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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q/ A


Amendment No. 1





|                                    |  |                                                                                             
|----------------------------------- |  | --------------------------------------------------------------------------------------------
|(Mark One)                          |  |                                                                                             
|þ                                   |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|For the period ended March 27, 2004
|or                                 
|                                   
|o                                   |  | 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: 1-16447


Maxtor Corporation


(Exact name of registrant as specified in its charter)


|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 77-0123732         
|(State or other jurisdiction of          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                        
|500 McCarthy Boulevard,
    Milpitas, CA |  | 95035(Zip Code)    
|(Address of principal executive offices) |  |                    

Registrants telephone number, including area code:


(408) 894-5000


þ o


þ o












---










MAXTOR CORPORATION


FORM 10-Q


March 27, 2004


INDEX


|                                  |  |                                                                                                                             |    |      |    | 
|--------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                  |  |                                                                                                                             |    | Page |   
|                                  |  |                                                                                                                             |    |      |   
|PART I. FINANCIAL
    INFORMATION
|Item 1.                           |  | Condensed Consolidated Financial Statements
    (Unaudited)                                                                 |    |      | 4  | 
|                                  |  | Condensed Consolidated Balance
    Sheets  March 27, 2004, and December 27,
    2003 (Unaudited)                           |    |      | 4  | 
|                                  |  | Condensed Consolidated Statements of
    Operations  Three months ended March 27, 2004,
    and March 29, 2003 (Unaudited) |    |      | 5  | 
|                                  |  | Condensed Consolidated Statements of Cash
    Flows  Three months ended March 27, 2004, and
    March 29, 2003 (Unaudited) |    |      | 6  | 
|                                  |  | Notes to Condensed Consolidated Financial
    Statements (Unaudited)                                                        |    |      | 7  | 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                   |    |      | 21 | 
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                              |    |      | 43 | 
|Item 4.                           |  | Controls and Procedures                                                                                                     |    |      | 43 | 
|                                 
|PART II. OTHER INFORMATION       
|Item 1.                           |  | Legal Proceedings                                                                                                           |    |      | 46 | 
|Item 2.                           |  | Changes in Securities and Use of
    Proceeds                                                                               |    |      | 47 | 
|Item 3.                           |  | Defaults Upon Senior Securities                                                                                             |    |      | 47 | 
|Item 4.                           |  | Submission of Matters to a Vote of Security
    Holders                                                                     |    |      | 47 | 
|Item 5.                           |  | Other Information                                                                                                           |    |      | 47 | 
|Item 6.                           |  | Exhibits and Reports on Form 8-K                                                                                            |    |      | 47 | 
|Signature Page                    |  |                                                                                                                             | 48 |     
|EXHIBIT 31.1                     
|EXHIBIT 31.2                     
|EXHIBIT 32.1                     
|EXHIBIT 32.2                     



1



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EXPLANATORY NOTE
















| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | Item 1. Condensed Consolidated Financial Statements
    (Unaudited)

2



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| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | Item 2. Managements Discussion and Analysis of
    Financial Condition and Results of Operations
|
| |  | Item 4. Controls and Procedures                                                                  





| |   |                                          
| | - | -----------------------------------------
| |  | Item 15. Exhibits and Reports on Form 8-K



3



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PART I. FINANCIAL INFORMATION







|        |                                                            
|------- | -----------------------------------------------------------
|Item 1. | Condensed Consolidated Financial Statements
    (Unaudited)

MAXTOR CORPORATION





CONDENSED CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              |  |            |         |           | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ------- | ------------ |  | ---------- | ------- | --------- | 
|                                           |                                                                                                                                                                                                                                                    | March 27,                                  |            |         | December 27, | 
|                                           |                                                                                                                                                                                                                                                    | 2004                                       |            |         | 2003         | 
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Restated                                   |            |         |             
|                                           |                                                                                                                                                                                                                                                    | (Unaudited)                                |           
|                                           |                                                                                                                                                                                                                                                    | (In thousands, except share and            |           
|                                           |                                                                                                                                                                                                                                                    | per share amounts)                         |           
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                                                                                                    |                                            |            |         |              |  |            |        
|                                           | Cash and cash equivalents                                                                                                                                                                                                                          |                                            | $          | 443,661 |              |  | $          | 530,816 |          
|                                           | Restricted cash                                                                                                                                                                                                                                    |                                            |            | 45,666  |              |  |            | 37,154  |          
|                                           | Marketable securities                                                                                                                                                                                                                              |                                            |            | 46,236  |              |  |            | 44,543  |          
|                                           | Restricted marketable securities                                                                                                                                                                                                                   |                                            |            | 41,930  |              |  |            | 42,337  |          
|                                           | Accounts receivable, net of allowance of doubtful accounts of
    $8,801 at March 27, 2004 and $11,220 at December 27,
    2003                                                                                                                    |                                            |            | 471,846 |              |  |            | 540,943 |          
|                                           | Other receivables                                                                                                                                                                                                                                  |                                            |            | 45,852  |              |  |            | 37,964  |          
|                                           | Inventories                                                                                                                                                                                                                                        |                                            |            | 228,139 |              |  |            | 218,011 |          
|                                           | Prepaid expenses and other                                                                                                                                                                                                                         |                                            |            | 34,254  |              |  |            | 38,301  |          
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Total current assets                       |            |         | 1,357,584    |  |            |         | 1,490,069 | 
|Property, plant and equipment, net         |                                                                                                                                                                                                                                                    |                                            | 354,773    |         |              |  | 342,679    |        
|Goodwill                                   |                                                                                                                                                                                                                                                    |                                            | 628,463    |         |              |  | 628,463    |        
|Other intangible assets, net               |                                                                                                                                                                                                                                                    |                                            | 40,783     |         |              |  | 61,619     |        
|Other assets                               |                                                                                                                                                                                                                                                    |                                            | 13,231     |         |              |  | 13,908     |        
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Total assets                               |            | $       | 2,394,834    |  |            | $       | 2,536,738 | 
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities:                       |                                                                                                                                                                                                                                                    |                                            |            |         |              |  |            |        
|                                           | Short-term borrowings, including current portion of long-term
    debt                                                                                                                                                                             |                                            | $          | 22,045  |              |  | $          | 77,037  |          
|                                           | Accounts payable                                                                                                                                                                                                                                   |                                            |            | 694,977 |              |  |            | 730,056 |          
|                                           | Accrued and other liabilities                                                                                                                                                                                                                      |                                            |            | 359,206 |              |  |            | 445,576 |          
|                                           | Liabilities of discontinued operations                                                                                                                                                                                                             |                                            |            | 807     |              |  |            | 1,487   |          
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Total current liabilities                  |            |         | 1,077,035    |  |            |         | 1,254,156 | 
|Long-term debt, net of current portion     |                                                                                                                                                                                                                                                    |                                            | 377,840    |         |              |  | 355,809    |        
|Other liabilities                          |                                                                                                                                                                                                                                                    |                                            | 175,579    |         |              |  | 180,088    |        
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Total liabilities                          |            |         | 1,630,454    |  |            |         | 1,790,053 | 
|Stockholders equity:                      |                                                                                                                                                                                                                                                    |                                            |            |         |              |  |            |        
|                                           | Preferred stock, $0.01 par value, 95,000,000 shares
    authorized; no shares issued or outstanding                                                                                                                                                |                                            |            |        |              |  |            |        |          
|                                           | Common stock, $0.01 par value, 525,000,000 shares
    authorized; 260,540,360 shares issued and
    247,294,622 shares outstanding at March 27, 2004 and
    259,246,819 shares issued and 246,001,081 shares
    outstanding at December 27, 2003 |                                            |            | 2,605   |              |  |            | 2,592   |          
|Additional paid-in capital                 |                                                                                                                                                                                                                                                    |                                            | 2,419,821  |         |              |  | 2,410,082  |        
|Deferred stock-based compensation          |                                                                                                                                                                                                                                                    |                                            |           |         |              |  | (110       | )      
|Accumulated deficit                        |                                                                                                                                                                                                                                                    |                                            | (1,603,014 | )       |              |  | (1,611,744 | )      
|Cumulative other comprehensive income      |                                                                                                                                                                                                                                                    |                                            | 9,907      |         |              |  | 10,804     |        
|Treasury stock (13,245,738 shares) at cost |                                                                                                                                                                                                                                                    |                                            | (64,939    | )       |              |  | (64,939    | )      
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Total stockholders equity                 |            |         | 764,380      |  |            |         | 746,685   | 
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                    | Total liabilities and stockholders equity |            | $       | 2,394,834    |  |            | $       | 2,536,738 | 
|                                           |                                                                                                                                                                                                                                                    |                                            |            |         |              | 



