<PAGE>   1
 
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-Q
                            ------------------------
(MARK ONE)
 
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
 
                       FOR THE PERIOD ENDED APRIL 3, 1999
 
                                       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: 0-14016
 
                            ------------------------
 
                               MAXTOR CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      77-0123732
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)
 
      510 COTTONWOOD DRIVE, MILPITAS, CA                           95035
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 432-1700
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
          5.75% CONVERTIBLE SUBORDINATED DEBENTURES, DUE MARCH 1, 2012
 
                            ------------------------
 
     Indicate by checkmark 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 [ ]
 
     Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     The aggregate market value of the registrant's common stock, $.01 par value
per share, held by nonaffiliates of the registrant was $401,331,889 on May 13,
1999 (based on the closing sales price of the registrant's common stock on that
date). Shares of the registrant's common stock held by each officer and director
and each person who owns more than 5% or more of the outstanding common stock of
the registrant have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily conclusive
determination for other purposes.
 
     As of May 13, 1999, 102,871,117 shares of the registrant's Common Stock,
$.01 par value, were issued and outstanding.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
                               MAXTOR CORPORATION
 
                                   FORM 10-Q
                                 APRIL 3, 1999
 
                                     INDEX
 
<TABLE>
<CAPTION>
                                                               PAGE
                                                              -------
<S>                                                           <C>
                    PART I. FINANCIAL INFORMATION
 
Item 1. Condensed Consolidated Financial Statements
         Condensed Consolidated Balance Sheets --
           April 3, 1999 and December 26, 1998..............        3
         Condensed Consolidated Statements of Operations --
           Three months ended April 3, 1999, and March 28,
  1998......................................................        4
         Condensed Consolidated Statements of Cash Flows --
           Three months ended April 3, 1999, and March 28,
  1998......................................................        5
         Notes to Condensed Consolidated Financial
  Statements................................................    6 - 8
 
Item 2. Management's Discussion and analysis of Financial
Condition and Results of
         Operations.........................................   9 - 22
 
                     PART II. OTHER INFORMATION
 
Item 1. Legal Proceedings...................................       23
 
Item 5. Other Information...................................       24
 
Item 6. Exhibits and Reports on Form 8-K....................       24
 
Signature...................................................       25
</TABLE>
 
                                        2
<PAGE>   3
 
                         PART I. FINANCIAL INFORMATION
 
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
                               MAXTOR CORPORATION
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                              APRIL 3, 1999    DECEMBER 26, 1998
                                                              -------------    -----------------
                                                               (UNAUDITED)
<S>                                                           <C>              <C>
Current assets:
  Cash and cash equivalents.................................    $ 185,588          $ 214,126
  Marketable securities.....................................       94,802             13,503
  Accounts receivable, net of allowance of doubtful accounts
     of $8,975 at April 3, 1999 and $8,409 at December 26,
     1998...................................................      225,235            317,758
  Inventories...............................................      127,095            153,192
  Prepaid expenses and other................................       56,261             45,198
                                                                ---------          ---------
          Total current assets..............................      688,981            743,777
Net property, plant and equipment...........................      113,122            108,290
Other assets................................................        7,878             11,346
                                                                ---------          ---------
          Total assets......................................    $ 809,981          $ 863,413
                                                                =========          =========
 
                              LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Short-term borrowings, including current portion of
     long-term debt.........................................    $   5,258          $   5,261
  Accounts payable..........................................      329,487            427,737
  Accrued and other liabilities.............................       94,764            115,937
                                                                ---------          ---------
          Total current liabilities.........................      429,509            548,935
Long-term debt due affiliate................................           --             55,000
Long-term debt..............................................       85,031             90,046
                                                                ---------          ---------
          Total liabilities.................................      514,540            693,981
Common stock, $0.01 par value, 250,000,000 shares
  authorized; 102,871,234 shares issued and outstanding at
  April 3, 1999 and 94,293,499 shares issued and outstanding
  at December 26, 1998......................................        1,029                943
Additional paid-in capital..................................      980,477            880,175
Accumulated deficit.........................................     (724,775)          (741,780)
Cumulative other comprehensive income -- unrealized gain on
  investments in equity securities..........................       38,710             30,094
                                                                ---------          ---------
          Total stockholders' equity........................      295,441            169,432
                                                                ---------          ---------
          Total liabilities and stockholders' equity........    $ 809,981          $ 863,413
                                                                =========          =========
</TABLE>
 
                            See accompanying notes.
 
                                        3
<PAGE>   4
 
                               MAXTOR CORPORATION
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
               (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                              -------------------------------
                                                              APRIL 3, 1999    MARCH 28, 1998
                                                              -------------    --------------
<S>                                                           <C>              <C>
Revenue.....................................................  $    681,506        $545,231
Revenue from affiliates.....................................            84           4,386
                                                              ------------        --------
          Total revenue.....................................       681,590         549,617
Cost of revenue.............................................       595,117         483,798
Cost of revenue from affiliates.............................            60           3,564
                                                              ------------        --------
          Total cost of revenue.............................       595,177         487,362
                                                              ------------        --------
          Gross profit......................................        86,413          62,255
Operating expenses:
  Research and development..................................        46,840          33,372
  Selling, general and administrative.......................        19,920          15,923
  Stock compensation expenses...............................           865          14,696
                                                              ------------        --------
          Total operating expenses..........................        67,625          63,991
                                                              ------------        --------
Income (loss) from operations...............................        18,788          (1,736)
Interest expense............................................        (3,680)         (8,768)
Interest and other income...................................         4,897             274
                                                              ------------        --------
Income (loss) before provision for income taxes.............        20,005         (10,230)
Provision for income taxes..................................         3,000              89
                                                              ------------        --------
Net Income (loss)...........................................        17,005         (10,319)
Unrealized gain on investments in equity securities.........         8,616           9,124
                                                              ------------        --------
Comprehensive income (loss).................................  $     25,621        $ (1,195)
                                                              ============        ========
Net income (loss) per share -- basic........................  $       0.17        $(672.16)
Net income (loss) per share -- diluted......................  $       0.17        $(672.16)
Shares used in per share calculation
  -- basic..................................................    98,912,770          15,352
  -- diluted................................................   101,515,783          15,352
</TABLE>
 
                            See accompanying notes.
 
                                        4
<PAGE>   5
 
                               MAXTOR CORPORATION
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED
                                                              -------------------------------
                                                              APRIL 3, 1999    MARCH 28, 1998
                                                              -------------    --------------
<S>                                                           <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................    $  17,005         $(10,319)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Depreciation and amortization.............................       17,973           15,756
  Stock compensation expense................................          865           14,696
  Gain on sale of other assets..............................       (1,565)              --
  Loss (gain) on disposal of property, plant & equipment....           --            1,312
  Change in assets & liabilities:
     Accounts receivable....................................       91,288          (62,131)
     Inventories............................................       26,097           (8,662)
     Other current assets...................................       (2,447)          (4,528)
     Accounts payable.......................................      (98,250)          89,999
     Accrued and other liabilities..........................      (21,173)          (2,482)
                                                                ---------         --------
          Net cash provided by operating activities.........       29,793           33,641
                                                                ---------         --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment................           --            2,972
Purchase of property, plant & equipment.....................      (22,785)          (8,332)
Purchase of marketable securities...........................      (81,299)              --
Other.......................................................           13            7,038
                                                                ---------         --------
          Net cash provided by (used in) investing
             activities.....................................     (104,071)           1,678
                                                                ---------         --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt, including short-term
  borrowings................................................           --           29,904
Principal payments of debt, including short-term
  borrowings................................................      (55,000)         (68,787)
Principal payments under capital lease obligations..........          (18)              (8)
Net payments under accounts receivable securitization.......           --              (48)
Proceeds from issuance of common stock from public offering,
  employee stock purchase plan and stock options
  exercised.................................................      100,758               --
                                                                ---------         --------
          Net cash provided by (used in) financing
             activities.....................................       45,740          (38,939)
                                                                ---------         --------
Net change in cash & cash equivalents.......................      (28,538)          (3,620)
Cash & cash equivalents at beginning of period..............      214,126           16,925
                                                                ---------         --------
Cash & cash equivalents at end of period....................    $ 185,588         $ 13,305
                                                                =========         ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
     Interest...............................................    $   4,155         $  6,272
     Income taxes...........................................    $      25         $    298
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Purchase of property, plant & equipment financed by
     accounts payable.......................................    $      --         $  8,919
  Purchase of property, plant & equipment financed by
     capital lease..........................................    $      --         $     13
  Increase (decrease) in receivable from on affiliates......    $  (1,235)        $  2,325
  Retirement of debt in exchange for bond redemption........    $   5,000         $     --
  Increase in unrealized gain on investments in equity
     securities.............................................    $   8,616         $  9,124
</TABLE>
 
                            See accompanying notes.
 
