<PAGE>   1

                                 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 1, 2000

                                       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                         (I.R.S.EMPLOYER
      OF 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 $831,575,302 on May 5,
2000 (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 5, 2000, 113,351,706 shares of the registrant's Common Stock,
$.01 par value, were issued and outstanding.
<PAGE>   2

                               MAXTOR CORPORATION

                                   FORM 10-Q
                                 APRIL 1, 2000

                                     INDEX

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
                      PART I.  FINANCIAL INFORMATION
Item 1.  Condensed Consolidated Financial Statements.................    3
         Condensed Consolidated Balance Sheets -- April 1, 2000 and
         January 1, 2000.............................................    3
         Condensed Consolidated Statements of Operations -- Three
         months ended April 1, 2000 and April 3, 1999................    4
         Condensed Consolidated Statements of Cash Flows -- Three
         months ended April 1, 2000 and April 3, 1999................    5
         Notes to Condensed Consolidated Financial Statements........    6
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................   11

                        PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings...........................................   22
Item 2.  Recent Sales of Unregistered Securities.....................   23
Item 3.  Exhibits and Reports on Form 8-K............................   23
Signature Page.......................................................   24
</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 1,      JANUARY 1,
                                                                 2000           2000
                                                              -----------    ----------
                                                              (UNAUDITED)
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents.................................  $  261,476     $  240,357
  Marketable securities.....................................     116,964        113,565
  Accounts receivable, net of allowance for doubtful
     accounts of $18,522 at April 1, 2000 and $15,459 at
     January 1, 2000........................................     252,551        231,616
  Inventories, net..........................................     107,356        103,854
  Prepaid expenses and other................................      22,506         12,338
                                                              ----------     ----------
          Total current assets..............................     760,853        701,730
Property, plant and equipment, net..........................     126,049        132,089
Goodwill and other intangible assets,net....................      52,595         55,107
Other assets................................................      14,188         17,409
                                                              ----------     ----------
          Total assets......................................  $  953,685     $  906,335
                                                              ==========     ==========

                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term borrowings, including current portion of
     long-term debt.........................................  $    5,000     $    5,000
  Accounts payable..........................................     411,697        404,874
  Accrued and other liabilities.............................     132,969        127,321
                                                              ----------     ----------
          Total current liabilities.........................     549,666        537,195
Long-term debt..............................................     107,986        113,770
                                                              ----------     ----------
          Total liabilities.................................     657,652        650,965
Common Stock, $0.01 par value, 250,000,000 shares
  authorized; 114,701,164 shares issued and outstanding at
  April 1, 2000 and 113,428,924 shares issued and
  outstanding at January 1, 2000............................       1,132          1,119
Additional paid-in capital..................................   1,052,162      1,043,964
Accumulated deficit.........................................    (764,327)      (791,928)
Cumulative other comprehensive income -- unrealized gain on
  investments in equity securities..........................       7,066          2,215
                                                              ----------     ----------
          Total stockholders' equity........................     296,033        255,370
                                                              ----------     ----------
          Total liabilities and stockholders' equity........  $  953,685     $  906,335
                                                              ==========     ==========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        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 1, 2000    APRIL 3, 1999
                                                              -------------    -------------
<S>                                                           <C>              <C>
Revenue.....................................................  $    691,286     $    681,590
Cost of revenue.............................................       582,456          595,177
                                                              ------------     ------------
  Gross profit..............................................       108,830           86,413
Operating expenses:
  Research and development..................................        55,362           47,273
  Selling, general and administrative.......................        25,318           20,352
  Amortization of goodwill and other intangible assets......         2,520
                                                              ------------     ------------
          Total operating expenses..........................        83,200           67,625
                                                              ------------     ------------
Income from operations......................................        25,630           18,788
Interest expense............................................        (3,863)          (3,680)
Interest and other income...................................         7,287            4,897
                                                              ------------     ------------
Income before provision for income taxes....................        29,054           20,005
Provision for income taxes..................................         1,453            3,000
                                                              ------------     ------------
Net income..................................................        27,601           17,005
Unrealized gain on investments in equity securities.........         4,851            8,616
                                                              ------------     ------------
Comprehensive income........................................  $     32,441     $     25,621
                                                              ============     ============
Net income per share -- basic...............................  $       0.24     $       0.17
Net income per share -- diluted.............................  $       0.23     $       0.17
Shares used in per share calculation
  -- basic..................................................   114,029,979       98,912,770
  -- diluted................................................   118,037,206      101,515,783
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        4
<PAGE>   5