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MAXTOR CORPORATION





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                     |                                     |                                     |           |             |                |   |         |             |         | 
|------------------------------------ | ----------------------------------- | ----------------------------------- | --------- | ----------- | -------------- | - | ------- | ----------- | ------- | 
|                                     |                                     | Three Months Ended                  |          
|                                     |                                     |                                     |          
|                                     |                                     | March 27, 2004                      |           |             | March 29, 2003 |  
|                                     |                                     |                                     |           |             |                |  
|                                     |                                     | Restated                            |           |             | Restated       |  
|                                     |                                     | (Unaudited)                         |          
|                                     |                                     | (In thousands, except share and per |          
|                                     |                                     | share amounts)                      |          
|Net revenues                         |                                     |                                     | 1,019,688 |             |                |   | 938,889 |            
|Cost of revenues                     |                                     |                                     | 864,625   |             |                |   | 767,042 |            
|                                     |                                     |                                     |           |             |                |  
|                                     | Gross profit                        |                                     |           | 155,063     |                |   |         | 171,847     |        
|Operating expenses:                  |                                     |                                     |           |             |                |   |         |            
|                                     | Research and development            |                                     |           | 85,103      |                |   |         | 87,025      |        
|                                     | Selling, general and administrative |                                     |           | 32,514      |                |   |         | 31,932      |        
|                                     | Amortization of intangible assets   |                                     |           | 20,836      |                |   |         | 20,562      |        
|                                     |                                     |                                     |           |             |                |  
|                                     |                                     | Total operating expenses            |           |             | 138,453        |   |         |             | 139,519 | 
|                                     |                                     |                                     |           |             |                |  
|Income from operations               |                                     |                                     | 16,610    |             |                |   | 32,328  |            
|Interest expense                     |                                     |                                     | (8,932    | )           |                |   | (5,577  | )          
|Interest income                      |                                     |                                     | 1,288     |             |                |   | 1,208   |            
|Other gain                           |                                     |                                     | 38        |             |                |   | 207     |            
|                                     |                                     |                                     |           |             |                |  
|Income before income taxes           |                                     |                                     | 9,004     |             |                |   | 28,166  |            
|Provision for income taxes           |                                     |                                     | 274       |             |                |   | 1,277   |            
|                                     |                                     |                                     |           |             |                |  
|Net income                           |                                     | $                                   | 8,730     |             |                | $ | 26,889  |            
|                                     |                                     |                                     |           |             |                |  
|Net income per share  basic         |                                     | $                                   | 0.04      |             |                | $ | 0.11    |            
|Net income per share  diluted       |                                     | $                                   | 0.03      |             |                | $ | 0.11    |            
|Shares used in per share calculation |                                     |                                     |           |             |                |   |         |            
|                                     |  basic                             |                                     |           | 246,590,255 |                |   |         | 243,634,139 |        
|                                     |  diluted                           |                                     |           | 256,960,154 |                |   |         | 246,866,117 |        



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MAXTOR CORPORATION





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |         |         |        |         |         |  
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | --------------------------------- | ---------------------------------------------------------------------------------- | ------ | --------- | ------- | ------- | ------ | ------- | ------- | -
|                                                                                                         |                                                                                     | Three Months Ended                |                                                                                   
|                                                                                                         |                                                                                     |                                   |                                                                                   
|                                                                                                         |                                                                                     | March 27,                         |                                                                                    |        | March 29, |        
|                                                                                                         |                                                                                     | 2004                              |                                                                                    |        | 2003      |        
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|                                                                                                         |                                                                                     | Restated                          |                                                                                    |        | Restated  |        
|                                                                                                         |                                                                                     | (Unaudited)                       |                                                                                   
|Cash Flows from Operating Activities:                                                                    |                                                                                     |                                   |                                                                                    |        |           |         |         |       
|Net income                                                                                               |                                                                                     | $                                 | 8,730                                                                              |        |           | $       | 26,889  |       
|Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:          |                                                                                     |                                   |                                                                                    |        |           |         |         |       
|                                                                                                         | Depreciation and amortization                                                       |                                   |                                                                                    | 36,107 |           |         |         | 41,942 |        
|                                                                                                         | Amortization of intangible assets                                                   |                                   |                                                                                    | 20,836 |           |         |         | 20,562 |        
|                                                                                                         | Stock-based compensation expense                                                    |                                   |                                                                                    | 144    |           |         |         | 273    |        
|                                                                                                         | Loss on sale of property, plant and equipment and other assets                      |                                   |                                                                                    | 353    |           |         |         | 2,308  |        
|                                                                                                         | Gain on retirement of bond                                                          |                                   |                                                                                    |       |           |         |         | (111   | )      
|                                                                                                         | Change in assets and liabilities:                                                   |                                   |                                                                                    |        |           |         |         |        |        
|                                                                                                         |                                                                                     | Accounts receivable               |                                                                                    |        | 69,097    |         |         |        | 38,404  |        
|                                                                                                         |                                                                                     | Other receivables                 |                                                                                    |        | (7,888    | )       |         |        | 5,015   |        
|                                                                                                         |                                                                                     | Inventories                       |                                                                                    |        | (10,128   | )       |         |        | (41,528 | )      
|                                                                                                         |                                                                                     | Prepaid expenses and other assets |                                                                                    |        | 3,910     |         |         |        | (8,992  | )      
|                                                                                                         |                                                                                     | Accounts payable                  |                                                                                    |        | (32,177   | )       |         |        | (18,232 | )      
|                                                                                                         |                                                                                     | Accrued and other liabilities     |                                                                                    |        | (90,879   | )       |         |        | (22,379 | )      
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|                                                                                                         |                                                                                     |                                   | Net cash provided by (used in) operating activities from
    continuing operations |        |           | (1,895  | )       |        |         | 44,151  |  
|                                                                                                         |                                                                                     |                                   | Net cash flow used in discontinued operations                                      |        |           | (680    | )       |        |         | (4,744  | )
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|                                                                                                         |                                                                                     |                                   | Net cash provided by (used in) operating activities                                |        |           | (2,575  | )       |        |         | 39,407  |  
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|Cash Flows from Investing Activities:                                                                    |                                                                                     |                                   |                                                                                    |        |           |         |         |       
|Proceeds from sale of property, plant and equipment                                                      |                                                                                     |                                   | 720                                                                                |        |           |         | 103     |       
|Purchase of property, plant and equipment                                                                |                                                                                     |                                   | (52,176                                                                            | )      |           |         | (20,609 | )     
|Decrease (increase) in restricted cash                                                                   |                                                                                     |                                   | (8,512                                                                             | )      |           |         | 2,739   |       
|Proceeds from sale of marketable securities                                                              |                                                                                     |                                   | 12,920                                                                             |        |           |         | 17,357  |       
|Purchase of marketable securities                                                                        |                                                                                     |                                   | (14,289                                                                            | )      |           |         | (13,886 | )     
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|                                                                                                         |                                                                                     |                                   | Net cash used in investing activities                                              |        |           | (61,337 | )       |        |         | (14,296 | )
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|Cash Flows from Financing Activities:                                                                    |                                                                                     |                                   |                                                                                    |        |           |         |         |       
|Proceeds from issuance of debt, including short-term Borrowings                                          |                                                                                     |                                   | 24,655                                                                             |        |           |         |        |       
|Principal payments of debt including short-term borrowings                                               |                                                                                     |                                   | (3,391                                                                             | )      |           |         | (4,622  | )     
|Principal payments under capital lease obligations                                                       |                                                                                     |                                   | (4,225                                                                             | )      |           |         | (7,132  | )     
|Payment of receivable-backed borrowing                                                                   |                                                                                     |                                   | (50,000                                                                            | )      |           |         |        |       
|Proceeds from issuance of common stock from employee stock
    purchase plan and stock options exercised |                                                                                     |                                   | 9,718                                                                              |        |           |         | 8,865   |       
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|                                                                                                         |                                                                                     |                                   | Net cash used in financing activities                                              |        |           | (23,243 | )       |        |         | (2,889  | )
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|Net change in cash and cash equivalents                                                                  |                                                                                     |                                   | (87,155                                                                            | )      |           |         | 22,222  |       
|Cash and cash equivalents at beginning of period                                                         |                                                                                     |                                   | 530,816                                                                            |        |           |         | 306,444 |       
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|Cash and cash equivalents at end of period                                                               |                                                                                     | $                                 | 443,661                                                                            |        |           | $       | 328,666 |       
|                                                                                                         |                                                                                     |                                   |                                                                                    |        |           |        
|Supplemental Disclosures of Cash Flow Information:                                                       |                                                                                     |                                   |                                                                                    |        |           |         |         |       
|                                                                                                         | Cash paid during the period for:                                                    |                                   |                                                                                    |        |           |         |         |        |        
|                                                                                                         |                                                                                     | Interest                          |                                                                                    | $      | 4,168     |         |         | $      | 7,370   |        
|                                                                                                         |                                                                                     | Income taxes                      |                                                                                    | $      | 2,146     |         |         | $      | 1,551   |        
|Schedule of Non-Cash Investing and Financing Activities:                                                 |                                                                                     |                                   |                                                                                    |        |           |         |         |       
|                                                                                                         | Purchase of property, plant and equipment financed by accounts
    payable          |                                   | $                                                                                  | 2,966  |           |         | $       | 3,287  |        
|                                                                                                         | Retirement of debt in exchange for bond Redemption                                  |                                   | $                                                                                  | 5,000  |           |         | $       | 5,000  |        
|                                                                                                         | Change in unrealized gain (loss) on investments                                     |                                   | $                                                                                  | (897   | )         |         | $       | 1,711  |        
|                                                                                                         | Purchase of property, plant and equipment financed by capital
    lease obligations |                                   | $                                                                                  |       |           |         | $       | 2,826  |        