                                        5
<PAGE>   6
 
                               MAXTOR CORPORATION
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements include the accounts of Maxtor Corporation (Maxtor or the
Company) and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated in consolidation. All adjustments of a normal
recurring nature which, in the opinion of management, are necessary for a fair
statement of the results for the interim periods have been made. It is
recommended that the interim financial statements be read in conjunction with
the Company's audited consolidated financial statements and notes thereto for
the fiscal year ended December 26, 1998 incorporated in the Company's annual
report on Form 10-K. Interim results are not necessarily indicative of the
operating results expected for later quarters or the full fiscal year.
 
 2. INVENTORIES
 
<TABLE>
<CAPTION>
                                                  APRIL 3, 1999    DECEMBER 26, 1998
                                                  -------------    -----------------
<S>                                               <C>              <C>
Inventories comprised (in thousands):
  Raw materials.................................    $ 39,640           $ 51,680
  Work-in-process...............................       3,977              6,308
  Finished goods................................      83,478             95,204
                                                    --------           --------
                                                    $127,095           $153,192
                                                    ========           ========
</TABLE>
 
 3. STOCKHOLDERS' EQUITY
 
     In February 1999, the Company completed a public offering of 7.8 million
shares of the Company's common stock. The Company received net proceeds of
approximately $95.8 million from the offering, after deducting the underwriting
discounts and estimated expenses payable by the Company. A portion of the
proceeds from the offering was used to prepay without penalty outstanding
aggregate principal indebtedness of $55.0 million owing to Hyundai Electronics
America under a subordinated note due July 31, 2001 (see Note 7).
 
                                        6
<PAGE>   7
                               MAXTOR CORPORATION
 
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)
 
 4. NET INCOME (LOSS) PER SHARE
 
     In accordance with the disclosure requirements of Statements of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share", a reconciliation of
the numerator and denominator of basic and diluted net income (loss) per share
calculations is provided as follows (in thousands, except share and per share
amounts):
 
<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                  -------------------------------
                                                  APRIL 3, 1999    MARCH 28, 1998
                                                  -------------    --------------
                                                            (UNAUDITED)
<S>                                               <C>              <C>
NUMERATOR -- BASIC AND DILUTED
Net income (loss)...............................  $     17,005        $(10,319)
                                                  ============        ========
Net income (loss) available to common
  stockholders..................................  $     17,005        $(10,319)
                                                  ============        ========
DENOMINATOR
Basic weighted average common shares
  outstanding...................................    98,912,770          15,352
Effect of dilutive securities:
  Common stock options..........................     2,603,013              --
                                                  ------------        --------
Diluted weighted average common shares..........   101,515,783          15,352
                                                  ============        ========
Basic net income (loss) per share...............  $       0.17        $(672.16)
                                                  ============        ========
Diluted net income (loss) per share.............  $       0.17        $(672.16)
                                                  ============        ========
</TABLE>
 
 5. CONTINGENCIES
 
     The Company currently is involved in a dispute with StorMedia Incorporated
("StorMedia"), which arises out of an agreement among the Company, StorMedia and
Hyundai Electronics Industries Co. Ltd. ("HEI") which became effective on
November 17, 1995. In that agreement, StorMedia agreed to supply disk media to
the Company. StorMedia's disk media did not meet the Company's specifications
and functional requirements as required by the agreement and the Company
ultimately terminated the agreement.
 
     After a class action securities lawsuit was filed against StorMedia by
certain of its shareholders in September 1996 which alleged, in part, that
StorMedia failed to perform under the agreement, StorMedia sued HEI, Mong Hun
Chung (HEI's chairman), Dr. Chong Sup Park (Hyundai Electronics America
("HEA")'s President and the individual who signed the StorMedia Agreement on
behalf of the Company) and K.S. Yoo (the individual who signed the StorMedia
Agreement on behalf of HEI) (collectively the "Original Defendants") in federal
court (the "Federal Suit"). In the Federal Suit, StorMedia alleged that at the
time HEI entered into the StorMedia Agreement, it knew that it would not and
could not purchase the volume of products it committed to purchase, and that
failure to do so caused damages to StorMedia in excess of $206 million.
 
     In December 1996, the Company filed a complaint against StorMedia and
William Almon (StorMedia's Chairman and Chief Executive Officer) in a Colorado
state court seeking approximately $100 million in damages and alleging, among
other claims, breach of contract, breach of implied warranty of fitness and
fraud under the StorMedia Agreement (the "Colorado Suit"). This proceeding was
stayed pending resolution of the Federal Suit. The Federal Suit was permanently
dismissed early in February 1998. On February 24, 1998, StorMedia filed a new
complaint in a California state court for $206 million, alleging fraud and
deceit against the Original Defendants and negligent misrepresentation against
HEI and the Company (the "California Suit"). On May 18, 1998, the stay on the
Colorado Suit was lifted by the Colorado state court. The Company's motion to
dismiss, or in the alternative, stay the California Suit, is pending. On
September 9, 1998,
 
                                        7
<PAGE>   8
                               MAXTOR CORPORATION
 
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)
 
the California Suit was stayed pending resolution of the Colorado Suit. On
October 11, 1998, StorMedia filed a voluntary petition for relief under Chapter
11 of the Bankruptcy Act. This bankruptcy filing caused an automatic stay of
proceedings against StorMedia, including the Colorado Suit. StorMedia has not
prosecuted its claims against the Company since it filed for bankruptcy
protection.
 
     The Company believes that it has valid defenses against the claims alleged
by StorMedia and intends to defend itself vigorously. However, due to the nature
of litigation and because the pending lawsuits are in the very early pre-trial
stages, the Company cannot determine the possible loss, if any, that may
ultimately be incurred either in the context of a trial or as a result of a
negotiated settlement. The litigation could result in significant diversion of
time by the Company's technical personnel, as well as substantial expenditures
for future legal fees. After considering the nature of the claims and facts
relating to the litigation, including the results of preliminary discovery, the
Company's management believes that the resolution of this matter will not have a
material adverse effect on the Company's business, financial condition or
results of operations. However, the results of these proceedings, including any
potential settlement, are uncertain and there can be no assurance that they will
not have a material adverse effect on the Company's business, financial position
and results of operations.
 
     The Company has been sued in the United States District Court for the
Northern District of California by Papst-Motoren GmbH and Papst
Licensing(collectively "Papst"). Papst alleges that the Company is infringing on
15 patents purportedly owned by Papst. The Company has not yet served its answer
to the complaint by Papst. While the final outcome of these claims cannot be
determined at this time, the Company believes that resolution of these claims
will not have a material adverse effect on its business, financial condition or
results of operations. This statement should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 26, 1998.
 
     No amounts have been reserved in the accompanying consolidated financial
statements for any legal claims or actions.
 
 6. RECLASSIFICATIONS
 
     Certain reclassifications have been made to prior year balances to conform
to current classifications.
 
 7. RELATED PARTY TRANSACTION
 
     During the quarter ended April 3, 1999, the Company paid off $55.0 million
of note payable to HEA and incurred $2.3 million of interest payment related to
the note (see Note 3). As of April 3, 1999, Maxtor has no outstanding
indebtedness to HEA.
 
     The cost of revenue includes certain component parts purchased from MMC
Technology, Inc., a wholly owned subsidiary of HEA, amounting to $38.2 million
for the quarter ended April 3, 1999 and $27.6 million for the quarter ended
March 28, 1998. The cost of revenue also includes certain component parts
purchased from HEI which to date have not been significant.
 