                               MAXTOR CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                              ---------------------
                                                              APRIL 1,    APRIL 3,
                                                                2000        1999
                                                              --------    ---------
<S>                                                           <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................  $ 27,601    $  17,005
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................    20,017       17,973
  Amortization of goodwill and other intangible assets......     2,512           --
  Stock compensation expense................................     1,767          865
  Gain on sale of other assets..............................        --       (1,565)
  Loss on disposal of property, plant and equipment.........        47           --
  Change in assets and liabilities:
     Accounts receivable....................................   (20,935)      91,288
     Inventories............................................    (3,502)      26,097
     Other assets...........................................    (5,149)      (2,447)
     Accounts payable.......................................     6,823      (98,250)
     Accrued and other liabilities..........................     5,648      (21,173)
                                                              --------    ---------
          Net cash provided by operating activities.........    34,829       29,793
                                                              --------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment................        25           --
Purchase of property, plant and equipment...................   (14,049)     (22,785)
Purchase of marketable securities...........................    (3,399)     (81,299)
Other.......................................................        --           13
                                                              --------    ---------
          Net cash used in investing activities.............   (17,423)    (104,071)
                                                              --------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt, including short-term
  borrowings................................................    (2,731)     (55,000)
Principal payments under capital lease obligations..........        --          (18)
Proceeds from issuance of common stock from public offering,
  employee stock purchase plan and stock options
  exercised.................................................     6,444      100,758
                                                              --------    ---------
          Net cash provided by financing activities.........     3,713       45,740
                                                              --------    ---------
Net change in cash and cash equivalents.....................    21,119      (28,538)
Cash and cash equivalents at beginning of period............   240,357      214,126
                                                              --------    ---------
Cash and cash equivalents at end of period..................  $261,476    $ 185,588
                                                              ========    =========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Purchase of property, plant and equipment financed by
     accounts payable.......................................  $    447    $      --
  Decrease in receivable from on affiliates.................  $     --    $  (1,235)
  Retirement of debt in exchange for bond redemption........  $  5,000    $   5,000
  Increase in unrealized gain on investments in equity
     securities.............................................  $  4,851    $   8,616
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        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 January 1, 2000 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

     Inventories, net comprised (in thousands):

<TABLE>
<CAPTION>
                                                          APRIL 1,      JANUARY 1,
                                                            2000           2000
                                                         -----------    ----------
                                                         (UNAUDITED)
<S>                                                      <C>            <C>
Raw materials..........................................   $ 32,195       $ 29,027
Work-in-process........................................      4,820          2,302
Finished goods.........................................     70,341         72,525
                                                          --------       --------
                                                          $107,356       $103,854
                                                          ========       ========
</TABLE>

 3. STOCKHOLDERS' EQUITY

     In March 2000, the Board of Directors amended the Company's (i) Amended and
Restated 1996 Stock Option Plan (the "Option Plan"), to increase the maximum
number of shares issuable under the Amended Option Plan by 5,500,000 shares, to
a total of 22,975,685 shares; (ii) 1998 Stock Purchase Plan (the "Purchase
Plan"), subject to stockholder approval, to increase the number of shares
reserved under the Purchase Plan by 2,100,000 shares to an aggregate total of
4,500,000 shares. Both amendments were approved by Stockholders on May 11, 2000.

 4. ACQUISITION OF CREATIVE DESIGN SOLUTIONS, INC.

     In September 1999, the Company acquired all the outstanding stock of
Creative Design Solutions, Inc. ("CDS"), in exchange for a total of 8,130,682
shares of our common stock and assumption of outstanding CDS stock options for
an aggregate purchase price of approximately $57.6 million, including
acquisition expenses.

