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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
    April 2, 2005
|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: 001-16447


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(Address of principal executive offices) |  | 95035(Zip Code)    

Registrants telephone number, including area code:


(408) 894-5000


þ o


þ o












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MAXTOR CORPORATION


FORM 10-Q/A


April 2, 2005


INDEX


|                                  |  |                                                                                                                            |    |      |    | 
|--------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                  |  |                                                                                                                            |    | Page |   
|                                  |  |                                                                                                                            |    |      |   
|PART I. FINANCIAL
    INFORMATION
|Item 1.                           |  | Condensed Consolidated Financial Statements
    (Unaudited)                                                                |    |      | 4  | 
|                                  |  | Condensed Consolidated Balance
    Sheets  April 2, 2005, and December 25,
    2004 (Unaudited)                           |    |      | 4  | 
|                                  |  | Condensed Consolidated Statements of
    Operations  Three months ended April 2, 2005,
    and March 27, 2004 (Unaudited) |    |      | 5  | 
|                                  |  | Condensed Consolidated Statements of Cash
    Flows  Three months ended April 2, 2005, and
    March 27, 2004 (Unaudited) |    |      | 6  | 
|                                  |  | Notes to Condensed Consolidated Financial
    Statements (Unaudited)                                                       |    |      | 7  | 
|Item 2.                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                  |    |      | 23 | 
|Item 3.                           |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                             |    |      | 50 | 
|Item 4.                           |  | Controls and Procedures                                                                                                    |    |      | 51 | 
|PART II. OTHER INFORMATION       
|Item 1.                           |  | Legal Proceedings                                                                                                          |    |      | 55 | 
|Item 2.                           |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                            |    |      | 56 | 
|Item 3.                           |  | Defaults Upon Senior Securities                                                                                            |    |      | 56 | 
|Item 4.                           |  | Submission of Matters to a Vote of Security
    Holders                                                                    |    |      | 56 | 
|Item 5.                           |  | Other Information                                                                                                          |    |      | 56 | 
|Item 6.                           |  | Exhibits                                                                                                                   |    |      | 56 | 
|Signature Page                    |  |                                                                                                                            | 57 |     
|EXHIBIT 31.1                     
|EXHIBIT 31.2                     
|EXHIBIT 32.1                     
|EXHIBIT 32.2                     



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EXPLANATORY NOTE














|                                  |  |                     |            |   |             |   |            |  
|--------------------------------- |  | ------------------- | ---------- | - | ----------- | - | ---------- | -
|                                  |  | As of April 2, 2005 |           
|                                  |  |                     |           
|Changes to Condensed Consolidated |  | (In thousands)      |           
|Balance Sheet                     |  | As Reported         |            |   | As Restated |  
|                                  |  |                     |            |   |             |  
|Inventories                       |  | $                   | 226,993    |   |             | $ | 231,028    |  
|Accumulated deficit               |  | $                   | (1,819,379 | ) |             | $ | (1,815,344 | )

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|                                  |  |                       |         |   |             |   |         |  
|--------------------------------- |  | --------------------- | ------- | - | ----------- | - | ------- | -
|                                  |  | Three Months Ended    |        
|                                  |  | April 2, 2005         |        
|                                  |  |                       |        
|                                  |  | (In thousands, except |        
|Changes to Condensed Consolidated |  | per share amounts)    |        
|Statements of Operations          |  | As Reported           |         |   | As Restated |  
|                                  |  |                       |         |   |             |  
|Cost of revenues                  |  | $                     | 957,232 |   |             | $ | 953,197 |  
|Gross profit                      |  | $                     | 112,369 |   |             | $ | 116,404 |  
|Net loss                          |  | $                     | (24,196 | ) |             | $ | (20,161 | )
|Net loss per share  basic        |  | $                     | (0.10   | ) |             | $ | (0.08   | )
|Net loss per share  diluted      |  | $                     | (0.10   | ) |             | $ | (0.08   | )







| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | Item 1. Condensed Consolidated Financial Statements
    (Unaudited)                              
|
| |  | Item 2. Managements Discussion and Analysis of
    Financial Condition and Results of Operations
|
| |  | Item 4. Controls and Procedures                                                                  





| |   |                 
| | - | ----------------
| |  | Item 6. Exhibits



3



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PART I. FINANCIAL INFORMATION