 8. SUBSEQUENT EVENT
 
     In April 1999, the Company sold a portion of its investment in Celestica
Inc. resulting in approximately $22.1 million gain, which will be included in
other income for the quarter ending July 3, 1999.
 
                                        8
<PAGE>   9
 
     This report contains forward-looking statements within the meaning of the
U.S. federal securities laws that involve risks and uncertainties. The
statements contained in this report that are not purely historical, including,
without limitation, statements regarding our expectations, beliefs, intentions
or strategies regarding the future, are forward-looking statements including
those discussed in Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations: "Results of Operations"; "Liquidity and
Capital Resources"; "Certain Factors Affecting Future Performance"; and
elsewhere in this report. In this report, the words "anticipate," "believe,"
"expect," "intend," "future" and similar expressions also identify forward-
looking statements. We make these forward-looking statements based upon
information available on the date hereof, and we have no obligation to update
any such forward-looking statements. Our actual results could differ materially
from those anticipated in this report as a result of certain factors including,
but not limited to, those set forth in the following risk factors and elsewhere
in this report.
 
     Maxtor(R) and No Quibble(R) are registered trademarks of Maxtor. The Maxtor
logo, DiamondMax(TM) and Formula 4(TM) are trademarks of Maxtor. All other brand
names and trademarks appearing in this report are the property of their
respective holders.
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The following discussion should be read in conjunction with the condensed
consolidated financial statements and the accompanying notes included in Part I.
Financial Information, Item 1. Condensed Consolidated Financial Statements of
this report.
 
RESULTS OF OPERATIONS
 
     REVENUE AND GROSS PROFIT
 
<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED
                                          -------------------------------
                                          APRIL 3, 1999    MARCH 28, 1998    CHANGE
                                          -------------    --------------    ------
                                                    (UNAUDITED)
<S>                                       <C>              <C>               <C>
(In millions)
  Total revenue.........................     $681.6            $549.6        $132.0
  Gross profit..........................     $ 86.4            $ 62.3        $ 24.1
  Net Income (loss).....................     $ 17.0            $(10.3)       $ 27.3
As a percentage of revenue:
  Total revenue.........................      100.0%            100.0%
  Gross profit..........................       12.7%             11.3%
  Net Income (loss).....................        2.5%             -1.9%
</TABLE>
 
  Revenue
 
     Total revenue increased 24.0% in the quarter ended April 3, 1999 compared
to the quarter ended March 28,1998 primarily due to an increase in unit
shipments of approximately 58.5%, partially offset by average unit prices which
were lower by 21.7%. Revenue from the OEM channel for the quarter ended April 3,
1999 represented 72.0% of total revenue compared to 75.8% for the corresponding
quarter in 1998. Revenue from the distribution and retail channel represented
28.0% of total revenue for the first quarter in 1999 compared to 24.2% for the
same quarter in fiscal year 1998. Revenue and unit volume growth in 1999 were
favorably impacted by better time to market performance, strengthening of the
OEM customer base, increased penetration of the distribution channel, and a
continued trend to shipping higher capacity drives. This was offset somewhat by
continued pricing pressures which resulted in lower average unit selling prices.
 
  Gross profit
 
     Gross profit as a percentage of revenue improved to 12.7% in first quarter
of 1999 from 11.3% in the first quarter of 1998. The increase in gross profit is
due mainly to the increase in unit volumes and the timely introduction of new,
higher margin products, which achieved market acceptance and higher
manufacturing yields. Gross margin was also favorably affected by improved
product designs which led to improved
 
                                        9
<PAGE>   10
 
manufacturing yields and lower component costs. However, growth of our gross
margin was partially constrained by continued rapid price erosion in the hard
disk drive market as a whole, which resulted in lower average selling prices per
unit. We believe that the decline in average selling prices is likely to
continue in the future and could constrain future growth in gross margin.
 
     OPERATING EXPENSES
 
<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED
                                          -------------------------------
                                          APRIL 3, 1999    MARCH 28, 1998    CHANGE
                                          -------------    --------------    ------
                                                    (UNAUDITED)
<S>                                       <C>              <C>               <C>
(In millions)
  Research and development..............      $46.8            $33.4         $ 13.4
  Selling, general and administrative...      $19.9            $15.9         $  4.0
  Stock compensation expenses...........      $ 0.9            $14.7         $(13.8)
As a percentage of revenue:
  Research and development..............        6.9%             6.1%
  Selling, general and administrative...        2.9%             2.9%
  Stock compensation expenses...........        0.1%             2.7%
</TABLE>
 
  Research and Development (R&D)
 
     R&D expense as a percentage of revenue increased slightly to 6.9% for the
first quarter of 1999 compared to 6.1% for the same quarter in 1998. The
absolute dollar level of R&D expenditures increased significantly due primarily
to our efforts to develop new products for the desktop computer market,
including the efforts to transition from the magneto-resistive head technology
to the giant magneto-resistive head technology, as well as products for a new
market segment. In March 1999, we announced our newest hard disk drive product,
the DiamondMax Plus 5120, which is our first product utilizing the giant
magneto-resistive head technology.
 
  Selling, General and Administrative (SG&A)
 
     SG&A expense remained flat at 2.9% as a percentage of revenue while
increasing in absolute dollars. The increase in absolute dollar in the first
quarter of 1999 was primarily due to the costs associated with supporting
Maxtor's higher sales volume. Controlled marketing, general and administrative
expenses enabled us to hold SG&A expenses as a percentage of revenue flat from
the first quarter of 1998.
 
  Stock Compensation
 
     In 1996 we adopted the 1996 Stock Option Plan (the Plan), pursuant to which
substantially all of our domestic employees and certain international employees
received options which were required to be accounted for as variable options.
These options, which were granted between May 1996 and October 1997, required
remeasurement of any intrinsic compensation element at each reporting date
determined by the difference between the estimated current fair value of our
stock and the exercise price of the options. In the first quarter of 1998, we
amended and restated the Plan to remove the variable features and all grants
subsequent to October 1997 have been subject to fixed terms. In the second
quarter of 1998, we offered and re-issued new fixed-award options in exchange
for options previously issued under variable terms, thereby eliminating the
requirement to remeasure these options in subsequent periods. In connection
therewith, we recorded compensation expense related to the difference between
the estimated fair market value of our stock as of March 28, 1998 and the stated
value of our options. Compensation cost was reflected in accordance with
Financial Accounting Standards Board Interpretation No. 28, "Accounting for
Stock Appreciation Rights and Other Variable Stock Option or Award Plans."
Accordingly, we recorded non-cash compensation expense of $14.7 million in the
first quarter of 1998 and $0.9 million in the first quarter of 1999. The
remaining unrecognized compensation element will be reflected in quarterly
charges, decreasing sequentially through the second quarter of 2001.
 
                                       10
<PAGE>   11
 
     INTEREST EXPENSE AND INTEREST INCOME
 
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED
                                           -------------------------------
                                           APRIL 3, 1999    MARCH 28, 1998    CHANGE
                                           -------------    --------------    ------
                                                     (UNAUDITED)
<S>                                        <C>              <C>               <C>
(In millions)
  Interest expense.......................      $3.7              $8.8         $ (5.1)
  Interest and other income..............      $4.9              $0.3         $  4.6
As a percentage of revenue:
  Interest expense.......................       0.5%              1.6%
  Interest and other income..............       0.7%              0.0%
</TABLE>
 
  Interest Expense
 
     Interest expense as a percentage of revenue declined from 1.6% in the first
quarter of 1998 to 0.5% in the first quarter of 1999. In absolute dollar terms,
interest expense decreased significantly from $8.8 million in the first quarter
of 1998 to $3.7 million in the first quarter of 1999. The decrease in interest
expense was due primarily to the retirement of debts between the second quarter
of 1998 and first quarter of 1999. Our total short-term and long-term
outstanding borrowings were $350.5 million at March 28, 1998 compared to $90.3
million at April 3, 1999.
 