     The acquisition was accounted for using the purchase method of accounting,
and accordingly, the recognized purchase price was allocated to the tangible and
identifiable intangible assets acquired and liabilities assumed on the basis of
their fair values on the acquisition date of September 10, 1999. Approximately
$2.7 million of the aggregate recognized purchase price was allocated to net
tangible assets consisting primarily of cash, accounts receivable, inventory,
prepaids, and property, plant and equipment, and $10.42 million to short-term
borrowings, accounts payable, accrued liabilities and deferred revenue. The
historical carrying amounts of such net assets approximated their fair values.
Approximately $7 million was allocated to acquired in-process technology and was
immediately charged to operations at the acquisition date because it had no
alternative future use. Approximately $10.3 million was allocated to current
products and

                                        6
<PAGE>   7
                               MAXTOR CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

technology, workforce and customer list, which are being amortized over their
estimated useful lives ranging from 1 to 7 years. The purchase price in excess
of the fair value of identified tangible and intangible assets and liabilities
assumed in the amount of $48.1 million was allocated to goodwill and is being
amortized over its estimated useful life of 7 years. The Company will evaluate
the periods of amortization continually to determine whether later events and
circumstances warrant revised estimates of useful lives.

     The unaudited pro forma consolidated amounts presented below give effect to
the acquisition of CDS as if it had occurred at the beginning of each of the
periods presented by consolidating the results of operations of CDS with the
results of the Company for the three months ended April 1, 2000 and April 3,
1999. The charge of $7.0 million is for acquired in-process technology has been
reflected in each of the periods presented below.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                                                  ----------------------------
                                                    APRIL 1,        APRIL 3,
                                                      2000            1999
                                                  ------------    ------------
                                                          (UNAUDITED)
<S>                                               <C>             <C>
Revenue.........................................  $    691,286    $    681,671
Net income (loss)...............................  $     20,573    $      2,856
Net income per share:
  Basic.........................................  $       0.18    $       0.03
  Diluted.......................................  $       0.17    $       0.03
Shares used in per share calculation
  Basic.........................................   114,029,979     107,043,452
  Diluted.......................................   118,037,206     107,767,124
</TABLE>

     The above unaudited pro forma consolidated amounts are not necessarily
indicative of the actual results of operations that would have been reported if
the event described above had occurred as of the beginning of the periods
described above, nor does such information purport to indicate the results of
the Company's future operations. In the opinion of management, all adjustments
necessary to present fairly such pro forma amounts have been made.

 5. NET INCOME PER SHARE

     The reconciliation of the numerator and denominator of the basic and
diluted net income per share calculations is provided as follows (in thousands,
except share and per share amounts):

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                                                  ----------------------------
                                                    APRIL 1,        APRIL 3,
                                                      2000            1999
                                                  ------------    ------------
                                                          (UNAUDITED)
<S>                                               <C>             <C>
NUMERATOR -- BASIC AND DILUTED
Net income......................................  $     27,601    $     17,005
                                                  ============    ============
Net income available to common stockholders.....  $     27,601    $     17,005
                                                  ============    ============
DENOMINATOR
Basic weighted average common shares
  outstanding...................................   114,029,979      98,912,770
Effect of dilutive securities:
  Common stock options..........................     4,007,227       2,603,013
                                                  ------------    ------------
Diluted weighted average common shares..........   118,037,206     101,515,783
                                                  ============    ============
Basic net income per share......................  $       0.24    $       0.17
                                                  ============    ============
Diluted net income per share....................  $       0.23    $       0.17
                                                  ============    ============
</TABLE>

                                        7
<PAGE>   8
                               MAXTOR CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

 6. SEGMENT REPORTING

     The Company has determined that we have a single reportable segment
consisting of the design, manufacture and sale of data storage products for
desktop computer and network storage systems used in heterogeneous computing
environments. We have a worldwide sales, service and distribution network.
Products are marketed and sold through a direct sales force to OEMs,
distributors and retailers in the United States, Europe and Asia Pacific.