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

MAXTOR CORPORATION





CONDENSED CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              |  |            |         |           | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ------- | ------------ |  | ---------- | ------- | --------- | 
|                                           |                                                                                                                                                                                                                                                   | April 2,                                   |            |         | December 25, | 
|                                           |                                                                                                                                                                                                                                                   | 2005                                       |            |         | 2004         | 
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Restated                                   |            |         |             
|                                           |                                                                                                                                                                                                                                                   | (Unaudited)                                |           
|                                           |                                                                                                                                                                                                                                                   | (In thousands, except share and            |           
|                                           |                                                                                                                                                                                                                                                   | per share amounts)                         |           
|ASSETS                                    
|Current assets:                            |                                                                                                                                                                                                                                                   |                                            |            |         |              |  |            |        
|                                           | Cash and cash equivalents                                                                                                                                                                                                                         |                                            | $          | 375,607 |              |  | $          | 378,065 |          
|                                           | Restricted cash                                                                                                                                                                                                                                   |                                            |            | 15,033  |              |  |            | 24,561  |          
|                                           | Marketable securities                                                                                                                                                                                                                             |                                            |            | 89,205  |              |  |            | 103,969 |          
|                                           | Accounts receivable, net of allowance of doubtful accounts of
    $7,813 at April 2, 2005 and $8,228 at December 25, 2004                                                                                                                         |                                            |            | 428,824 |              |  |            | 425,528 |          
|                                           | Other receivables                                                                                                                                                                                                                                 |                                            |            | 30,300  |              |  |            | 40,838  |          
|                                           | Inventories                                                                                                                                                                                                                                       |                                            |            | 231,028 |              |  |            | 229,410 |          
|                                           | Prepaid expenses and other                                                                                                                                                                                                                        |                                            |            | 31,391  |              |  |            | 36,336  |          
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Total current assets                       |            |         | 1,201,388    |  |            |         | 1,238,707 | 
|Property, plant and equipment, net         |                                                                                                                                                                                                                                                   |                                            | 338,252    |         |              |  | 347,934    |        
|Goodwill                                   |                                                                                                                                                                                                                                                   |                                            | 489,482    |         |              |  | 489,482    |        
|Other intangible assets, net               |                                                                                                                                                                                                                                                   |                                            | 1,233      |         |              |  | 1,450      |        
|Other assets                               |                                                                                                                                                                                                                                                   |                                            | 11,981     |         |              |  | 30,168     |        
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Total assets                               |            | $       | 2,042,336    |  |            | $       | 2,107,741 | 
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                          
|LIABILITIES AND STOCKHOLDERS EQUITY      
|Current liabilities:                       |                                                                                                                                                                                                                                                   |                                            |            |         |              |  |            |        
|                                           | Short-term borrowings, including current portion of long-term
    debt                                                                                                                                                                            |                                            | $          | 72,469  |              |  | $          | 82,561  |          
|                                           | Accounts payable                                                                                                                                                                                                                                  |                                            |            | 629,208 |              |  |            | 674,947 |          
|                                           | Accrued and other liabilities                                                                                                                                                                                                                     |                                            |            | 345,894 |              |  |            | 324,369 |          
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Total current liabilities                  |            |         | 1,047,571    |  |            |         | 1,081,877 | 
|Long-term debt, net of current portion     |                                                                                                                                                                                                                                                   |                                            | 363,963    |         |              |  | 382,570    |        
|Other liabilities                          |                                                                                                                                                                                                                                                   |                                            | 65,448     |         |              |  | 66,695     |        
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Total liabilities                          |            |         | 1,476,982    |  |            |         | 1,531,142 | 
|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; 266,375,220 shares issued and
    253,129,482 shares outstanding at April 2, 2005 and
    263,413,578 shares issued and 250,167,840 shares
    outstanding at December 25, 2004 |                                            |            | 2,664   |              |  |            | 2,634   |          
|Additional paid-in capital                 |                                                                                                                                                                                                                                                   |                                            | 2,440,074  |         |              |  | 2,429,551  |        
|Accumulated deficit                        |                                                                                                                                                                                                                                                   |                                            | (1,815,344 | )       |              |  | (1,795,183 | )      
|Cumulative other comprehensive income      |                                                                                                                                                                                                                                                   |                                            | 2,899      |         |              |  | 4,536      |        
|Treasury stock (13,245,738 shares) at cost |                                                                                                                                                                                                                                                   |                                            | (64,939    | )       |              |  | (64,939    | )      
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Total stockholders equity                 |            |         | 565,354      |  |            |         | 576,599   | 
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 
|                                           |                                                                                                                                                                                                                                                   | Total liabilities and stockholders equity |            | $       | 2,042,336    |  |            | $       | 2,107,741 | 
|                                           |                                                                                                                                                                                                                                                   |                                            |            |         |              | 