  Interest and Other Income
 
     Interest and other income in the first quarter of 1999 increased
significantly in both absolute dollar amount and as a percentage of revenue when
compared to the first quarter of 1998. The increase was primarily due to the
increase in total cash and cash equivalents and marketable securities, which
were generated from our public offerings in July 1998 and February 1999. Our
total cash and cash equivalents and marketable securities were $280.4 million at
April 3, 1999 compared to $13.3 million at March 28, 1998.
 
     PROVISION FOR INCOME TAXES
 
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED
                                           -------------------------------
                                           APRIL 3, 1999    MARCH 28, 1998    CHANGE
                                           -------------    --------------    ------
                                                     (UNAUDITED)
<S>                                        <C>              <C>               <C>
(In millions)
  Income (loss) before provision for
     income taxes........................      $20.0            $(10.2)       $ 30.2
  Provision for income taxes.............      $ 3.0            $  0.1        $  2.9
</TABLE>
 
     The provision for income taxes consists primarily of federal alternative
minimum tax and foreign taxes. Due to our net operating losses ("NOL"), NOL
carryforwards and favorable tax status in Singapore, we have not incurred any
significant foreign, U.S. federal, state or local income taxes for prior fiscal
periods.
 
     The Company's effective tax rate for the periods 1998 and 1999 differs from
the combined federal and state rates due to the repatriation of foreign earnings
absorbed by current year domestic tax losses, and our domestic losses not
providing current tax benefits, offset in part by the tax savings associated
with our Singapore operations, which is not taxable as a result of our pioneer
tax status in Singapore.
 
YEAR 2000 COMPLIANCE
 
  Year 2000 Issue Described
 
     Many currently installed computer systems and software products are coded
to accept, store or report only two digit entries in date code fields. Beginning
in the Year 2000, these date code fields will need to accept four digit entries
to distinguish 21st century dates from 20th century dates. This is the "Year
2000 Issue." As a result, computer systems and/or software used by many
companies, including Maxtor and our vendors and customers, will need to be
upgraded to comply with such Year 2000 requirements. We could be impacted by
Year 2000 Issues occurring in our own infrastructure or faced by our major
distributors, suppliers, customers,
 
                                       11
<PAGE>   12
 
vendors and financial service organizations. Such Year 2000 Issues could include
information errors, significant information system failures, or failures of
equipment, vendors, suppliers or customers. Any disruption in our operations as
a result of Year 2000 Issues, whether by us or a third party, could have a
material adverse effect on our business, financial condition and results of
operations.
 
  Our Hard Disk Drives Comply
 
     Our hard disk drives are able to operate in the Year 2000 and beyond. The
Year 2000 Issue is only relevant to hardware and software components that use or
affect time and date data or system settings. In the case of our hard disk
drives, the ability to operate correctly in the next century is dependent on the
software and programming loaded on our hard disk drives by the system. Since our
hard disk drives have no inherent time or date function, they will not determine
whether a given system, or any software on a given system, will operate
correctly or incorrectly in the next century. As a result, all of our hard disk
drives are able to receive, store and retrieve data, and operate with a system
or software that is Year 2000 compliant without modification.
 
  Our State of Readiness
 
     Overview. To address Year 2000 readiness, we have implemented a corporate
program to coordinate efforts across all business functions and geographic
areas, which includes addressing risks associated with business partners and
other third-party relationships. Our internal Year 2000 readiness program is
separated into four phases: (1) Awareness, (2) Inventory, (3) Assessment and (4)
Resolution. We have substantially completed the "assessment" phase and expect to
have substantially completed all four phases by June of 1999. Additionally, we
have formed a Year 2000 Program Office to coordinate the foregoing corporate
program and also have engaged external Year 2000 consultants to assist with
methodology and process of the inventory, assessment and resolution phases.
There can be no assurance that we will be able to complete all four phases in a
timely manner, or that the process will adequately address the Year 2000 Issue.
 
     Core IT Systems. We have implemented the R3 system from SAP A.G. The SAP
system is designed to automate more fully our business processes and is
certified by SAP A.G. as Year 2000 compliant. The initial step of this
implementation was completed in early October 1998 and included most of the
major functional areas of our business.
 
     Other Information Technology Systems. Our other information technology
systems include factory information and control systems, computer aided design
systems, banking interface systems, electronic data interchange systems, credit
card processing, customer call management, human resources systems, non-United
States payroll processing, and shipment and just in time delivery management
systems. We have determined that most of our human resources systems, factory
information systems, call management system, non-United States payroll
processing and supplier just-in-time delivery management systems are not Year
2000 compliant. We have completed our assessment of all non Year 2000 compliant
systems and have engaged vendors to repair or replace these systems. The
inventory and assessment portion of our networked PC's has been completed and we
are now in the remediation stage for the hardware and software applications. We
will assign the highest resolution priority to repair or replace items that
affect new product development, volume production and distribution.
 
     Networking Systems. In a recent corporate level business decision, we have
concluded that instead of upgrading our current Banyan Vines based networking
system, it would be much more beneficial to us if we implemented NT-servers and
Microsoft Exchange Mailman System. The decision has been made to go forward with
the NT-server implementation now, in order to avoid impacting critical
development programs at a later time. The current out look of the NT-server
implementation schedule is for completion by September 30, 1999. The NT-server
network is Y2K compliant.
 
     Non-Information Technology Systems. Our non-information technology systems
include departmental and personal automated applications used in all of our
functional areas, building systems such as heating, cooling, and air
purification, component and hard disk drive test equipment, and manufacturing
equipment. We currently are assessing our non-information technology systems to
determine the level of risk of business
 
                                       12
<PAGE>   13
 
interruption associated with a failure of each system and to prioritize our
resolution activities. We will assign the highest resolution priority to repair
or replace items that affect new product development, volume production and
distribution.
 
     Vendors and Suppliers. Our vendors and suppliers include the sources of
materials used in our hard disk drives, the JIT (Just In Time) and forward
carrier logistics operations, the sources of the equipment and supplies used by
us in the conduct of our business, as well as our landlords, financial
institutions, and other service providers. Inventory of our material suppliers
has been completed and on site assessments of our logistics suppliers are under
way. The Maxtor Year 2000 Program Office has created an extensive repository of
detailed data and information collected from our inventory and remediation
activities as well as our supplier assessments. Assessments include
determination of the level of risk of business interruption associated with a
failure of a vendor or supplier because of the Year 2000 Issue and assignment of
priority to resolution activities.
 
     Customers. Our assessment of our Year 2000 issues with our customers will
dovetail with similar activities which our customers will engage in with respect
to Maxtor. Several of our customers, including Compaq, Dell and IBM, have begun
the process of asking us for written and/or in person assurances that our
ability to supply product to them in volume will not be affected by the Year
2000 Issue.
 
  The Costs to Address Our Year 2000 Issues
 
     We made capital expenditures of approximately $33.0 million and incurred
related expenses of approximately $7.5 million in fiscal 1998 in connection with
our implementation of the SAP system. We expect to make capital expenditures of
approximately $10.0 million and incur expenses of approximately $4.0 million in
fiscal 1999 in connection with the resolution of our Year 2000 issues. During
the quarter ended April 3, 1999, we incurred approximately $0.4 million in
capital expenditures and $1.0 million in expenses related to our Year 2000
issues. No significant system projects have been deferred due to Year 2000
issues. As we progress in our Year 2000 readiness program, these costs may
change. In addition, our cost estimates do not include potential costs related
to any customer or other claims resulting from our failure to adequately correct
our Year 2000 issues.
 
  The Risks of Our Year 2000 Issues
 
     We believe that resolution of our Year 2000 Issues has been and will be
complex, expensive and time intensive. In addition, resolution of our Year 2000
Issues could be adversely affected by various risk factors, including without
limit:
 
     - any failure to provide adequate training to employees;
 
     - any failure to retain skilled personnel to implement the SAP system or
       find suitable replacements for such personnel;
 
     - any expansion of the scope of the implementation plan due to
       unanticipated changes in our business or unanticipated findings in the
       Awareness, Inventory or Assessment phases of our Year 2000 readiness
       program;
 
     - any failure to devise and run appropriate testing procedures that
       accurately reflect the demands that will be placed on new systems
       following implementation;
 
     - any failures by vendors or other third parties to accurately assess their
       own Year 2000 readiness or the Year 2000 readiness of their respective
       vendors and other third parties and any resulting failures; and
 
     - any failure to develop and implement adequate fall-back, work around or
       other contingency plans in the event that difficulties or delays arise.
 