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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




|   |                                           
|-- | ------------------------------------------
|1. | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation





| |                 
| | ----------------
| | Use of Estimates





| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements





| |                         
| | ------------------------
| | Stock-Based Compensation



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                                                              |                       |                    |       |       |             |   |        |        | 
|------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------ | ----- | ----- | ----------- | - | ------ | ------ | 
|                                                                                                              |                       | Three Months Ended |      
|                                                                                                              |                       |                    |      
|                                                                                                              |                       | March 27,          |       |       | March 29,   |  
|                                                                                                              |                       | 2004               |       |       | 2003        |  
|                                                                                                              |                       |                    |       |       |             |  
|                                                                                                              |                       | Restated(1)        |       |       | Restated(1) |  
|Net income applicable to common stockholders, as reported                                                     |                       | $                  | 8,730 |       |             | $ | 26,889 |       
|Add: Stock-based employee compensation expense included in
    reported net income                            |                       |                    | 144   |       |             |   | 273    |       
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards |                       |                    | 5,491 |       |             |   | 5,523  |       
|                                                                                                              |                       |                    |       |       |             |  
|                                                                                                              | Pro forma net income  |                    | $     | 3,383 |             |   | $      | 21,639 | 
|                                                                                                              |                       |                    |       |       |             |  
|Net income per share                                                                                          |                       |                    |       |       |             |   |        |       
|                                                                                                              | As reported  basic   |                    | $     | 0.04  |             |   | $      | 0.11   | 
|                                                                                                              | Pro forma  basic     |                    | $     | 0.01  |             |   | $      | 0.09   | 
|                                                                                                              | As reported  diluted |                    | $     | 0.03  |             |   | $      | 0.11   | 
|                                                                                                              | Pro forma  diluted   |                    | $     | 0.01  |             |   | $      | 0.09   | 






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



|                               |  |                    |           |   |           |  |           |  
|------------------------------ |  | ------------------ | --------- | - | --------- |  | --------- | -
|                               |  | Three Months Ended |          
|                               |  |                    |          
|                               |  | March 27,          |           |   | March 29, | 
|                               |  | 2004               |           |   | 2003      | 
|                               |  |                    |           |   |           | 
|Risk-free interest rate        |  |                    | 3.02      | % |           |  | 2.88      | %
|Weighted average expected life |  |                    | 4.5 years |   |           |  | 4.5 years |  
|Volatility                     |  |                    | 75        | % |           |  | 75        | %
|Dividend yield                 |  |                    |          |   |           |  |          |  



|                               |  |                    |           |   |           |  |           |  
|------------------------------ |  | ------------------ | --------- | - | --------- |  | --------- | -
|                               |  | Three Months Ended |          
|                               |  |                    |          
|                               |  | March 27,          |           |   | March 29, | 
|                               |  | 2004               |           |   | 2003      | 
|                               |  |                    |           |   |           | 
|Risk-free interest rate        |  |                    | 1.01      | % |           |  | 1.12      | %
|Weighted average expected life |  |                    | 0.5 years |   |           |  | 0.5 years |  
|Volatility                     |  |                    | 76        | % |           |  | 75        | %
|Dividend yield                 |  |                    |          |   |           |  |          |  



8



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                
| | ---------------
| | Fiscal Calendar





|   |                                    
|-- | -----------------------------------
|2. | Restatement of Financial Statements







9



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                      |  |                      |            |   |             |   |            |   |  |  |  |  |  |  |  | 
|------------------------------------- |  | -------------------- | ---------- | - | ----------- | - | ---------- | - |  |  |  |  |  |  |  | 
|                                      |  | As of March 27, 2004 |            |   |             |   |           
|                                      |  |                      |            |   |             |   |           
|                                      |  | As Reported          |            |   | As Restated |   |            |   |  | 
|                                      |  |                      |            |   |             |   |            |   |  | 
|Changes to Consolidated Balance Sheet |  |                      |            |   |             |   |            |   |  |  |  |  |  |  |  | 
|Goodwill                              |  | $                    | 813,951    |   |             | $ | 628,463    |   |  |  |  |  |  |  |  | 
|Accrued and other liabilities         |  |                      | 367,981    |   |             |   | 359,206    |   |  |  |  |  |  |  |  | 
|Deferred taxes                        |  |                      | 196,455    |   |             |   |           |   |  |  |  |  |  |  |  | 
|Other liabilities                     |  |                      | 181,580    |   |             |   | 175,579    |   |  |  |  |  |  |  |  | 
|Accumulated deficit                   |  | $                    | (1,628,757 | ) |             | $ | (1,603,014 | ) |  |  |  |  |  |  |  | 

|                                              |  |                      |        |   |                      |   |        |             |  |   |             |   |  |   |        |  
|--------------------------------------------- |  | -------------------- | ------ | - | -------------------- | - | ------ | ----------- |  | - | ----------- | - |  | - | ------ | -
|                                              |  | As of March 27, 2004 |        |   | As of March 29, 2003 |  
|                                              |  |                      |        |   |                      |  
|                                              |  | As Reported          |        |   | As Restated          |   |        | As Reported |  |   | As Restated |  
|                                              |  |                      |        |   |                      |   |        |             |  |   |             |  
|Changes to Consolidated Results of Operations |  |                      |        |   |                      |   |        |             |  |   |             |   |  |   |        |  
|Research and development                      |  | $                    | 84,770 |   |                      | $ | 85,103 |             |  | $ | 86,661      |   |  | $ | 87,025 |  
|Interest expense                              |  |                      | (8,832 | ) |                      |   | (8,932 | )           |  |   | (5,422      | ) |  |   | (5,577 | )
|Net income                                    |  | $                    | 9,163  |   |                      | $ | 8,730  |             |  | $ | 27,408      |   |  | $ | 26,889 |  
|Net income per share  diluted                |  | $                    | 0.04   |   |                      | $ | 0.03   |             |  |   |             |   |  |   |        |  



|   |                            
|-- | ---------------------------
|3. | Supplemental Financial Data

