,
the assets will be written down based on the excess of the carrying amount over
the fair value of the assets. Fair value would generally be determined by
calculating the discounted future cash flows using a discount rate based upon
the Company's weighted average cost of capital. Based upon the estimate of the
future undiscounted cash flows, the Company has not recognized an impairment
loss for the March 2002 quarter. Significant judgments and assumptions are
required in the forecast of future operating results used in the preparation of
the estimated future cash flows, including long-term forecasts of overall market
conditions, increased participation on current 40 gigabyte products and the
Company's timely participation in the next generation 60 gigabyte and 80
gigabyte products. The Company expects improved operating results in fiscal 2003
and beyond. Changes in these estimates could have a material adverse effect on
the assessment of the long-lived assets, thereby requiring the Company to write
down the assets.

Inventory Valuation. The Company is dependent on a few customers and a limited
-------------------
number of product programs for each customer. 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 program to another for
a particular customer. The Company regularly assesses the valuation of
inventories and writes down those inventories that are obsolete or in excess of
the forecasted usage to the estimated realizable values. 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 product life cycles, which
can range from six to twelve 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 assessing inventory write-off requirements because it is
difficult to accurately forecast for a specific product beyond this time frame
due to potential introductions of new products by competitors, technology
obsolescence or fluctuations in demand for the Company's products. If market
conditions are less favorable than the forecast or actual demand from customers
is lower than the estimates, the Company may be required to record additional
inventory write-downs. If demand is higher than expected due to a change in mix
or forecast; the Company may sell inventory that had previously been written
down.

RESULTS OF OPERATIONS

NET SALES
Net sales from continuing operations were $52.4 million and $188.3 million for
the three and six-month periods ended March 31, 2002, respectively, compared to
net sales of $193.1 million and $383.0 million for the comparable periods in
fiscal 2001. The decrease is attributable to a combination of lower unit
shipments and lower prices. The Company shipped 6.6 million and 28.3 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, 2002, compared to 22.9 million and 46
million head gimbal assemblies shipped during the three and six-month periods
ended April 1, 2001. The decrease in shipments during the three and six-month
periods ended March 31, 2002 compared to the same periods last fiscal year is
the result of the Company's late and limited participation during the first half
of fiscal 2002 on its customers 40 gigabyte per platter programs. The Company
faced technical issues with HGAs and was not qualified on customers' 40 gigabyte
7200 RPM programs in the first half of fiscal 2002. The Company was shipping
HGAs supporting customers' 40 gigabyte 5400 RPM programs with sales for these
products representing approximately 60% and 29% of sales for the three and
six-month periods ended March 31, 2002. Sales for customers' approaching
end of life 20 and 30 gigabyte per platter programs represented 28% and 64% of
sales, respectively, for the three and six-month periods ended March 31, 2002.


                                       11

<PAGE>

Head gimbal assemblies accounted for 26% and 52% of net sales during the three
and six-month periods ended March 31, 2002 versus 51% and 50% for the comparable
periods last year. Head stack assemblies accounted for 62% and 40% of net sales
versus for 43% and 44% for the same periods last year.

The Company's customer base remains highly concentrated as its three HDD
customers, Maxtor, Samsung and Western Digital, accounted for 88% and 92% of net
sales for the three and six-month periods ended March 31, 2002, compared to 92%
and 94% for the comparable periods last year.

GROSS MARGIN
The Company's gross margins are primarily influenced by the relationship of unit
sales 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 loss from continuing operations was $56.1 million and $34.4
million for the three and six-month periods ended March 31, 2002, as compared to
a gross margin of $28.4 million and $66.7 million for the same periods last
year. The decline in gross margin during the second quarter and first half of
fiscal year 2002 is attributed to significantly lower unit volumes, lower
pricing and lower manufacturing yields. The gross margin for the three and
six-month period ended March 31, 2002 includes a $20 million charge resulting
from excess inventories related to technical issues with the 40 gigabyte per
platter programs and severance costs related to an 11% reduction in force, or
approximately 1,250 employees, at the Company's U.S. and Thailand facilities.