     It has been widely predicted that a significant amount of litigation
surrounding business interruptions will arise out of Year 2000 Issues. It is
uncertain whether, or to what extent, we may be affected by such litigation.
Because our hard disk drives are able to operate in the Year 2000 and beyond, we
do not anticipate exposure to material product defect or similar litigation. Any
such litigation, however, could have a material adverse effect
 
                                       13
<PAGE>   14
 
on our business, financial condition and results of operations. We also may not
receive any assistance, damages or other relief as a result of our initiation of
any litigation related to the Year 2000 Issue. Our inability to implement our
Year 2000 plans or to otherwise address Year 2000 Issues in a timely manner
could have a material adverse effect on our business, financial condition and
results of operations.
 
  Our Contingency Plans
 
     As part of the four-step process outlined above, specific contingency plans
are being developed in connection with the assessment and resolution of the
risks identified. We have established certain information technology contingency
plans, and we are continuing to develop such plans regarding each specific area
of risk associated with the Year 2000 Issue. In addition, we have begun to
develop contingency plans to cover any material shortages or logistics related
delays, which we identified as potential occurrences as a result of our on site
supplier assessments. There is no assurance that we will complete contingency
plans that address risks which actually arise or that any such contingency plans
will properly address their intended purposes if they are implemented. In
addition, we do not have and do not anticipate obtaining any insurance policy
which contains material coverage for potential injuries or damages related to or
caused by the Year 2000 Issue.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     At April 3, 1999, we had $280.4 million in cash, cash equivalents and
marketable securities as compared to $227.6 million at December 26,1998. In
February 1999, we completed an underwritten secondary public offering of
7,800,000 newly-issued shares of our common stock and received $95.8 million,
net of offering costs and expenses.
 
     Operating activities provided net cash of $29.8 million for the quarter
ended April 3, 1999. The cash provided from operating activities was principally
generated from net income, adjustment of other non-cash charges, collection of
accounts receivable and decrease in inventory, which was partially offset by the
decrease in accounts payable and accrued expenses. We used $104.1 million in
investing activities during the first quarter of 1999, principally for the
purchase of marketable securities and property, plant and equipment. During the
quarter ended April 3,1999, we reduced short and long-term debt by $60.0 million
using approximately $55.0 million of the proceeds from our February 1999 public
offering and cash from operations.
 
     As of April 3, 1999, our outstanding debts comprised $90.0 million of
publicly-traded Subordinated Debentures, due March 1, 2012 and approximately
$0.3 million in capital lease obligations. Our outstanding 5.75% Subordinated
Debentures are entitled to annual sinking fund payments of $5.0 million which
commenced March 1, 1998. These debentures no longer are convertible into our
common stock or any other security of Maxtor.
 
     We also have a $200.0 million asset securitization program with Fleet
National Bank under which we sell our eligible trade accounts receivable on a
non-recourse basis through a special purpose entity. At December 26, 1998,
$100.0 million of accounts receivable was securitized under the program and
excluded from our accounts receivable balance.
 
     We believe the existing capital resources together with cash generated from
operations and borrowing capacity, will be sufficient to fund our operations
through at least the next 12 months. We require substantial working capital to
fund our business, particularly to finance accounts receivable and inventory,
and to invest in property, plant and equipment. During 1999, capital
expenditures are expected to be between approximately $130.0 million and $145.0
million, to be used principally for adding manufacturing capacity and
implementing new and updating existing information technology systems. We intend
to seek financing arrangements, including a line of credit, to fund our future
capacity expansion plans, as necessary. However, our ability to generate cash
will depend on, among other things, demand in the desktop hard disk drive market
and pricing conditions. If we need additional capital, there can be no assurance
that such additional financing can be obtained, or, if obtained, that it will be
available on satisfactory terms. See discussion below under the heading "Certain
Factors Affecting Future Performance."
 
                                       14
<PAGE>   15
 
                  CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE
 
WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT OF $724.8 MILLION
 
     We have a history of significant losses. During each of the 19 consecutive
quarters ended September 27, 1997, we incurred significant operating losses
ranging from $125.5 million to $3.1 million per quarter, with net losses ranging
from $130.2 million to $4.5 million. These losses were primarily a result of the
following:
 
     - delayed product introductions;
 
     - product performance and quality problems;
 
     - low manufacturing yields and under-utilization of manufacturing capacity;
 
     - high operating and interest expenses; and
 
     - overall market conditions in the hard disk drive industry, including
       fluctuations in demand and declining average selling prices.
 
     As of April 3, 1999, we had an accumulated deficit of approximately $724.8
million. If we do not address successfully the factors that led to our history
of losses, we will not be profitable in the future. Even if we successfully
address these factors, we still may not be profitable in the future.
 
OUR AVERAGE SELLING PRICES ARE DECLINING
 
     We anticipate that average selling prices in the hard disk drive industry
will continue to decline for the foreseeable future. The average selling price
of a hard disk drive rapidly declines over its commercial life due to
technological enhancement, productivity improvement, increases in industry
supply, competitors lowering prices to absorb excess capacity, liquidation of
excess inventories, or when competitors attempt to gain market share. These
factors make it very challenging to maintain consistent revenue growth and
profitability in the hard disk drive industry.
 
UNLESS WE CONSISTENTLY EXECUTE, WE WILL HAVE SIGNIFICANT LOSSES
 
     Most of our products are sold to desktop computer manufacturers. Such
manufacturers use the quality, storage capacity, performance and price
characteristics of hard disk drives to select, or qualify, their hard disk drive
suppliers. Such manufacturers typically seek to qualify three or four suppliers
for each hard disk drive product generation. To qualify consistently with these
manufacturers, and thus succeed in the desktop hard disk drive industry, we must
execute consistently on our product development and manufacturing processes to
be among the first-to-market introduction and first-to-volume production at
leading storage capacity per disk with competitive prices and high quality. Once
a manufacturer has chosen its hard disk drive suppliers for a given desktop
computer product, it generally will purchase hard disk drives from those
suppliers for the commercial life of that product line. If we miss a
qualification opportunity, we may not have another opportunity to do business
with that manufacturer until we introduce our next generation of products. The
effect of missing a product qualification opportunity is magnified by the
limited number of high volume manufacturers of personal computers. If we do not
reach the market or deliver volume production in a timely manner, we may lose
opportunities to qualify our products, our gross margins probably will decline
due to rapidly declining average selling prices, and we probably will lose
market share.
 
SUBSTANTIAL DEPENDENCE ON THE DESKTOP COMPUTER MARKET
 
     While there has been significant growth in the demand for desktop computers
over the past several years, according to International Data Corporation, the
growth rate in the desktop computer market has slowed in recent quarters.
Because of our reliance on the desktop segment of the personal computer market,
we will be affected more by changes in market conditions for desktop computers
than would a company with a broader range of products. Any decrease in the
demand for desktop computers could cause a decrease in the demand for our
products.
 
                                       15
<PAGE>   16
 
     Although our current products are designed for the largest segment of the
hard disk drive market, the desktop computer market, demand may shift to other
market segments over time. We also believe that to remain a significant supplier
of hard disk drives to major manufacturers of personal computers, we will need
to offer a broader range of hard disk drive products to our customers.
Therefore, we will need to develop and manufacture new products that address
additional hard disk drive market segments and emerging technologies to remain
competitive in the hard disk drive industry. Examples of potentially important
market segments that our current products are not designed to address include:
 
     - the client-server market;
 
     - lower cost, lower performance personal computer systems (typically below
       $699); and
 
     - laptop personal computers.
 
     To specifically address these or additional market segments, we would have
to reengineer some of our existing technology and develop new technology.
Certain of our competitors have significant advantages over us in one or more of
these and other potentially significant new or growing market segments. Any
failure by us to successfully develop and introduce new products to address
specifically these additional market segments could have a material adverse
effect on our business, financial condition and results of operations.
 