     Operations outside the United States primarily consist of the manufacturing
plants in Singapore that produces subassemblies and final assemblies for our
disk drive products. Revenue by destination and long-lived asset information by
geographic area for each of the three months ended April 1, 2000 and April 3,
1999 is presented in the following table:

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED          THREE MONTHS ENDED
                                              APRIL 1, 2000               APRIL 3, 1999
                                          ---------------------    ---------------------------
                                                     LONG-LIVED                     LONG-LIVED
                                          REVENUE      ASSETS         REVENUE         ASSETS
                                          -------    ----------    -------------    ----------
                                                             (IN THOUSANDS)
<S>                                       <C>        <C>           <C>              <C>
United States...........................  308,332      52,317         493,710         53,369
Asia Pacific............................  190,277      72,710          94,757         59,242
Europe..................................  161,310       1,022          82,942            509
Latin America and other.................   31,367           0          10,181              0
                                          -------     -------         -------        -------
          Total.........................  691,286     126,049         681,590        113,120
                                          =======     =======         =======        =======
</TABLE>

 7. 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 agreement on behalf of the Company)
and K.S. Yoo (the individual who signed the 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 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 filed an
Amended Complaint in July, 1998. Defendants filed a motion to dismiss in August,
1998, which is still pending. On September 9, 1998, the California Suit was
stayed pending resolution of the Colorado Suit. On

                                        8
<PAGE>   9
                               MAXTOR CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

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.

     Maxtor filed a proof of claim in the bankruptcy cases of both StorMedia
Inc. and StorMedia International. In response, on November 2, 1999, StorMedia
filed its Objections to Proof of Claim and Counterclaims and Crossclaims thereby
commencing an adversary proceeding in its bankruptcy proceeding against Maxtor
and HEI.

     On February 16, 2000, StorMedia, Maxtor and HEI stipulated and the
Bankruptcy Court ordered that the stay of the Bankruptcy Court be modified to
allow the Colorado suit to proceed to final, non-appealable judgment or
settlement in the Colorado court.

     On April 11, 2000, Defendants filed an Answer to the Company's Amended
Complaint and an Amended Counterclaim against the Company, HEI, Dr. Park, and
Mr. Yoo.

     On May 2, 2000, the Company filed: (i) a Reply to Defendants' Amended
Counterclaim; (ii) a Motion to Dismiss the Third Counterclaim; and (iii) a
Motion to Strike Defendants' Seventh, Twelfth, Fourteenth, Fifteenth, and
Sixteenth Affirmative Defenses. The Company's Motion to Dismiss and Motion to
Strike are still pending.

     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.

     No amounts have been reserved in the accompanying condensed consolidated
financial statements for any legal claims or actions.

 8. RECLASSIFICATIONS

     Certain reclassifications have been made to prior quarter balances to
conform to current quarter classifications.

 9. RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." The
Statement will require us to recognize all derivatives on the balance sheet at
fair value. SFAS No. 133 requires that derivative instruments used to hedge be
identified specifically as to assets, liabilities, firm commitments or
anticipated transactions and measured as to effectiveness and ineffectiveness
when hedging changes in fair value or cash flows. Derivative instruments that do
not qualify as either a fair value or cash flow hedge will be valued at fair
value with the resultant gain or loss recognized in current earnings. Changes in
the effective portion of fair value hedges will be recognized in current
earnings along with the change in fair value of the hedged item. Changes in the
effective portion of the fair value of cash flow hedges will be recognized in
other comprehensive income until realization of the cash flows of the hedged
item through current earnings. Any ineffective portion of hedges will be
recognized in

                                        9
<PAGE>   10
                               MAXTOR CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

current earnings. In June 1999, the FASB issued SFAS No. 137, "Deferral of the
Effective Date of FASB Statement No. 133," to defer for one year the effective
date of implementation of SFAS NO. 133. SFAS No. 133, as amended by SFAS No.
137, is effective for fiscal years beginning after June 15, 2000, with earlier
application encouraged. We are in the process of evaluating the requirements of
SFAS Nos. 133, but do not expect this pronouncement to materially impact our
financial position or results of operation.