RESEARCH AND DEVELOPMENT: Research and development expenses for continuing
operations declined to $12.1 million and $24.5 million for the three and
six-month periods ended March 31, 2002 as compared to $14.2 million and $27.4
million for the same periods last year. The reduction in spending for the three
and six-month periods ended March 31, 2002 is attributed to lower depreciation
expense, a reduction in workforce and elimination of profit-sharing and bonus
accruals.

SELLING, GENERAL & ADMINISTRATIVE: Selling, general and administrative ("SG&A")
expenses for continuing operations were $6.6 million and $12.6 million for the
three and six-month periods ended March 31, 2002, compared to $7.5 million and
$14.8 million for the same periods last year. The decrease in spending is
attributed to a reduction in workforce, elimination of profit-sharing and bonus
accrual, and reduction in spending for outside services for the three and
six-month period ending March 31, 2002.

INTEREST INCOME (EXPENSE) AND OTHER, NET: Interest income (expense) and other,
net for the three and six-month periods ended March 31, 2002 was $(3) thousand
and $1.54 million, respectively, as compared to $53 thousand and $(3.2) million
for the comparable periods last year. The changes in interest income (expense)
and other, net is due to lower interest expense of $2.1 million in the first
half of fiscal 2002 and a $0.2 million foreign exchange gain compared to
interest expense of $3.9 million and a foreign exchange loss of $1.8 million for
the comparable period last year.

INCOME TAXES: The Company recorded a tax benefit of $0.7 million for the three
and six-month period ended March 31, 2002, compared to $0.1 million for the
comparable periods last year. The tax benefit was primarily attributable to a
new law that eliminated the 90% limitation on US alternative minimum tax net
operating loss utilization for tax years ending in 2001 and 2002 and extended
net operating loss carrybacks from 2 years to 5 years.


                                       12

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
As of the end of the first six months of fiscal 2002, the Company had cash and
investments of $100.2 million, total assets of $434 million, including $24.8
million of assets from its discontinued operations of Scion Photonics, Inc., and
total liabilities of $168.5 million. Cash and short-term investments decreased
by $53.5 million from fiscal 2001 year end primarily reflecting the net loss of
$81.1 million and capital expenditures of $37.2 million, partially offset by
depreciation and amortization and a decrease in accounts receivable.

Cash utilized by operating activities for the six-month period ending March 31,
2002 was $28 million. The negative cash flow from operating activities was
primarily attributed to the net loss from continuing operations of $81.1 million
and a decrease in accounts payable balances of $20.2 million due to capital
equipment payments being made in the first month of the first fiscal quarter of
2002, combined with lower build volume and a reduction of $11.3 million in
accrued liabilities due to a reduction in accrued compensation and benefits.
This was partially offset by depreciation and amortization of $47.3 million, and
decreases in accounts receivable and inventory of $36.0 million and $6.4
million, respectively. The change in accounts receivable and inventory is the
result of lower sales and build volume for the first six months of fiscal 2002.

Cash utilized by investing activities totaled $56.4 million for the six-month
period ended March 31, 2002. The Company's business is highly capital intensive.
During the six-month period ended March 31, 2002, the Company incurred capital
expenditures of $37.2 million. The Company's current plan for capital equipment
purchases during fiscal 2002 is approximately $60 - $70 million. As of March 31,
2002, commitments for construction or purchase of capital equipment for the
Company totaled approximately $14.7 million.

Cash provided by financing activities was $11.7 million, the result of proceeds
from short-term borrowings of $5.7 million, including an incremental Thai baht
denominated borrowing and proceeds from employee stock and option plans totaling
$4.7 million. Total short-term baht borrowings total $13.8 million and mature in
May and June 2002. Cash flows from financing activities also include a $4.9
million net investment from JDS Uniphase received by Scion. JDS Uniphase
purchased Scion in April 2002. As such, Scion is shown as a discontinued
operation of the Company. Read-Rite expects to record a gain of $8 million to
$9 million in the third fiscal quarter of 2002 as a result of the sale of Scion.

The Company believes that it has adequate capital resources for the next twelve
months. The Company has, and may in the future, raise additional capital through
debt or equity offerings. 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 through 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.