|                                               |                                          |                |          |         |              |   |          |         | 
|---------------------------------------------- | ---------------------------------------- | -------------- | -------- | ------- | ------------ | - | -------- | ------- | 
|                                               |                                          | March 27,      |          |         | December 27, |  
|                                               |                                          | 2004           |          |         | 2003         |  
|                                               |                                          |                |          |         |              |  
|                                               |                                          | (In thousands) |         
|Inventories:                                   |                                          |                |          |         |              |   |          |        
|                                               | Raw materials                            |                | $        | 54,002  |              |   | $        | 56,132  | 
|                                               | Work-in-process                          |                |          | 36,106  |              |   |          | 44,650  | 
|                                               | Finished goods                           |                |          | 138,031 |              |   |          | 117,229 | 
|                                               |                                          |                |          |         |              |  
|                                               |                                          | $              | 228,139  |         |              | $ | 218,011  |        
|                                               |                                          |                |          |         |              |  
|Prepaid expenses and other:                    |                                          |                |          |         |              |   |          |        
|                                               | Investments in securities, at fair value |                | $        | 14,592  |              |   | $        | 15,536  | 
|                                               | Prepaid expenses and other               |                |          | 19,662  |              |   |          | 22,765  | 
|                                               |                                          |                |          |         |              |  
|                                               |                                          | $              | 34,254   |         |              | $ | 38,301   |        
|                                               |                                          |                |          |         |              |  
|Property, plant and equipment, at cost:        |                                          |                |          |         |              |   |          |        
|                                               | Buildings                                |                | $        | 161,115 |              |   | $        | 152,381 | 
|                                               | Machinery and equipment                  |                |          | 630,505 |              |   |          | 608,735 | 
|                                               | Software                                 |                |          | 80,690  |              |   |          | 79,682  | 
|                                               | Furniture and fixtures                   |                |          | 27,145  |              |   |          | 26,583  | 
|                                               | Leasehold improvements                   |                |          | 86,789  |              |   |          | 86,430  | 
|                                               |                                          |                |          |         |              |  
|                                               |                                          | $              | 986,244  |         |              | $ | 953,811  |        
|Less accumulated depreciation and amortization |                                          |                | (631,471 | )       |              |   | (611,132 | )      
|                                               |                                          |                |          |         |              |  
|Net property, plant and equipment              |                                          | $              | 354,773  |         |              | $ | 342,679  |        
|                                               |                                          |                |          |         |              |  

10



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                               |                                              |   |         |         |  |   |         |         | 
|------------------------------ | -------------------------------------------- | - | ------- | ------- |  | - | ------- | ------- | 
|Accrued and other liabilities: |                                              |   |         |         |  |   |         |        
|                               | Income taxes payable                         |   | $       | 22,183  |  |   | $       | 23,763  | 
|                               | Accrued payroll and payroll-related expenses |   |         | 70,340  |  |   |         | 132,967 | 
|                               | Accrued warranty                             |   |         | 191,325 |  |   |         | 209,426 | 
|                               | Restructuring liabilities, short-term        |   |         | 10,684  |  |   |         | 9,096   | 
|                               | Accrued expenses (Restated)(1)               |   |         | 65,481  |  |   |         | 71,811  | 
|                               |                                              |   |         |         |  |  
|                               |                                              | $ | 360,013 |         |  | $ | 447,063 |        
|                               |                                              |   |         |         |  |  

|                  |                                      |   |         |         |  |   |         |         | 
|----------------- | ------------------------------------ | - | ------- | ------- |  | - | ------- | ------- | 
|Other liabilities |                                      |   |         |         |  |   |         |        
|                  | Tax indemnification liability        |   | $       | 135,245 |  |   | $       | 135,559 | 
|                  | Restructuring liabilities, long-term |   |         | 25,828  |  |   |         | 29,727  | 
|                  | Other (Restated)(1)                  |   |         | 14,506  |  |   |         | 14,802  | 
|                  |                                      |   |         |         |  |  
|                  |                                      | $ | 175,579 |         |  | $ | 180,088 |        
|                  |                                      |   |         |         |  |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.





|   |                                     
|-- | ------------------------------------
|4. | Goodwill and Other Intangible Assets







11



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |         |   |          |        |         |   |         |       |        | 
|----------------------------- | ------------------- | -------------------- |  | -------------- | -------- | - | ----------------- | ------------ | ------- | ----- | -------- | ------ | -------- | ------ | ------- | ----------- | ------------ | - | ------- | ----- | ------- | - | -------- | ------ | ------- | - | ------- | ----- | ------ | 
|                              |                     |                      |  | March 27, 2004 |          |   | December 27, 2003 |             
|                              |                     |                      |  |                |          |   |                   |             
|                              |                     | Useful               |  |                | Gross    |   |                   |              |         | Gross |          |        |         
|                              |                     | Life                 |  |                | Carrying |   |                   | Accumulated  |         |       |          |        | Carrying |        |         | Accumulated |              |   |        
|                              |                     | (Years)              |  |                | Amount   |   |                   | Amortization |         |       | Net      |        |          | Amount |         |             | Amortization |   |         | Net   |        
|                              |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |        
|                              |                     |                      |  | (In thousands) |          |   | (In thousands)    |             
|Goodwill (Restated)(1)        |                     |                      |  |                |          | $ | 628,463           |              |         |       |         |        |          | $      | 628,463 |             |              | $ | 628,463 |       |         |   |         |        |         | $ | 628,463 |      
|                              |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |        
|Quantum HDD                   |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |         |   |          |        |         |   |         |      
|                              | Existing Technology |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |         |   |          |        |         |   |         |       |       
|                              |                     | Core technology      |  |                | 5        |   |                   | $            | 96,700  |       |          | $      | (58,020  | )      |         | $           | 38,680       |   |         | $     | 96,700  |   |          | $      | (53,185 | ) |         | $     | 43,515 | 
|                              |                     | Consumer electronics |  |                | 3        |   |                   |              | 8,900   |       |          |        | (8,900   | )      |         |             |             |   |         |       | 8,900   |   |          |        | (8,158  | ) |         |       | 742    | 
|                              |                     | High-end             |  |                | 3        |   |                   |              | 75,500  |       |          |        | (75,500  | )      |         |             |             |   |         |       | 75,500  |   |          |        | (69,208 | ) |         |       | 6,292  | 
|                              |                     | Desktop              |  |                | 3        |   |                   |              | 105,000 |       |          |        | (105,000 | )      |         |             |             |   |         |       | 105,000 |   |          |        | (96,250 | ) |         |       | 8,750  | 
|MMC Technology                |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |         |   |          |        |         |   |         |      
|                              | Existing technology |                      |  | 5              |          |   |                   | 4,350        |         |       |          | (2,247 | )        |        |         | 2,103       |              |   | $       | 4,350 |         |   | $        | (2,030 | )       |   | $       | 2,320 |       
|                              |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |        
|Total other intangible assets |                     |                      |  |                |          | $ | 290,450           |              |         | $     | (249,667 | )      |          | $      | 40,783  |             |              | $ | 290,450 |       |         | $ | (228,831 | )      |         | $ | 61,619  |      
|                              |                     |                      |  |                |          |   |                   |              |         |       |          |        |          |        |         |             |              |   |         |       |        






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.





|   |                                         
|-- | ----------------------------------------
|5. | Short-term Borrowings and Long-term Debt



|                                                |  |           |         |   |              |   |         |  
|----------------------------------------------- |  | --------- | ------- | - | ------------ | - | ------- | -
|                                                |  | March 27, |         |   | December 27, |  
|                                                |  | 2004      |         |   | 2003         |  
|                                                |  |           |         |   |              |  
|6.8% Convertible Senior Notes due 2010          |  | $         | 230,000 |   |              | $ | 230,000 |  
|5.75% Subordinated Debentures due March 1, 2012 |  |           | 59,352  |   |              |   | 59,352  |  
|Manufacturing Facility Loan, Suzhou, China      |  |           | 30,000  |   |              |   | 15,000  |  
|Economic Development Board of Singapore Loans   |  |           | 30,784  |   |              |   | 24,138  |  
|Mortgages                                       |  |           | 33,782  |   |              |   | 34,164  |  
|Equipment Loans and Capital Leases              |  |           | 15,967  |   |              |   | 20,192  |  
|Receivable-backed Borrowing                     |  |           |        |   |              |   | 50,000  |  
|                                                |  |           |         |   |              |  
|                                                |  |           | 399,885 |   |              |   | 432,846 |  
|Less amounts due within one year                |  |           | (22,045 | ) |              |   | (77,037 | )
|                                                |  |           |         |   |              |  
|                                                |  | $         | 377,840 |   |              | $ | 355,809 |  
|                                                |  |           |         |   |              |  



12



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


















13



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |           
|-- | ----------
|6. | Guarantees



| |                                                  
| | -------------------------------------------------
| | Intellectual Property Indemnification Obligations





| |                 
| | ----------------
| | Accrued Warranty



|                                            |  |                    |         |   |           |   |         |  
|------------------------------------------- |  | ------------------ | ------- | - | --------- | - | ------- | -
|                                            |  | Three Months Ended |        
|                                            |  |                    |        
|                                            |  | March 27,          |         |   | March 29, |  
|                                            |  | 2004               |         |   | 2003      |  
|                                            |  |                    |         |   |           |  
|Balance at the beginning of the period      |  | $                  | 209,426 |   |           | $ | 278,713 |  
|Charges to operations                       |  |                    | 39,431  |   |           |   | 60,824  |  
|Settlements                                 |  |                    | (56,507 | ) |           |   | (49,035 | )
|Changes in estimates, primarily expirations |  |                    | (1,025  | ) |           |   | (23,919 | )
|                                            |  |                    |         |   |           |  
|Balance at the end of the period            |  | $                  | 191,325 |   |           | $ | 266,583 |  
|                                            |  |                    |         |   |           |  