     In December 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain
of the SEC's views in applying generally accepted accounting principles to
revenue recognition in financial statements. In March 2000, the SEC issued SAB
No. 101A to defer for one quarter the effective date of implementation of SAB
No. 101 with earlier application encouraged. We are required to adopt SAB 101 in
the second quarter of fiscal 2000. We do not expect the adoption of SAB 101 to
have a material effect on our financial position or results of operations.

     In March 2000, the Financial Accounting Standards Board issued
interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the definition of an employee for purposes of applying Accounting
Practice Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25"), the criteria for determining whether a plan qualifies as a noncompensatory
plan, the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and the accounting for an exchange of
stock compensation awards in a business combination. This interpretation is
effective July 1. 2000, but certain conclusions in the interpretation cover
specific events that occur after either December 15, 1998, or January 12, 2000.
Management believes that FIN 44 will not have a material effect on the financial
position or results of operations of the Company.

10. RELATED PARTY TRANSACTION

     During the quarter ended April 1, 2000, the Company had cost of revenue
that included certain component parts purchased from MMC Technology, Inc., a
wholly owned subsidiary of HEA, amounting to $41 million as compared to $30.2
million during the comparable quarter of fiscal 1999. The cost of revenue also
includes certain component parts purchased from HEI which to date have not been
significant.

     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.

                                       10
<PAGE>   11

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.

     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.

  Acquisition of Creative Design Solutions, Inc.

     In September 1999, we acquired privately held Creative Design Solutions,
Inc. ("CDS"), a leading participant in the emerging network attached storage
market. We transitioned from being a supplier of hard disk drives for the
desktop personal computer market to a company well positioned to provide storage
solutions that will deliver outstanding price and performance values in
networked environments. See Note 4 to the Condensed Consolidated Financial
Statements.

     We formed Maxtor Network Systems Group ("MNSG") subsequent to the
acquisition of CDS. MNSG concentrates on products and offerings in or related to
the Network Attached Storage market.

  Revenue and Gross Profit

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                             ------------------------------
                                             APRIL 1, 2000    APRIL 3, 1999    CHANGE
                                             -------------    -------------    ------
                                                      (UNAUDITED)
                                                          (IN MILLIONS)
<S>                                          <C>              <C>              <C>
Total revenue..............................     $691.3           $681.6        $ 9.7
Gross profit...............................     $108.8           $ 86.4        $22.4
Net income.................................     $ 27.6           $ 17.0        $10.6
As a percentage of revenue:
Total revenue..............................      100.0%           100.0%
Gross profit...............................       15.7%            12.7%
Net income.................................        4.0%             2.5%
</TABLE>

  Revenue

     Total revenue for the first quarter of fiscal year 2000 increased 1.4%
compared to the same quarter in fiscal year 1999 primarily due to the increase
in volume shipments coupled with better product mix. Total shipments for the
first fiscal quarter 2000 were 6.6 million units, which was 1.0 million units or
18.5% higher compared to the first fiscal quarter a year ago. Revenue from the
OEM channel for the quarter ended April 1, 2000 represented 70.4% of total
revenue compared to 72.0% for the corresponding quarter in 1999. Revenue from
the distribution and retail channels represented 29.6% of total revenue for the
first quarter in 2000 compared to 28.0% for the same quarter in fiscal year
1999.

     Revenue and unit volume growth in 2000 were favorably impacted by better
time to market performance, increased penetration of the distribution channel,
and a continued trend to shipping higher capacity drives.

                                       11
<PAGE>   12

  Gross Profit

     Gross profit as a percentage of revenue increased to 15.7% in the first
quarter of 2000 from 12.7% in the same quarter of 1999. The increase in gross
profit is due mainly to favorable mix, higher aerial density products, better
costs and efficiencies, timely introduction of new, higher margin products, and
continued market acceptance. Gross margin was also favorably affected by
improved product designs, which led to improved manufacturing yields and lower
component costs. We expect volume growth to continue for the remainder of the
fiscal year 2000.