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

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


                                       13

<PAGE>

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.
For the first six months of fiscal 2002, the Company incurred a loss of $81.1
million, including a special charge of $20.0 million, in part, related to
technical issues on 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 or Cancelled 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 or cancellation of
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. 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, 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


                                       14

<PAGE>

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 one location in the
Philippines for its 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; Asset Utilization

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


                                       15

<PAGE>

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 asset impairment charges. The carrying value of property, plant
and equipment is reviewed if the facts and circumstances suggest that property,
plant and equipment may be 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. During fiscal 2002, the Company is
transitioning to 40 GB per platter 3.5-inch hard disk drive products, but
currently has limited participation on these customer programs. As a result, the
Company expect lower sales for the second half of fiscal 2002 as compared to the
second half of 2001 and expects to incur a loss for fiscal year 2002.

 In assessing the recoverability of long-lived assets, the Company compares the
carrying value to the undiscounted future cash flows the assets are expected to
generate. If the total of the undiscounted future cash flows is less than the
carrying amount of the assets, the assets will be written down based on the
excess of the carrying amount over the fair value of the assets. Fair value
would generally be determined by calculating the discounted future cash flows
using a discount rate based upon our weighted average cost of capital.
Significant judgments and assumptions are required in the forecast of future
operating results used in the preparation of the estimated future cash flows,
including long-term forecasts of overall market conditions and the expected
successful execution of our business strategy in that market. 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 anticipated demand
for its products. The Company made capital expenditures during fiscal 2001 of
$84 million compared to $93.6 million during fiscal 2000. The Company expects
capital expenditures between $60 - 70 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,
which in turn, could materially and adversely affect the Company's business,
financial condition and results of operations. A special charge was incurred in
the second fiscal quarter of 2002 relating to inventory write-offs with respect
to technical challenges on the 40 gigabyte 7200 RPM programs. 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,


                                       16

<PAGE>

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.

                        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. In the second quarter of fiscal 2002 the Company
experienced significantly lower shipments as a result of technical issues with
HGAs supporting customers' 40 gigabyte per platter 7200 RPM programs. As a
consequence, the Company experienced a significant reduction in net sales,
negative gross margin and incurred significant losses in 1999 and the first half
of fiscal 2002.

                            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


                                       17

<PAGE>

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 Note 10 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 SECURITY HOLDERS

The Company's 2002 Annual Meeting of Stockholders was held on Thursday, February
28, 2002 at the Company's Fremont, California manufacturing facility. At the
meeting 119,938,476 shares were entitled to vote and 101,973,588 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 are the votes
    received by the nominees for Board of Directors, all of whom were elected:

       NAME OF NOMINEE                VOTES CAST FOR           VOTES WITHHELD
       Cyril J. Yansouni                100,517,195               1,456,393
       Matthew J. O'Rourke              100,650,104               1,323,484
       Michael L. Hackworth             100,713,272               1,260,316
       William J. Almon                 100,646,821               1,326,767
       Robert M. White                  100,715,035               1,258,553
       Alan S. Lowe                     100,338,983               1,634,605

    Proposal 2. AMENDMENT TO THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN TO
    INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE BY 2,100,000 SHARES. The
    amendment to increase the number of shares under the Company's Employee
    Stock Purchase Plan as noted above was ratified and approved with 96,624,070
    votes in favor, 3,069,959 votes against, and 2,279,559 abstentions.

    Proposal 3. APPROVAL OF THE COMPANY'S 2001 DIRECTORS' OPTION PLAN AND
    RESERVATION FOR ISSUANCE OF 500,000 SHARES OF COMMON STOCK The proposal for
    the 2001 Directors' Option Plan was approved with 55,180,652 voting in
    favor, 44,456,538 voting against and 2,336,398 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 2002 fiscal year. The stockholders approved the
    ratification of independent auditors with 101,170,895 voting in favor,
    694,456 voting against and 108,237 abstentions.

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits

          10.67 Merger Agreement among JDS Uniphase, JDSU Acquisitions Four,
          Inc., Scion Photonics Inc., Read-Rite Corporation and each of the
          Investors dated April 19, 2002


                                       18

<PAGE>

     (b)  Reports on Form 8-K

          There were no Reports on Form 8-K filed during the second 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: May 15, 2002                              By:  /s/ Andrew C. Holcomb
                                                -------------------------------
                                                Chief Financial Officer


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