14



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                        
|-- | -----------------------
|7. | Quantum HDD Acquisition







|                             |  |          |      |               |          |   |       |       |  |   |       |   |  |   |       |  
|---------------------------- |  | -------- | ---- | ------------- | -------- | - | ----- | ----- |  | - | ----- | - |  | - | ----- | -
|                             |  |          |      | Severance     |          |   |       |       | 
|                             |  | Facility |      |               | and      |   |       | Other |  |   |      
|                             |  | Costs    |      |               | Benefits |   |       | Costs |  |   | Total |  
|                             |  |          |      |               |          |   |       |       |  |   |       |  
|                             |  |          |      | (In millions) |          |   |      
|Provision at April 2, 2001   |  | $        | 45.3 |               |          | $ | 29.2  |       |  | $ | 12.7  |   |  | $ | 87.2  |  
|Amounts paid                 |  |          | (0.9 | )             |          |   | (15.5 | )     |  |   | (12.7 | ) |  |   | (29.1 | )
|                             |  |          |      |               |          |   |       |       |  |   |       |  
|Balance at December 29, 2001 |  |          | 44.4 |               |          |   | 13.7  |       |  |   |      |   |  |   | 58.1  |  
|Amounts paid                 |  |          | (4.5 | )             |          |   | (13.7 | )     |  |   |      |   |  |   | (18.2 | )
|                             |  |          |      |               |          |   |       |       |  |   |       |  
|Balance at December 28, 2002 |  |          | 39.9 |               |          |   |      |       |  |   |      |   |  |   | 39.9  |  
|Amounts paid                 |  |          | (8.5 | )             |          |   |      |       |  |   |      |   |  |   | (8.5  | )
|                             |  |          |      |               |          |   |       |       |  |   |       |  
|Balance at December 27, 2003 |  |          | 31.4 |               |          |   |      |       |  |   |      |   |  |   | 31.4  |  
|Amounts paid                 |  |          | (1.9 | )             |          |   |      |       |  |   |      |   |  |   | (1.9  | )
|                             |  |          |      |               |          |   |       |       |  |   |       |  
|Balance at March 27, 2004    |  | $        | 29.5 |               |          | $ |      |       |  | $ |      |   |  | $ | 29.5  |  
|                             |  |          |      |               |          |   |       |       |  |   |       |  





|   |                        
|-- | -----------------------
|8. | Discontinued Operations



15



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |              
|-- | -------------
|9. | Restructuring





|    |                     
|--- | --------------------
|10. | Net Income Per Share



|                                                 |                                         |                    |             |            |             |   |             |           | 
|------------------------------------------------ | --------------------------------------- | ------------------ | ----------- | ---------- | ----------- | - | ----------- | --------- | 
|                                                 |                                         | Three Months Ended |            
|                                                 |                                         |                    |            
|                                                 |                                         | March 27,          |             |            | March 29,   |  
|                                                 |                                         | 2004               |             |            | 2003        |  
|                                                 |                                         |                    |             |            |             |  
|                                                 |                                         | Restated(1)        |             |            | Restated(1) |  
|Numerator  Basic and Diluted                    |                                         |                    |             |            |             |   |             |          
|Net income                                       |                                         | $                  | 8,730       |            |             | $ | 26,889      |          
|                                                 |                                         |                    |             |            |             |  
|Net income available to common stockholders      |                                         | $                  | 8,730       |            |             | $ | 26,889      |          
|                                                 |                                         |                    |             |            |             |  
|Denominator                                      |                                         |                    |             |            |             |   |             |          
|Basic weighted average common shares outstanding |                                         |                    | 246,590,255 |            |             |   | 243,634,139 |          
|Effect of dilutive securities:                   |                                         |                    |             |            |             |   |             |          
|                                                 | Common stock options                    |                    |             | 10,304,899 |             |   |             | 3,135,070 | 
|                                                 | Restricted shares subject to repurchase |                    |             | 65,000     |             |   |             | 96,908    | 
|                                                 |                                         |                    |             |            |             |  
|Diluted weighted average common shares           |                                         |                    | 256,960,154 |            |             |   | 246,866,117 |          
|                                                 |                                         |                    |             |            |             |  
|Net income per share  basic                     |                                         | $                  | 0.04        |            |             | $ | 0.11        |          
|                                                 |                                         |                    |             |            |             |  
|Net income per share  diluted                   |                                         | $                  | 0.03        |            |             | $ | 0.11        |          
|                                                 |                                         |                    |             |            |             |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



|                                                                             |  |                    |            |  |           |  |            | 
|---------------------------------------------------------------------------- |  | ------------------ | ---------- |  | --------- |  | ---------- | 
|                                                                             |  | Three Months Ended |           
|                                                                             |  |                    |           
|                                                                             |  | March 27,          |            |  | March 29, | 
|                                                                             |  | 2004               |            |  | 2003      | 
|                                                                             |  |                    |            |  |           | 
|Common stock options                                                         |  |                    | 2,880,733  |  |           |  | 17,747,072 | 
|As-if converted shares related to 6.8% Convertible Senior
    Notes due 2010 |  |                    | 18,756,362 |  |           |  |           | 



|    |                     
|--- | --------------------
|11. | Comprehensive Income



16



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                  |  |                    |       |   |             |   |        | 
|----------------------------------------------------------------- |  | ------------------ | ----- | - | ----------- | - | ------ | 
|                                                                  |  | Three Months Ended |      
|                                                                  |  |                    |      
|                                                                  |  | March 27,          |       |   | March 29,   |  
|                                                                  |  | 2004               |       |   | 2003        |  
|                                                                  |  |                    |       |   |             |  
|                                                                  |  | Restated(1)        |       |   | Restated(1) |  
|Net income                                                        |  | $                  | 8,730 |   |             | $ | 26,889 | 
|Unrealized gain (loss) on investments in securities               |  |                    | (865  | ) |             |   | 1,799  | 
|Less: reclassification adjustment for gain included in net income |  |                    | 32    |   |             |   | 88     | 
|                                                                  |  |                    |       |   |             |  
|Comprehensive income                                              |  | $                  | 7,833 |   |             | $ | 28,600 | 
|                                                                  |  |                    |       |   |             |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



|    |                                                   
|--- | --------------------------------------------------
|12. | Segment, Geography and Major Customers Information







17



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                    |           |  |           |   |         | 
|------------------------------ |  | ------------------ | --------- |  | --------- | - | ------- | 
|                               |  | Three Months Ended |          
|                               |  |                    |          
|                               |  | March 27,          |           |  | March 29, |  
|                               |  | 2004               |           |  | 2003      |  
|                               |  |                    |           |  |           |  
|United States                  |  | $                  | 318,647   |  |           | $ | 303,969 | 
|Asia Pacific and Japan         |  |                    | 306,837   |  |           |   | 283,327 | 
|Europe, Middle East and Africa |  |                    | 381,234   |  |           |   | 330,593 | 
|Latin America and other        |  |                    | 12,970    |  |           |   | 21,000  | 
|                               |  |                    |           |  |           |  
|Total                          |  | $                  | 1,019,688 |  |           | $ | 938,889 | 
|                               |  |                    |           |  |           |  



|                               |  |               |           |  |               |   |           | 
|------------------------------ |  | ------------- | --------- |  | ------------- | - | --------- | 
|                               |  | March 27,     |           |  | December 27,  |  
|                               |  | 2004          |           |  | 2003          |  
|                               |  |               |           |  |               |  
|                               |  | (Restated)(1) |           |  | (Restated)(1) |  
|United States                  |  | $             | 899,733   |  |               | $ | 916,401   | 
|Asia Pacific and Japan         |  |               | 136,600   |  |               |   | 129,380   | 
|Europe, Middle East and Africa |  |               | 693       |  |               |   | 731       | 
|Latin America and other        |  |               | 224       |  |               |   | 157       | 
|                               |  |               |           |  |               |  
|Total                          |  | $             | 1,037,250 |  |               | $ | 1,046,669 | 
|                               |  |               |           |  |               |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.





|    |              
|--- | -------------
|13. | Contingencies







18



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












19



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                          
|--- | -------------------------
|14. | Related Party Transaction





|    |                 
|--- | ----------------
|15. | Subsequent Event



20



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations





Restatement








21



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Background














22



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Executive Overview










Critical Accounting Policies








| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | revenue recognition;                                                          
|
| |  | sales returns, other sales allowances and allowance for doubtful
    accounts;

23



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| |   |                                                               
| | - | --------------------------------------------------------------
| |  | valuation of intangibles, long-lived assets and goodwill;     
|
| |  | product warranty;                                             
|
| |  | inventory reserves;                                           
|
| |  | income taxes; and                                             
|
| |  | restructuring liabilities, litigation and other contingencies.