  Operating expenses

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                             ------------------------------
                                             APRIL 1, 2000    APRIL 3, 1999    CHANGE
                                             -------------    -------------    ------
                                                      (UNAUDITED)
                                                          (IN MILLIONS)
<S>                                          <C>              <C>              <C>
Research and development...................      $55.4            $47.3         $8.4
Selling, general and administrative........      $25.3            $20.3         $7.8
Amortization of goodwill and other
  intangible assets........................      $ 2.5            $  --         $2.5
As a percentage of revenue:
Research and development...................        8.0%             6.9%
Selling, general and administrative........        4.0%             3.0%
Amortization of goodwill and other
  intangible assets........................        0.3%             0.0%
</TABLE>

  Research and Development (R&D)

     R&D expense as a percentage of revenue increased to 8.0% in the first
quarter of 2000 compared to 6.9% for the same quarter in 1999. The absolute
dollar increase in R&D expenditures was due to our continued efforts to maintain
leadership products, addressing the requirements of the desktop PC market as
well as investments in the Network Attached Storage market.

  Selling, General and Administrative (SG&A)

     SG&A expense increased, in terms of absolute dollars and as a percentage of
revenue, for the first quarter of 2000 when compared to the same periods of
fiscal year 1999. The increase in absolute dollars is primarily due to our costs
associated with supporting Maxtor's higher sales volume.

  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 $0.9 million in the
first three months of 1999 and $0.3 million in the first three months of 2000.
The remaining unrecognized compensation element will be reflected in quarterly
charges, decreasing sequentially through the second quarter of 2001.

                                       12
<PAGE>   13

  Amortization of Goodwill and Other Intangible Assets

     Amortization of goodwill and other intangible assets represents the
amortization of workforce, customer list and other current products and
technology arising from the acquisition of CDS amount to $2.5 million. There
were no such expenses in the first quarter of 1999 as we did not acquire CDS
until the third quarter of 1999.

  Interest Expense and Interest Income

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                             ------------------------------
                                             APRIL 1, 2000    APRIL 3, 1999    CHANGE
                                             -------------    -------------    ------
                                                      (UNAUDITED)
                                                              (IN MILLIONS)
<S>                                          <C>              <C>              <C>
Interest expense...........................      $3.9             $3.7          $0.2
Interest and other income..................      $7.3             $4.9          $2.4
  As a percentage of revenue:
Interest expense...........................       0.6%             0.5%
Interest and other income..................       1.1%             0.7%
</TABLE>

  Interest Expense

     Interest expense as a percentage of revenue increased from 0.5% in the
first quarter of 1999 to 0.6% in the first quarter of fiscal year 2000. In
absolute dollar terms, interest expense increased by $.2 million in the first
quarter of 2000. Our total short-term and long-term outstanding borrowings were
$90.3 million as of April 3, 1999 and $113.0 million as of April 1, 2000.

  Interest and Other Income

     Interest and other income in the first quarter of 2000 increased in both
absolute dollar amount and as a percentage of revenue when compared to the first
quarter of 1999. Our total cash and cash equivalents and marketable securities
were $280.4 million as of April 3, 1999 compared to $378.4 million as of April
1, 2000.

  Provision for Income Taxes

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                             ------------------------------
                                             APRIL 1, 2000    APRIL 3, 1999    CHANGE
                                             -------------    -------------    ------
                                                      (UNAUDITED)
                                                              (IN MILLIONS)
<S>                                          <C>              <C>              <C>
Income before provision for income taxes...      $29.1            $20.0          9.1
Provision for income taxes.................      $ 1.5            $ 3.0         (1.5)
</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 the current
or prior fiscal periods.

YEAR 2000 READINESS

     We have not experienced any known material adverse impacts on our current
products, internal information systems, and non-information technology systems
(equipment and systems) as a result of the year 2000 issue. Based on the work
done, we have not incurred material costs to address the year 2000 readiness of
our systems (as a result of relatively new information systems) and products.
There can be no assurance that the cost estimates associated with Year 2000 or
leap year date issues will not have a material adverse effect on our results of
operations and financial condition.

LIQUIDITY AND CAPITAL RESOURCES

     At April 1, 2000, we had $378.4 million in cash and cash equivalents and
marketable securities as compared to $353.9 million at January 1, 2000.