A SIGNIFICANT AMOUNT OF OUR REVENUE COMES FROM A FEW CUSTOMERS
 
     We sell most of our products to a limited number of customers. During the
quarter ended April 3, 1999, one customer, Dell, accounted for approximately
25.8% of our revenue, and our top ten customers accounted for approximately
68.8% of our revenue. During the quarter ended March 28, 1998, two customers,
Dell and IBM, accounted for approximately 25.9% and 18.7%, respectively, of our
revenue, and our top ten customers accounted for approximately 73.8% of our
revenue.
 
     We believe that a relatively small number of customers will continue to
account for a significant portion of our revenue for the foreseeable future, and
that the proportion of our revenue from such customers could continue to
increase in the future. These customers have a wide variety of suppliers to
choose from and therefore can make substantial demands on us. Even if we
successfully qualify a product for a given customer, such customer generally is
not obligated to purchase any minimum volume of products from us and generally
is able to terminate its relationship with us at any time. Our ability to
maintain strong relationships with our principal customers is essential to our
future performance. If we lose a key customer or if any of our key customers
reduce their orders of our products or require us to reduce our prices before we
are able to reduce costs, our business, financial condition and results of
operations could be materially and adversely affected.
 
OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY
 
     Our recent revenue growth rates may not be sustainable. Our quarterly
results may not be indicative of our future performance. Our quarterly operating
results have fluctuated significantly in the past and may fluctuate
significantly in the future. Our future performance will depend on many factors,
including the following:
 
     - our ability to be consistently among the first-to-volume production with
       competitive products;
 
     - fluctuations in the demand for hard disk drives as a result of the
       cyclical and seasonal nature of the desktop computer industry;
 
     - the availability of and efficient use of manufacturing capacity;
 
     - changes in product or customer mix;
 
     - our existing competitors introducing better products at competitive
       prices before we do;
 
     - new competitors entering our market;
 
     - our ability to manage successfully the complex and difficult process of
       qualifying our products with our customers;
 
                                       16
<PAGE>   17
 
     - our customers canceling, rescheduling or deferring significant orders for
       our products, particularly in anticipation of new products or
       enhancements from us or our competitors;
 
     - the ability of certain of our distribution and retail customers to return
       unsold products for credit;
 
     - the ability of certain of our distribution and retail customers to
       receive lower prices retroactively on their inventory of our products
       when we lower prices on our products;
 
     - our ability to purchase enough components and raw materials at
       competitive prices which allow us to make a profit;
 
     - the availability of adequate capital resources;
 
     - increases in research and development expenditures, particularly as a
       percentage of revenue, required to maintain our competitive position;
 
     - changes in our strategy;
 
     - personnel changes; and
 
     - other general economic and competitive factors.
 
     Many of our operating expenses are relatively fixed and difficult to reduce
or modify. As a result, the fixed nature of our operating expenses will magnify
any adverse effect of a decrease in revenue on our results of operations.
 
     As a result of these and other factors, we believe that period to period
comparisons of our historical results of operations are not a good predictor of
our future performance. If our future operating results are below the
expectations of stock market analysts, our stock price may decline.
 
OUR CUSTOMERS ARE PLACING NEW AND COSTLY DEMANDS ON US
 
     Our customers are adopting more sophisticated business models that place
additional strains on our business. For example, many personal computer
manufacturers, including some of our largest personal computer manufacturing
customers, are starting to adopt build-to-order manufacturing models that reduce
their component inventories and related costs and enable them to tailor their
products more specifically to the needs of their customers.
 
     Some of our personal computer manufacturing customers also are considering
or have implemented a "channel assembly" model in which the manufacturer ships a
minimal computer system to the dealer or other assembler, and component
suppliers (including hard disk drive manufacturers such as us) ship parts
directly to the dealer or other assembler for installation at its location.
Finally, certain of our manufacturing customers have adopted just-in-time
inventory management processes that require component suppliers to maintain
inventory at or near the customer's production facility. These new business
models require us to hold our products in inventory longer, which increases our
risk of inventory obsolescence and average selling price decline. These changing
models also increase our capital requirements and costs, complicate our
inventory management strategies, and make it difficult for us to match our
manufacturing plans with projected customer demand.
 
THE HARD DISK DRIVE MARKET IS HIGHLY COMPETITIVE
 
     Although our share of the desktop hard disk drive market has increased
steadily since the first quarter of 1997, this market segment and the hard disk
drive market in general are intensely competitive even during periods when
demand is stable. We compete primarily with manufacturers of 3.5-inch hard disk
drives for the personal computer industry, including:
 
     - Fujitsu Limited;
 
     - Quantum Corporation;
 
     - Samsung Electronic Company Limited;
 
     - Seagate Technology, Inc.; and
 
     - Western Digital Corporation.
 
                                       17
<PAGE>   18
 
     We also could face significant competition from other companies, such as
International Business Machines Corporation, in our current markets or in other
markets into which we may expand our product portfolio.
 
     Many of our competitors have a number of significant advantages over us,
including:
 
     - a larger market share;
 
     - a broader array of product lines;
 
     - preferred vendor status with some of our customers;
 
     - extensive name recognition and marketing power; and
 
     - significantly greater financial, technical and manufacturing resources.
 
     Unlike us, some of our competitors make many of their own components which
may provide them with certain benefits including lower costs. Our competitors
also may:
 
     - consolidate or establish strategic relationships among themselves to
       lower their product costs or to otherwise compete more effectively
       against us;
 
     - lower their product prices to gain market share; or
 
     - bundle their products with other products to increase demand for their
       products.
 
     In addition, new competitors could emerge and rapidly capture market share.
 
     If we fail to compete successfully against current or future competitors,
our business, operating results and financial condition may be materially and
adversely affected.
 
DEMAND FOR OUR PRODUCTS FLUCTUATES
 
     We currently offer a single product family that is designed for desktop
computers. As a result, the demand for our products depends on the overall
demand for desktop computers. The desktop computer and hard disk drive markets
tend to go through periods of rapid growth followed by periods of oversupply and
rapid price and gross margin erosion. This environment makes it difficult for us
and our customers to reliably forecast demand for our products. We do not have
long-term supply contracts with our customers, and our customers often can defer
or cancel orders with limited notice and without significant penalty.
 
WE MUST EFFECTIVELY RESPOND TO CHANGING TECHNOLOGY; WE MUST EFFECTIVELY
TRANSITION TO GIANT MAGNETO-RESISTIVE HEAD TECHNOLOGY
 
     Our future performance will depend on our ability to enhance current
products and to develop and introduce volume production of new competitive
products on a timely and cost-effective basis. We also must keep pace with and
correctly anticipate technological developments and evolving industry standards
and methodologies. Advances in magnetic, optical or other technologies, or the
development of entirely new technologies, could lead to new competitive products
that have better performance and/or lower prices than our products. Examples of
such new technologies include giant magneto-resistive head technology (which
already has been introduced by IBM and Fujitsu and which Western Digital
reportedly will use in its products under an agreement with IBM) and
optically-assisted recording technologies (which currently are being developed
by companies such as TeraStor Corporation and Seagate). We have incorporated
giant magneto-resistive head technology into our newest product. We have decided
not to pursue optically-assisted recording technologies at this time. Our
inability to introduce or achieve volume production of new competitive products,
(regardless of whether they include giant magneto-resistive head technology) on
a timely and cost-effective basis has in the past and in the future could have a
material adverse effect on our business, financial condition and results of
operations.
 
                                       18
<PAGE>   19
 
TO DEVELOP NEW PRODUCTS, WE MUST EFFECTIVELY INTEGRATE PARTS FROM THIRD PARTIES
 
     Unlike some of our competitors, we do not manufacture any of the parts used
in our products. Instead, our products incorporate parts designed by and
purchased from third parties. Consequently, the success of our products depends
on our ability to gain access to and integrate parts that use leading-edge
technology. To successfully manage these integration projects we must:
 
     - obtain high quality parts;
 
     - hire skilled personnel;
 
     - effectively integrate different products from a variety of vendors; and
 
     - manage difficult scheduling and delivery problems.
 
     Our success will depend on our ability to develop and maintain
relationships with key suppliers.
 
WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS
 
     A number of the parts used in our products are available from only one or a
limited number of outside suppliers. Currently, we purchase digital signal
processor/controller and spin/servo integrated circuits only from Texas
Instruments, Inc. and purchase channel integrated circuits only from Lucent
Technologies, Inc. As we have experienced in the past, some of the parts we
require may periodically be in short supply. As a result, we must allow for
significant ordering lead times for certain parts. In addition, we may have to
pay significant cancellation charges to suppliers if we cancel orders for parts
because we reduce production due to production cut-backs caused by market
oversupply, reduced demand, transition to new products or technologies or for
other reasons. We order the majority of our parts on a purchase order basis and
only have limited long-term volume purchase agreements with certain existing
suppliers. If we cannot obtain sufficient quantities of high quality parts when
we need them, our business, financial condition and results of operations could
be materially and adversely affected.
 
WE DEPEND ON OUR KEY PERSONNEL
 
     Our success depends upon the continued contributions of our key employees,
many of whom would be extremely difficult to replace. We also do not have key
person life insurance on any of our personnel. Most of our senior management and
a significant number of our other employees have been with us for less than
three years. Worldwide competition for skilled employees in the hard disk drive
industry is extremely intense. We believe that some of our competitors recently
have made targeted efforts to recruit employees from us and such efforts have
resulted in us losing some skilled managers. There is no guarantee that we will
be successful in retaining our key employees. If we are unable to retain our
existing employees or to hire and integrate new employees, our business,
financial condition and results of operations could be materially and adversely
affected.
 
WE HAVE ONLY ONE MANUFACTURING FACILITY AND HAVE TAKEN STEPS TO ADD A FACILITY
 
     Our volume manufacturing operations currently are based in a single
facility in Singapore. In line with our forecast for additional customer
demands, we have secured an additional manufacturing facility in Singapore. A
fire, flood, earthquake or other disaster or condition affecting our facility
could have a material adverse effect on our business, financial condition and
results of operations. Additionally, the current forecast for our products may
not be indicative of our customers' demand in the future and any material change
could result in manufacturing over capacity and have a material adverse effect
on our business, financial condition and results of operations.
 
                                       19
<PAGE>   20
 
WE MAY NEED MORE CAPITAL IN THE FUTURE BECAUSE THE HARD DISK DRIVE BUSINESS IS
CAPITAL INTENSIVE
 
     Our business is capital intensive, and we may need more capital in the
future. Our future capital requirements will depend on many factors, including:
 
     - the rate of our sales growth;
 
     - the level of our profits or losses;
 
     - the timing and extent of our spending to support facilities upgrades and
       product development efforts;
 
     - the timing and size of business or technology acquisitions; and
 
     - the timing of introductions of new products and enhancements to our
       existing products.
 
     We may issue additional equity to raise capital. Any future equity
financing will decrease existing stockholders' percentage equity ownership and
may, depending on the price at which the equity is sold, result in significant
economic dilution to such stockholders. Furthermore, our board of directors is
authorized under our charter documents to issue preferred stock with rights,
preferences or privileges senior to those of our common stock without
stockholder approval.
 
     While we currently do not have a revolving credit facility, it is our goal
to obtain one in the near future. However, we believe that current market
conditions for such facilities are not as favorable as they have been at certain
times in the past, that for various reasons the number of potential lenders
actively providing credit facilities to companies in the data storage industry
has decreased recently, and that the terms on which the remaining potential
lenders are willing to offer such facilities, in many cases, are restrictive
and/or costly. Consequently, the terms and conditions under which we might
obtain such a facility are uncertain. Any failure to obtain adequate credit
facilities on acceptable terms could have a material and adverse effect on our
business, financial condition and results of operations.
 
PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED; WE FACE RISK OF THIRD PARTY
CLAIMS OF INFRINGEMENT
 
     We have patent protection on some of our technology. We may not receive
patents for our current or future patent applications, and any patents that we
have or that are issued to us may be invalidated, circumvented or challenged.
Moreover, the rights granted under any such patents may not provide us with any
competitive advantages. Finally, our competitors may develop or otherwise
acquire equivalent or superior technology.
 
     We also rely on trade secret, copyright and trademark laws, as well as the
terms of our contracts to protect our proprietary rights. We may have to
litigate to enforce patents issued or licensed to us, to protect trade secrets
or know-how owned by us or to determine the enforceability, scope and validity
of our proprietary rights and the proprietary rights of others. Enforcing or
defending our proprietary rights could be expensive and might not bring us
timely and effective relief.
 
     We may have to obtain licenses of other parties' intellectual property and
pay royalties. If we are unable to obtain such licenses, we may have to stop
production of our products or alter our products. In addition, the laws of
certain countries in which we sell and manufacture our products, including
various countries in Asia, may not protect our products and intellectual
property rights to the same extent as the laws of the United States. Our
protective measures in these countries may be inadequate to protect our
proprietary rights. Any failure to enforce and protect our intellectual property
rights could have a material adverse effect on our business, financial condition
and results of operations.
 
     When we were a majority-owned subsidiary of Hyundai Electronics America, we
had the benefit of certain third party intellectual property rights on terms
that may have been more favorable than would have been available to us if we had
not been a majority-owned subsidiary of Hyundai Electronics America. We may not
be able to obtain similar rights in the future on terms as favorable.
 
     We have been sued by Papst-Motoren GmbH and Papst Licensing (collectively
"Papst") claiming infringement of a number of hard disk drive motor patents. The
lawsuit is pending in the United States District Court for the Northern District
of California. This lawsuit relates to the alleged infringement of 15 of
 
                                       20
<PAGE>   21
 
the hard disk drive motor patents described above. The patents in question
relate to motors that we purchase from motor vendors and the use of such motors
in hard disk drives. While we believe that we have valid defenses to the Papst
claim, the results of any litigation are inherently uncertain and there is no
assurance that Papst will not assert other infringement claims relating to
current patents, pending patent applications and future patents or patent
applications. Additionally, there is no assurance that we will be able to
successfully defend ourselves against any such lawsuit. A favorable outcome for
Papst in the lawsuit could result in the issuance of an injunction against us or
our products and/or the payment of monetary damages equal to a reasonable
royalty or recovered lost profits or, in the case of a finding of a willful
infringement, treble damages and could have a material adverse effect on our
business, financial condition and results of operations.
 
WE ARE DEPENDENT ON OUR INTERNATIONAL OPERATIONS; WE FACE RISKS FROM OUR
INTERNATIONAL SALES
 
     We conduct most of our manufacturing and testing operations and purchase a
substantial portion of our key parts outside the U.S. We also sell a significant
portion of products to foreign distributors and retailers.
 
     Our dependence on revenue from international sales and our need to manage
international operations each involves a number of inherent risks, including:
 
     - economic slowdown and/or downturn in the computer industry in such
       foreign markets;
 
     - international currency fluctuations;
 
     - general strikes or other disruptions in working conditions;
 
     - political instability;
 
     - trade restrictions;
 
     - changes in tariffs;
 
     - the difficulties associated with staffing and managing international
       operations;
 
     - generally longer periods to collect receivables;
 
     - unexpected changes in or impositions of legislative or regulatory
       requirements;
 
     - reduced protection for intellectual property rights in some countries;
 
     - potentially adverse taxes; and
 
     - delays resulting from difficulty in obtaining export licenses for certain
       technology and other trade barriers.
 
     The specific economic conditions in each country will impact our
international sales. For example, our international contracts are denominated
primarily in U.S. dollars. Significant downward fluctuations in currency
exchange rates against the U.S. dollar could cause our products to become
relatively more expensive to distributors and retailers in those countries. In
addition, we attempt to manage the impact of foreign currency exchange rate
changes by entering into short-term, foreign exchange contracts. If we do not
effectively manage the risks associated with international operations and sales,
our business, financial condition and results of operations could be materially
and adversely affected.
 
WE HAVE EXPOSURE FROM OUR WARRANTIES
 
     Our products may contain defects. We generally warrant our products for
three years. Our standard warranty contains a limit on damages and an exclusion
of liability for consequential damages and for negligent or improper use of the
product. We establish a reserve, at the time of product shipment, in an amount
equal to our estimated warranty expenses. We had warranty reserves of $44.0
million as of April 3, 1999 and $25.1 million as of March 28, 1998. While we
believe that our warranty reserves will be sufficient, the failure to maintain
sufficient warranty reserves or the unenforceability of our liability
limitations could have a material adverse effect on our business, financial
condition and results of operations.
 