Results of Operations




| |                          
| | -------------------------
| | Revenues and Gross Profit

|                            |  |                    |         |   |           |   |       |        |  |   |       |  
|--------------------------- |  | ------------------ | ------- | - | --------- | - | ----- | ------ |  | - | ----- | -
|                            |  | Three Months Ended |         |   |          
|                            |  |                    |         |   |          
|                            |  | March 27,          |         |   | March 29, |   |       |       
|                            |  | 2004               |         |   | 2003      |   |       | Change | 
|                            |  |                    |         |   |           |   |       |        | 
|                            |  | (In millions)      |        
|Total revenues              |  | $                  | 1,019.7 |   |           | $ | 938.9 |        |  | $ | 80.8  |  
|Gross profit                |  | $                  | 155.1   |   |           | $ | 171.8 |        |  | $ | (16.7 | )
|Net income (Restated)(1)    |  | $                  | 8.7     |   |           | $ | 26.9  |        |  | $ | (18.2 | )
|As a percentage of revenue: |  |                    |         |   |           |   |       |        |  |   |       |  
|Total revenues              |  |                    | 100.0   | % |           |   | 100.0 | %      |  |   |       |  
|Gross profit                |  |                    | 15.2    | % |           |   | 18.3  | %      |  |   |       |  
|Net income (Restated)(1)    |  |                    | 0.9     | % |           |   | 2.9   | %      |  |   |       |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.

Revenue


Revenues.






24



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| |                               
| | ------------------------------
| | Cost of Revenues; Gross Profit



25



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Operating Expenses


|                                       |  |                    |      |   |           |   |      |        |  |   |      |  
|-------------------------------------- |  | ------------------ | ---- | - | --------- | - | ---- | ------ |  | - | ---- | -
|                                       |  | Three Months Ended |      |   |          
|                                       |  |                    |      |   |          
|                                       |  | March 27,          |      |   | March 29, |   |      |       
|                                       |  | 2004               |      |   | 2003      |   |      | Change | 
|                                       |  |                    |      |   |           |   |      |        | 
|                                       |  | (In millions)      |     
|Research and development (Restated)(1) |  | $                  | 85.1 |   |           | $ | 87.0 |        |  | $ | (1.9 | )
|Selling, general and administrative    |  | $                  | 32.5 |   |           | $ | 31.9 |        |  | $ | 0.6  |  
|Amortization of intangible assets      |  | $                  | 20.8 |   |           | $ | 20.6 |        |  | $ | 0.2  |  
|As a percentage of revenue:            |  |                    |      |   |           |   |      |        |  |   |      |  
|Research and development (Restated)(1) |  |                    | 8.3  | % |           |   | 9.3  | %      |  |   |      |  
|Selling, general and administrative    |  |                    | 3.2  | % |           |   | 3.4  | %      |  |   |      |  
|Amortization of intangible assets      |  |                    | 2.0  | % |           |   | 2.2  | %      |  |   |      |  






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



| |                                 
| | --------------------------------
| | Research and Development (R&D)





| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    (SG&A)





| |                         
| | ------------------------
| | Stock-based Compensation





| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | All Quantum HDD options and Quantum HDD restricted stock held by
    employees who accepted offers of employment with Maxtor, or
    transferred employees, whether or not options or
    restricted stock have vested;
|
| |  | Vested Quantum HDD options and vested Quantum HDD restricted
    stock held by Quantum employees whose employment is terminated
    prior to the separation, or former service
    providers; and                      
|
| |  | Vested Quantum HDD restricted stock held by any other individual.                                                                                                                                                        



26



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|                                       |  |                    |     |  |           |   |     | 
|-------------------------------------- |  | ------------------ | --- |  | --------- | - | --- | 
|                                       |  | Three Months Ended |    
|                                       |  |                    |    
|                                       |  | March 27,          |     |  | March 29, |  
|                                       |  | 2004               |     |  | 2003      |  
|                                       |  |                    |     |  |           |  
|                                       |  | (In millions)      |    
|Research and development               |  | $                  | 0.1 |  |           | $ | 0.2 | 
|Selling, general and administrative    |  |                    |    |  |           |   | 0.1 | 
|                                       |  |                    |     |  |           |  
|Total stock-based compensation expense |  | $                  | 0.1 |  |           | $ | 0.3 | 
|                                       |  |                    |     |  |           |  





| |                                  
| | ---------------------------------
| | Amortization of Intangible Assets







| |                     
| | --------------------
| | Restructuring Charge





| |                                                 
| | ------------------------------------------------
| | Interest Expense, Interest Income and Other Gain

|                               |                             |                    |      |    |           |   |      |        |  |   |      |   | 
|------------------------------ | --------------------------- | ------------------ | ---- | -- | --------- | - | ---- | ------ |  | - | ---- | - | 
|                               |                             | Three Months Ended |      |    |          
|                               |                             |                    |      |    |          
|                               |                             | March 27,          |      |    | March 29, |   |      |       
|                               |                             | 2004               |      |    | 2003      |   |      | Change | 
|                               |                             |                    |      |    |           |   |      |        | 
|                               |                             | (In millions)      |     
|Interest expense (Restated)(1) |                             | $                  | (8.9 | )  |           | $ | (5.6 | )      |  | $ | (3.3 | )
|Interest income                |                             | $                  | 1.3  |    |           | $ | 1.2  |        |  | $ | 0.1  |  
|Other gain                     |                             | $                  |     |    |           | $ | 0.2  |        |  | $ | (0.2 | )
|                               | As a percentage of revenue: |                    |      |    |           |   |      |        |  |   |      |   | 
|Interest expense (Restated)(1) |                             |                    | (0.9 | )% |           |   | (0.6 | )%     |  |   |      |  
|Interest income                |                             |                    | 0.1  | %  |           |   | 0.1  | %      |  |   |      |  
|Other gain                     |                             |                    | 0.0  | %  |           |   | 0.0  | %      |  |   |      |  

27



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|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.



| |                 
| | ----------------
| | Interest Expense





| |                
| | ---------------
| | Interest Income





| |           
| | ----------
| | Other Gain





| |                           
| | --------------------------
| | Provision for Income Taxes

|                                                       |  |                    |     |  |           |   |      |        |  |   |       |  
|------------------------------------------------------ |  | ------------------ | --- |  | --------- | - | ---- | ------ |  | - | ----- | -
|                                                       |  | Three Months Ended |     |  |          
|                                                       |  |                    |     |  |          
|                                                       |  | March 27,          |     |  | March 29, |   |      |       
|                                                       |  | 2004               |     |  | 2003      |   |      | Change | 
|                                                       |  |                    |     |  |           |   |      |        | 
|                                                       |  | (In millions)      |    
|Income before provision for income taxes (Restated)(1) |  | $                  | 9.0 |  |           | $ | 28.2 |        |  | $ | (19.2 | )
|Provision for income taxes                             |  | $                  | 0.3 |  |           | $ | 1.3  |        |  | $ | (1.0  | )






|    |                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------
|(1) | For additional information regarding the restatement, see
    note 2 of the Notes to Consolidated Financial Statements.