                                       13
<PAGE>   14

     Operating activities provided net cash of $34.8 million for the quarter
ended April 1, 2000. The cash provided from operating activities was principally
generated from net income after adjustment for depreciation and amortization,
which was partially offset by the increase of accounts receivable. We used $17.4
million in investing activities during the first quarter of 2000, principally
for the purchase of property, plant and equipment. During the quarter ended
April 1, 2000, we reduced short and long-term debt by $5.8 million.

     As of April 1, 2000, our outstanding debt comprised $85.0 million of
publicly-traded subordinated debentures, due March 1, 2012 and a Singapore
dollar denominated loan equivalent to $28.0 million from the Economic Board of
Development of Singapore which is guaranteed by Scotia Capital. Our outstanding
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 April 1, 2000, $75.0
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 2000, capital
expenditures are expected to be between approximately $90.0 million and $120.0
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 and working capital, 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."

                  CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT OF $764.3 MILLION

     We have a history of significant losses. With the exception of the fiscal
year ended December 26, 1998, we incurred losses in each of the recent years.
These losses were primarily a result of:

     - 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.

     During the quarter ended April 1, 2000 the Company had net income of $27.6
million as compared to $17.0 during the same quarter of fiscal 1999.

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

                                       14
<PAGE>   15

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.

     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;

     - 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 1, 2000, one customer, Dell, accounted for approximately
13.0% of our revenue, and our top ten customers accounted for approximately
50.6% of our revenue. During the quarter ended April 3, 1999, two customers,
Dell and IBM, accounted for approximately 25.8% and 9.8%, respectively, of our
revenue, and our top ten customers accounted for approximately 68.8% 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.

                                       15
<PAGE>   16

OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY

     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;

     - the average unit selling price of our 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 markets;

     - our ability to manage successfully the complex and difficult process of
       qualifying our products with our customers;

     - 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 allows 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

                                       16
<PAGE>   17

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;

     - IBM;

     - Quantum Corporation;

     - Samsung Electronic Company Limited;

     - Seagate Technology, Inc.; and

     - Western Digital Corporation.

     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 products that are designed for desktop computers and
network storage systems. As a result, the demand for our products depends on the
overall demand for desktop computers and the NAS market. The desktop computer
market tends 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

                                       17
<PAGE>   18

customers, and our customers often can defer or cancel orders with limited
notice and without significant penalty.

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.

SUPPLIER CONSOLIDATIONS

     Recently, two consolidations have been announced by Maxtor media suppliers.
HMT Technology Corp. and Komag, Inc. on the one hand and MMC Technology, Inc.
and Trace Storage Technology, Inc. on the other hand have announced intentions
to enter into business combinations. While the business consolidations are not
complete, the period of negotiation may lead to operational disruptions,
including supply interruptions or quality issues. If the business combinations
are completed, our risks include increased costs and reduced quality, from
causes ranging from reduced competition to internal disruption, as well as the
possibility of reduced or interrupted supply. While there are other media
sources, there is no assurance that they would choose to do business with us, or
that they could be successfully qualified or that they could provide an adequate
supply. If we cannot obtain sufficient quantities of high quality media 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. 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. 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.

                                       18
<PAGE>   19

WE WILL NEED ADDITIONAL MANUFACTURING CAPACITY IN THE FUTURE

     Our volume manufacturing operations currently are based in Singapore. A
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. Although we believe that we will be able to add capacity at our
current facilities or another facility to provide sufficient capacity through at
least the end of 2000, our inability to add capacity to allow us to meet our
customers' demands in a timely manner may limit our future growth and could have
a material adverse effect on our business, financial condition and results of
operations.

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.

     We intend to seek financing arrangements, including a line of credit, to
fund our future capacity expansion and working capital, 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.

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

                                       19
<PAGE>   20

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, which was filed in the United States District Court for the Northern
District of California, has been transferred to the United States District Court
for the Eastern District of Louisiana for coordination or consolidation with
pre-trial proceedings with three other actions involving Papst patents. The
alleged infringement claimed by Papst involves 15 of the hard disk drive motor
patents referenced above and relates 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.