                                       21
<PAGE>   22
 
OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE
 
     Our stock price and the number of shares traded each day has varied
greatly. We expect these fluctuations to continue due to factors including:
 
     - quarterly fluctuations in operating results;
 
     - announcements of new products by us or our competitors;
 
     - gains or losses of significant customers;
 
     - changes in stock market analysts' estimates;
 
     - the presence or absence of short-selling of our common stock; and
 
     - events affecting other companies that the market deems comparable to us.
 
     Our stock price also may be affected by events relating to Hyundai
Electronics America and Hyundai Electronics Industries, including sales of our
common stock by Hyundai Electronics America or the perception that such sales
may occur (due to the financial condition of Hyundai Electronics America or
otherwise). There have been reports that Hyundai Electronics Industries is
planning to sell some operations that do not directly relate to its core
semiconductor business. Hyundai Electronics America and Hyundai Electronics
Industries have informed Maxtor that following the closing of its February 1999
public offering and the expiration of the 90-day period during which Hyundai
Electronics America has agreed not to offer or sell additional shares without
the consent of Salomon Smith Barney Inc., they may consider selling additional
Maxtor shares at a time they deem appropriate. Finally, our stock price may be
subject to extreme fluctuations in response to general economic conditions in
the U.S., Korea, Southeast Asia and elsewhere, such as interest rates, inflation
rates, exchange rates, unemployment rates, and trade surpluses and deficits. It
is likely that in some future quarter or quarters our operating results will be
below the expectations of stock market analysts or investors. In such event, our
stock price probably will decline.
 
     In February 1999, DECS Trust IV, a newly-formed trust, sold 12,500,000
DECS. The terms of the DECS provide that DECS Trust IV may distribute shares of
our common stock owned by Hyundai Electronics America on or about February 15,
2002, or upon earlier liquidation of DECS Trust IV under certain circumstances.
We do not know how or whether investors in the DECS offering will resell the
DECS. Any market that develops for the DECS could reduce the demand for our
common stock or otherwise negatively affect the market for our common stock.
 
                                       22
<PAGE>   23
 
                           PART II. OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
     The Company currently is involved in a dispute with StorMedia Incorporated
("StorMedia"), which arises out of an agreement among the Company, StorMedia and
Hyundai Electronics Industries Co. Ltd. (HEI) which became effective on November
17, 1995. In that agreement, StorMedia agreed to supply disk media to the
Company. StorMedia's disk media did not meet the Company's specifications and
functional requirements as required by the agreement and the Company ultimately
terminated the agreement.
 
     After a class action securities lawsuit was filed against StorMedia by
certain of its shareholders in September 1996 which alleged, in part, that
StorMedia failed to perform under the agreement, StorMedia sued HEI, Mong Hun
Chung (HEI's chairman), Dr. Chong Sup Park (Hyundai Electronics America (HEA)'s
President and the individual who signed the StorMedia Agreement on behalf of the
Company) and K.S. Yoo (the individual who signed the StorMedia Agreement on
behalf of HEI) (collectively the "Original Defendants") in federal court (the
"Federal Suit"). In the Federal Suit, StorMedia alleged that at the time HEI
entered into the StorMedia Agreement, it knew that it would not and could not
purchase the volume of products it committed to purchase, and that failure to do
so caused damages to StorMedia in excess of $206 million.
 
     In December 1996, the Company filed a complaint against StorMedia and
William Almon (StorMedia's Chairman and Chief Executive Officer) in a Colorado
state court seeking approximately $100 million in damages and alleging, among
other claims, breach of contract, breach of implied warranty of fitness and
fraud under the StorMedia Agreement (the "Colorado Suit"). This proceeding was
stayed pending resolution of the Federal Suit. The Federal Suit was permanently
dismissed early in February 1998. On February 24, 1998, StorMedia filed a new
complaint in a California state court for $206 million, alleging fraud and
deceit against the Original Defendants and negligent misrepresentation against
HEI and the Company (the "California Suit"). On May 18, 1998, the stay on the
Colorado Suit was lifted by the Colorado state court. The Company's motion to
dismiss, or in the alternative, stay the California Suit, is pending. On
September 9, 1998, the California Suit was stayed pending resolution of the
Colorado Suit. On October 11, 1998, StorMedia filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Act. This bankruptcy filing caused an
automatic stay of proceedings against StorMedia, including the Colorado Suit.
StorMedia has not prosecuted its claims against the Company since it filed for
bankruptcy protection.
 
     The Company believes that it has valid defenses against the claims alleged
by StorMedia and intends to defend itself vigorously. However, due to the nature
of litigation and because the pending lawsuits are in the very early pre-trial
stages, the Company cannot determine the possible loss, if any, that may
ultimately be incurred either in the context of a trial or as a result of a
negotiated settlement. The litigation could result in significant diversion of
time by the Company's technical personnel, as well as substantial expenditures
for future legal fees. After considering the nature of the claims and facts
relating to the litigation, including the results of preliminary discovery, the
Company's management believes that the resolution of this matter will not have a
material adverse effect on the Company's business, financial condition or
results of operations. However, the results of these proceedings, including any
potential settlement, are uncertain and there can be no assurance that they will
not have a material adverse effect on the Company's business, financial position
and results of operations.
 
     The Company has been sued in the United States District Court for the
Northern District of California by Papst-Motoren GmbH and Papst Licensing
(collectively "Papst"). Papst alleges that the Company is infringing on 15
patents purportedly owned by Papst. The Company has not yet served its answer to
the complaint by Papst. While the final outcome of these claims cannot be
determined at this time, the Company believes that resolution of these claims
will not have a material adverse effect on its business, financial condition or
results of operations. This statement should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 26, 1998.
 
     No amounts have been reserved in the accompanying consolidated financial
statements for any legal claims or actions.
 
                                       23
<PAGE>   24
 
ITEM 5. OTHER INFORMATION
 
     The net proceeds to Maxtor from the sale of 49,731,225 shares of Maxtor
common stock in our initial public offering (Registration Statement No.
333-56099), effective July 30, 1998, including the underwriter's exercise of
their overallotment on August 14, 1998, were approximately $328.8 million after
deducting underwriting discounts and estimated offering expenses payable by
Maxtor.
 
     From the date of the closing of the initial public offering through April
3, 1999, we applied the net proceeds as follows: approximately $200.0 million
was used to pay certain outstanding indebtedness under certain credit facilities
due to various banks; approximately $128.8 million was used for general
corporate purposes.
 
     The net proceeds to Maxtor from the sale of 7,800,000 shares of Maxtor
common stock in our secondary public offering (Registration Statement No.
333-69307), effective February 9, 1999, were approximately $95.8 million after
deducting underwriting discounts and estimated offering expenses payable by
Maxtor.
 
     From the date of the closing of the secondary public offering through April
3, 1999, we applied the net proceeds as follows: $55.2 million was used to pay
outstanding principal indebtedness and accrued interest owing to Hyundai
Electronics America under a subordinated note due July 31, 2001; $40.6 million
was used for general corporate purposes.
 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
 
(SEE INDEX TO EXHIBITS ON PAGE E-1 OF THIS REPORT.)
 
     There were no reports filed on Form 8-K during the reporting period ended
April 3, 1999.
 
ITEMS 2, 3 AND 4 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
 
                                       24
<PAGE>   25
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
                                          MAXTOR CORPORATION
 
                                          By:         /s/ PAUL J. TUFANO
 
                                            ------------------------------------
                                                       Paul J. Tufano
                                              Senior Vice President, Finance,
                                                Chief Financial Officer and
                                                Principal Accounting Officer
 
Date: May 17, 1999
 
                                       25
<PAGE>   26
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBIT                                                                   SEQUENTIALLY
  NO                               DESCRIPTION                           NUMBERED PAGES
-------                            -----------                           --------------
<C>        <S>                                                           <C>
  27       Financial Data Schedule.....................................
</TABLE>
 
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