28



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Liquidity and Capital Resources














29



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| |                        
| | -----------------------
| | Contractual Obligations



|                                                                                       |  |       |           |           |        |   |         |           |     |   |             |           |  |               |         |  |  |   |         | 
|-------------------------------------------------------------------------------------- |  | ----- | --------- | --------- | ------ | - | ------- | --------- | --- | - | ----------- | --------- |  | ------------- | ------- |  |  | - | ------- | 
|                                                                                       |  |       |           | Less Than |        |   |         |           | 3-5 |   |             | More Than | 
|                                                                                       |  | Total |           |           | 1 Year |   |         | 1-3 Years |     |   | Years(1)(2) |           |  | 5 Years(1)(2) |        
|                                                                                       |  |       |           |           |        |   |         |           |     |   |             |           |  |               |        
|Long-term Debt                                                                         |  | $     | 383,918   |           |        | $ | 11,017  |           |     | $ | 59,753      |           |  | $             | 33,796  |  |  | $ | 279,352 | 
|Capital Lease Obligations                                                              |  |       | 15,967    |           |        |   | 11,028  |           |     |   | 4,939       |           |  |               |        |  |  |   |        | 
|Operating Leases(3)                                                                    |  |       | 299,265   |           |        |   | 35,379  |           |     |   | 63,855      |           |  |               | 61,902  |  |  |   | 138,129 | 
|Purchase Obligations(4)                                                                |  |       | 813,155   |           |        |   | 788,530 |           |     |   | 12,686      |           |  |               | 11,939  |  |  |   |        | 
|Other Long-term Liabilities Reflected on the Companys
    Balance Sheet under GAAP(5) |  |       | 50        |           |        |   |        |           |     |   | 50          |           |  |               |        |  |  |   |        | 
|Total                                                                                  |  | $     | 1,512,355 |           |        | $ | 845,954 |           |     | $ | 141,283     |           |  | $             | 107,637 |  |  | $ | 417,481 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include $103 million which may be borrowed under a
    facility in a U.S.-dollar-denominated loan, to be secured by our
    facilities in Suzhou, China, drawable until April 2007, and
    repayable in eight semi-annual installments commencing October
    2007; the borrowings under this facility will bear interest at
    LIBOR plus 50 basis points (subject to adjustment to
    60 basis points).                                                                                                                                                                                                                                                       
|   
|(2) | Does not include $67 million which we are obligated to
    contribute to our China subsidiary to allow drawdowns under the
    facilities described under footnote (1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(3) | Includes future minimum annual rental commitments, including
    amounts accrued as restructuring liabilities as of
    March 27, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Purchase obligations are defined as contractual obligations for
    purchase of goods or services, which are enforceable and legally
    binding on the Company and that specify all significant terms,
    including fixed or minimum quantities to be purchased, fixed,
    minimum or variable price provisions and the approximate timing
    of the transaction. The expected timing of payment of the
    obligations set forth above is estimated based on current
    information. Timing of payments and actual amounts paid may be
    different depending on the time of receipt of goods or services
    or changes to agreed-upon amounts for some obligations.
|   
|(5) | Excludes operating leases accrued as restructuring liabilities
    as of March 27, 2004. We have also excluded
    $135.6 million relating to our tax sharing indemnification
    agreement with Quantum Corporation as the time period within
    which the obligations may become due and owing is not specified.                                                                                                                                                                                                                                                                                                                                                         





30



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31



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CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE




| |                                                                    
| | -------------------------------------------------------------------
| | We have a history of losses and may not maintain
    profitability.





| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The decline of average selling prices in the hard disk
    drive industry could cause our operating results to suffer and
    make it difficult for us to achieve or maintain
    profitability.





| |                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Intense competition in the hard disk drive market could
    reduce the demand for our products or the prices of our
    products, which could adversely affect our operating
    results.





| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | consolidate or establish strategic relationships to lower their
    product costs or to otherwise compete more effectively against
    us;                
|
| |  | lower their product prices to gain market share;                                                                                                          
|
| |  | sell their products with other products to increase demand for
    their products;                                                                        
|
| |  | develop new technology which would significantly reduce the cost
    of their products; or                                                                
|
| |  | offer more products than we do and therefore enter into
    agreements with customers to supply hard disk drives as part of
    a larger supply agreement.



32



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| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | Our quarterly operating results have fluctuated
    significantly in the past and are likely to fluctuate in the
    future.





| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the average selling price of our products;                                                                                                                                                                           
|
| |  | fluctuations in the demand for our products as a result of the
    seasonal nature of the desktop computer industry and the markets
    for our customers products, as well as the overall
    economic environment;
|
| |  | market acceptance of our products;                                                                                                                                                                                   
|
| |  | our ability to qualify our products successfully with our
    customers;                                                                                                                                             
|
| |  | changes in purchases by our primary customers, including the
    cancellation, rescheduling or deferment of orders;                                                                                                  
|
| |  | changes in product and customer mix;                                                                                                                                                                                 
|
| |  | actions by our competitors, including announcements of new
    products or technological innovations;                                                                                                                
|
| |  | our ability to execute future product development and production
    ramps effectively;                                                                                                                              
|
| |  | the availability, and efficient use, of manufacturing capacity;                                                                                                                                                      
|
| |  | our inability to reduce a significant portion of our fixed costs
    due, in part, to our ongoing capital expenditure
    requirements; and                                                                          
|
| |  | our ability to procure and purchase critical components at
    competitive prices.                                                                                                                                   





| |                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have significant leverage which could materially and
    adversely affect our ability to obtain additional financing and
    our ability to meet debt service obligations will be dependent
    on our future performance, which is subject to risk.



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| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to qualify as a supplier to computer
    manufacturers or their subcontractors for a future generation of
    hard disk drives, then these manufacturers or subcontractors may
    not purchase any units of an entire product line, which will
    have a significant adverse impact on our sales.





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because we are substantially dependent on desktop computer
    drive sales, a decrease in the demand for desktop computers
    could reduce demand for our products.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | The loss of one or more significant customers or a
    decrease in their orders of products would cause our revenues to
    decline.





| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to develop and maintain relationships with our
    key distributors, if we experience problems associated with
    distribution channels, or if our key distributors favor our
    competitors products over ours, our operating results
    could suffer.



34



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| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | If we do not expand into new hard drive market segments,
    and maintain our presence in the hard disk drive market, our
    revenues will suffer.





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Our customers have adopted a subcontractor model that
    increases our credit risk and could result in an increase in our
    operating costs.





| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | If we fail to match production with product demand or to
    manage inventory, our operating results could suffer.



35



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because we purchase a significant portion of our parts
    from a limited number of third party suppliers, we are subject
    to the risk that we may be unable to acquire quality components
    in a timely manner, or effectively integrate parts from
    different suppliers, and these component shortages or
    integration problems could result in delays of product shipments
    and damage our business and operating results.









| |                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to acquire needed additional
    manufacturing capacity, or MKE does not meet our manufacturing
    requirements or a disaster occurs at one of our or MKEs
    plants, our growth will be adversely impacted and our business,
    financial condition and operating results could suffer.



36



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| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to risks related to product defects, which
    could subject us to warranty claims in excess of our warranty
    provision or which are greater than anticipated due to the
    unenforceability of liability limitations.





| |                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have asserted claims against Quantum, and Quantum has
    asserted claims against us, for payment under agreements entered
    into in connection with our acquisition of the Quantum HDD
    business. In the event these claims are not resolved favorably
    in the aggregate, our business, financial condition, operating
    results, cash flows and liquidity could be harmed.





| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Quantum incurs non-insured tax liabilities as a result
    of its separation of Quantum HDD from Quantum Corporation in
    connection with our acquisition of the Quantum HDD business, our
    financial condition and operating results could be negatively
    affected.



37



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| |                                                                                                            
| | -----------------------------------------------------------------------------------------------------------
| | Any failure to adequately protect and enforce our
    intellectual property rights could harm our business.





| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to existing claims relating to our
    intellectual property which are costly to defend and may harm
    our business.



38



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| |                                                                           
| | --------------------------------------------------------------------------
| | We face risks from our substantial international
    operations and sales.





| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties with staffing and managing international operations;                                                                                                                                                         
|
| |  | transportation and supply chain disruptions and increased
    transportation expense as a result of epidemics, terrorist
    activity, acts of war or hostility, increased security and less
    developed infrastructure;
|
| |  | economic slowdown and/or downturn in foreign markets;                                                                                                                                                                     

39



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| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | international currency fluctuations;                                                                                                                                                                                
|
| |  | political and economic uncertainty caused by epidemics,
    terrorism or acts of war or hostility;                                                                                                                  
|
| |  | legislative and regulatory responses to terrorist activity such
    as increased restrictions on cross-border movement of products
    and technology;                                                              
|
| |  | legislative, regulatory, police, or civil responses to epidemics
    or other outbreaks of infectious diseases such as quarantines,
    factory closures, or increased restrictions on transportation or
    travel;
|
| |  | general strikes or other disruptions in working conditions;                                                                                                                                                         
|
| |  | labor shortages;                                                                                                                                                                                                    
|
| |  | political instability;                                                                                                                                                                                              
|
| |  | changes in tariffs;                                                                                                                                                                                                 
|
| |  | generally longer periods to collect receivables;                                                                                                                                                                    
|
| |  | unexpected legislative or regulatory requirements;                                                                                                                                                                  
|
| |  | reduced protection for intellectual property rights in some
    countries;                                                                                                                                          
|
| |  | significant unexpected duties or taxes or other adverse tax
    consequences;                                                                                                                                       
|
| |  | difficulty in obtaining export licenses and other trade barriers;                                                                                                                                                   
|
| |  | seasonality;                                                                                                                                                                                                        
|
| |  | increased transportation/shipping costs; and                                                                                                                                                                        
|
| |  | credit and access to capital issues faced by our international
    customers.                                                                                                                                       





| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | Our operations and prospects in China are subject to
    significant political, economic and legal uncertainties.