                                       20
<PAGE>   21

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 $56.3
million as of April 1, 2000 and $51.2 million as of January 1, 2000. 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.

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. Our stock price may be subject to 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.

                                       21
<PAGE>   22

                          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 agreement on behalf of the Company)
and K.S. Yoo (the individual who signed the 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 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 filed an
Amended Complaint in July, 1998. Defendants filed a motion to dismiss in August,
1998, which is still 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.

     Maxtor filed a proof of claim in the bankruptcy cases of both StorMedia
Inc. and StorMedia International. In response, on November 2, 1999, StorMedia
filed its Objections to Proof of Claim and Counterclaims and Crossclaims thereby
commencing an adversary proceeding in its bankruptcy proceeding against Maxtor
and HEI.

     On February 16, 2000, StorMedia, Maxtor and HEI stipulated and the
Bankruptcy Court ordered that the stay of the Bankruptcy Court be modified to
allow the Colorado suit to proceed to final, non-appealable judgment or
settlement in the Colorado court.

     On April 11, 2000, Defendants filed an Answer to the Company's Amended
Complaint and an Amended Counterclaim against the Company, HEI, Dr. Park, and
Mr. Yoo.

     On May 2, 2000, the Company filed: (i) a Reply to Defendants' Amended
Counterclaim; (ii) a Motion to Dismiss the Third Counterclaim; and (iii) a
Motion to Strike Defendants' Seventh, Twelfth, Fourteenth, Fifteenth, and
Sixteenth Affirmative Defenses. The Company's Motion to Dismiss and Motion to
Strike still are pending.

     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.

                                       22
<PAGE>   23

     On March 18, 1999, we were sued in the United States District Court for the
Northern District of California by Papst Licensing GmbH ("Papst"). The lawsuit
alleges infringement of 15 patents covering various features of hard disk drive
technology. We filed an Answer and Counterclaim on May 19, 1999, asserting
defenses of implied license, patent exhaustion, misuse, invalidity,
unenforceability and noninfringement, among others. By Order dated October 12,
1999, this case and 3 other actions involving Papst patents were transferred for
coordinated or consolidated pre-trial proceedings by the Judicial Panel on
Multidistrict Litigation to the Eastern District of Louisiana. On April 10,
2000, Papst filed a motion challenging aspects of our unfair competition
counterclaim. We filed an opposition brief on May 1, 2000. A ruling on this
motion is expected during May or June, 2000. We will participate in various
discovery proceedings that are expected to commence within the next few months,
and otherwise intend to vigorously defend this action. Although the final
outcome of these claims cannot be determined at this time, we do not believe
that resolution of these claims will have a material adverse effect on Maxtor's
business, financial condition or results of operations. This statement should be
read in conjunction with our Registration Statement on form S-3 as well as our
periodic reports filed with the SEC. 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.

     No amounts have been reserved in the accompanying consolidated financial
statements for any legal claims or actions.

ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES

     During September 1999, Creative Design Solutions, Inc. ("CDS"), a
California corporation merged with and into a wholly owned subsidiary of Maxtor,
which subsidiary then merged with and into Maxtor. We issued approximately
8,130,700 shares of our common stock in return for all of the outstanding
capital stock of CDS as of the date of the acquisition. The issuance was deemed
to be exempt from registration with the SEC in reliance upon Regulation D
promulgated under the Securities Act of 1933, as amended, based upon the limited
number of persons receiving shares and the knowledge and experience of such
persons or their representative in evaluating the proposed investment. In
addition, we have reserved approximately 825,000 shares of our common stock for
issuance upon exercise of outstanding stock options of CDS, which we assumed in
the acquisition.

ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K

     a. See Index to Exhibits on pages 25 to 27 hereof.

     Item 4 and 5 are not applicable and have been omitted.

                                       23
<PAGE>   24

                                   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 15, 2000

                                       24
<PAGE>   25

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.                            DESCRIPTION
-----------                            -----------
<C>            <S>
 27.1          Financial Data Schedule
</TABLE>