40



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##### Table of Contents







| |                                                   
| | --------------------------------------------------
| | The loss of key personnel could harm our business.





| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We could be subject to environmental liabilities which
    could increase our expenses and harm our business, financial
    condition and results of operations.



41



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| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The market price of our common stock fluctuated
    substantially in the past and is likely to fluctuate in the
    future as a result of a number of factors, including the release
    of new products by us or our competitors, the loss or gain of
    significant customers or changes in stock market analysts
    estimates.





| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | quarterly fluctuations in operating results;                                                                                 
|
| |  | announcements of new products by us or our competitors such as
    products that address additional hard disk drive segments;
|
| |  | gains or losses of significant customers;                                                                                    
|
| |  | changes in stock market analysts estimates;                                                                                 
|
| |  | the presence of short-selling of our common stock;                                                                           
|
| |  | sales of a high volume of shares of our common stock by our
    large stockholders;                                          
|
| |  | events affecting other companies that the market deems
    comparable to us;                                                 
|
| |  | general conditions in the semiconductor and electronic systems
    industries; and                                           
|
| |  | general economic conditions in the United States and abroad.                                                                 



| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Anti-takeover provisions in our certificate of
    incorporation could discourage potential acquisition proposals
    or delay or prevent a change of control.



42



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|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk

Derivatives




Investments






|                      |  |          |        |    |          |   |        |            |  |   |        |    |  |         |        |  |          |   |        |          |  |   |        |   |  |   |        |  
|--------------------- |  | -------- | ------ | -- | -------- | - | ------ | ---------- |  | - | ------ | -- |  | ------- | ------ |  | -------- | - | ------ | -------- |  | - | ------ | - |  | - | ------ | -
|                      |  |          |        |    |          |   |        | Fair Value |  |   |        |    |  |         |       
|                      |  |          |        |    |          |   |        | as of      |  |   |        |    |  |         |       
|                      |  |          |        |    |          |   |        | March 27,  |  |   |        |    |  |         |       
|                      |  | +150 bps |        |    | +100 bps |   |        | +50 bps    |  |   | 2004   |    |  | -50 bps |        |  | -100 bps |   |        | -150 bps | 
|                      |  |          |        |    |          |   |        |            |  |   |        |    |  |         |        |  |          |   |        |          | 
|                      |  | ($000)   |       
|Financial Instruments |  | $        | 87,062 |    |          | $ | 87,423 |            |  | $ | 87,790 |    |  | $       | 88,166 |  |          | $ | 88,512 |          |  | $ | 88,898 |   |  | $ | 89,087 |  
|% Change              |  |          | (1.25  | )% |          |   | (0.84  | )%         |  |   | (0.43  | )% |  |         |        |  |          |   | 0.39   | %        |  |   | 0.83   | % |  |   | 1.04   | %



|                             |  |                                |       |       |           |   |        |                                |  |   |        |    |  |   |        |  |  |   |        |   |  |   |        |   |  |   |        |  
|---------------------------- |  | ------------------------------ | ----- | ----- | --------- | - | ------ | ------------------------------ |  | - | ------ | -- |  | - | ------ |  |  | - | ------ | - |  | - | ------ | - |  | - | ------ | -
|                             |  |                                |       |       |           |   |        | Fair Value                     |  |   |        |    |  |   |       
|                             |  |                                |       | as of |           |   |       
|                             |  | Valuation of Security Given X% |       |       | March 27, |   |        | Valuation of Security Given X% | 
|                             |  | Decrease in the Security Price |       |       | 2004      |   |        | Increase in the Security Price | 
|                             |  |                                |       |       |           |   |        |                                | 
|                             |  |                                |       |       |           |   |        | ($000)                         |  |   |       
|Corporate equity investments |  | $                              | 7,296 |       |           | $ | 10,944 |                                |  | $ | 12,403 |    |  | $ | 14,592 |  |  | $ | 16,781 |   |  | $ | 18,240 |   |  | $ | 21,888 |  
|% Change                     |  |                                | (50   | )%    |           |   | (25    | )%                             |  |   | (15    | )% |  |   |        |  |  |   | 15     | % |  |   | 25     | % |  |   | 50     | %






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) Hiring additional accounting personnel and engaging
    outside contractors with technical accounting expertise, as
    needed, and reorganizing the accounting and finance department
    to ensure that accounting personnel with adequate experience,
    skills and knowledge relating to complex, non-routine
    transactions are directly involved in the review and accounting
    evaluation of our complex, non-routine transactions;
|
| | (2) Involving both internal accounting personnel and
    outside contractors with technical accounting expertise, as
    needed, early in the evaluation of a complex, non-routine
    transaction to obtain additional guidance as to the application
    of generally accepted accounting principles to such a proposed
    transaction;                                                                                                         
|
| | (3) Documenting to standards established by senior
    accounting personnel and the principal accounting officer the
    review, analysis and related conclusions with respect to
    complex, non- routine transactions; and                                                                                                                                                                                                                      
|
| | (4) Requiring senior accounting personnel and the principal
    accounting officer to review complex non-routine transactions to
    evaluate and approve the accounting treatment for such
    transactions.                                                                                                                                                                                                                                      







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Evaluation of Effectiveness of Disclosure Controls and
Procedures




45



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##### Table of Contents






PART II. OTHER INFORMATION







|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings











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##### Table of Contents












|        |                                          
|------- | -----------------------------------------
|Item 2. | Changes in Securities and Use of Proceeds








|        |                                
|------- | -------------------------------
|Item 3. | Defaults Upon Senior Securities








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders








|        |                  
|------- | -----------------
|Item 5. | Other Information








|        |                                 
|------- | --------------------------------
|Item 6. | Exhibits and Reports on Form 8-K

Exhibits.


Reports on Form 8-K.








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SIGNATURES






| |                   
| | ------------------
| | Maxtor Corporation
| | (Registrant)      



| |     |                       
| | --- | ----------------------
| | By: | /s/ Duston M. Williams

| |                                  
| | ---------------------------------
| |                                  
| | Duston M. Williams               
| | Executive Vice President, Finance
| | and Chief Executive Officer      



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EXHIBIT INDEX


|        |    |             |  |                                                                                                                                                                                                                                                                               
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .1(1)       |  | Supplementary Agreement on Amendment of Foreign Exchange
    Loan Contract between Maxtor Technology (Suzhou) Co., Ltd.
    and Bank of China SIP Sub-branch, dated March 24, 2004.                                                                                           
|       
|        | 10 | .2(1)       |  | Letter of Direction from Radian Reinsurance Inc., Merrill Lynch
    Commercial Financial Corp., Maxtor Funding LLC and Maxtor
    Corporation to U.S. Bank National Association, dated
    April 2, 2004.                                                                     
|       
|        | 31 | .1          |  | Certification of Dr. C.S. Park, Chairman and Chief
    Executive Officer of the Registrant pursuant to Rule 13a-14
    adopted under the Securities Exchange Act of 1934, as amended,
    and Section 302 of the Sarbanes-Oxley Act of 2002.                                  
|       
|        | 31 | .2          |  | Certification of Duston M. Williams, Executive Vice President,
    Finance and Chief Financial Officer of the Registrant pursuant
    to Rule 13a-14 adopted under the Securities Exchange Act of
    1934, as amended, and Section 302 of the Sarbanes-Oxley Act
    of 2002.
|       
|        | 32 | .1          |  | Certification of Dr. C.S. Park, Chairman and Chief
    Executive Officer of the Registrant furnished pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                              
|       
|        | 32 | .2          |  | Certification of Duston M. Williams, Executive Vice President,
    Finance and Chief Financial Officer of the Registrant furnished
    pursuant to 18 U.S.C. § 1350, as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.                                






|    |                                                                          
|--- | -------------------------------------------------------------------------
|(1) | Incorporated by reference to exhibits of Form 10-Q filed
    May 6, 2004.

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