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MAXTOR CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                      |                                     |                                     |           |         |             |   |           |         |             | 
|------------------------------------- | ----------------------------------- | ----------------------------------- | --------- | ------- | ----------- | - | --------- | ------- | ----------- | 
|                                      |                                     | Three Months Ended                  |          
|                                      |                                     |                                     |          
|                                      |                                     | April 2,                            |           |         | March 27,   |  
|                                      |                                     | 2005                                |           |         | 2004        |  
|                                      |                                     |                                     |           |         |             |  
|                                      |                                     | Restated                            |           |         |            
|                                      |                                     | (Unaudited)                         |          
|                                      |                                     | (In thousands, except share and per |          
|                                      |                                     | share amounts)                      |          
|Net revenues                          |                                     | $                                   | 1,069,601 |         |             | $ | 1,019,688 |        
|Cost of revenues                      |                                     |                                     | 953,197   |         |             |   | 864,625   |        
|                                      |                                     |                                     |           |         |             |  
|                                      | Gross profit                        |                                     |           | 116,404 |             |   |           | 155,063 |            
|Operating expenses:                   |                                     |                                     |           |         |             |   |           |        
|                                      | Research and development            |                                     |           | 78,551  |             |   |           | 85,103  |            
|                                      | Selling, general and administrative |                                     |           | 37,302  |             |   |           | 32,514  |            
|                                      | Amortization of intangible assets   |                                     |           | 217     |             |   |           | 20,836  |            
|                                      | Restructuring charge                |                                     |           | 13,854  |             |   |           |        |            
|                                      |                                     |                                     |           |         |             |  
|                                      |                                     | Total operating expenses            |           |         | 129,924     |   |           |         | 138,453     | 
|                                      |                                     |                                     |           |         |             |  
|Income (loss) from operations         |                                     |                                     | (13,520   | )       |             |   | 16,610    |        
|Interest expense                      |                                     |                                     | (8,401    | )       |             |   | (8,932    | )      
|Interest income                       |                                     |                                     | 2,356     |         |             |   | 1,288     |        
|Other gain (loss)                     |                                     |                                     | (268      | )       |             |   | 38        |        
|                                      |                                     |                                     |           |         |             |  
|Income (loss) before income taxes     |                                     |                                     | (19,833   | )       |             |   | 9,004     |        
|Provision for income taxes            |                                     |                                     | 328       |         |             |   | 274       |        
|                                      |                                     |                                     |           |         |             |  
|Net income (loss)                     |                                     | $                                   | (20,161   | )       |             | $ | 8,730     |        
|                                      |                                     |                                     |           |         |             |  
|Net income (loss) per share  basic   |                                     | $                                   | (0.08     | )       |             | $ | 0.04      |        
|Net income (loss) per share  diluted |                                     | $                                   | (0.08     | )       |             | $ | 0.03      |        
|Shares used in per share calculation  |                                     |                                     |           |         |             |   |           |        
|                                      |                                     |  basic                             |           |         | 251,595,181 |   |           |         | 246,590,255 | 
|                                      |                                     |  diluted                           |           |         | 251,595,181 |   |           |         | 256,960,154 | 



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MAXTOR CORPORATION


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                         |                                                                            |                                   |                                                                  |        |           |         |         |        |         |         |  
|-------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------- | ---------------------------------------------------------------- | ------ | --------- | ------- | ------- | ------ | ------- | ------- | -
|                                                                                                         |                                                                            | Three Months Ended                |                                                                 
|                                                                                                         |                                                                            |                                   |                                                                 
|                                                                                                         |                                                                            | April 2,                          |                                                                  |        | March 27, |        
|                                                                                                         |                                                                            | 2005                              |                                                                  |        | 2004      |        
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|                                                                                                         |                                                                            | Restated                          |                                                                  |        |          
|                                                                                                         |                                                                            | (Unaudited)                       |                                                                 
|                                                                                                         |                                                                            | (In thousands)                    |                                                                 
|Cash Flows from Operating Activities:                                                                    |                                                                            |                                   |                                                                  |        |           |         |         |       
|Net income (loss)                                                                                        |                                                                            | $                                 | (20,161                                                          | )      |           | $       | 8,730   |       
|Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:          |                                                                            |                                   |                                                                  |        |           |         |         |       
|                                                                                                         | Depreciation and amortization                                              |                                   |                                                                  | 37,307 |           |         |         | 36,107 |        
|                                                                                                         | Amortization of intangible assets                                          |                                   |                                                                  | 217    |           |         |         | 20,836 |        
|                                                                                                         | Stock-based compensation expense                                           |                                   |                                                                  | 13     |           |         |         | 144    |        
|                                                                                                         | Restructuring charge, net                                                  |                                   |                                                                  | 13,752 |           |         |         |       |        
|                                                                                                         | Loss (gain) on sale of property, plant and equipment and
    other assets  |                                   |                                                                  | (338   | )         |         |         | 353    |        
|                                                                                                         | Net loss on sale of investments                                            |                                   |                                                                  | 12     |           |         |         |       |        
|                                                                                                         | Change in assets and liabilities:                                          |                                   |                                                                  |        |           |         |         |        |        
|                                                                                                         |                                                                            | Accounts receivable               |                                                                  |        | (3,296    | )       |         |        | 69,097  |        
|                                                                                                         |                                                                            | Other receivables                 |                                                                  |        | 10,538    |         |         |        | (7,888  | )      
|                                                                                                         |                                                                            | Inventories                       |                                                                  |        | (1,618    | )       |         |        | (10,128 | )      
|                                                                                                         |                                                                            | Prepaid expenses and other assets |                                                                  |        | 3,765     |         |         |        | 3,910   |        
|                                                                                                         |                                                                            | Accounts payable                  |                                                                  |        | (47,211   | )       |         |        | (32,177 | )      
|                                                                                                         |                                                                            | Accrued and other liabilities     |                                                                  |        | 6,526     |         |         |        | (90,879 | )      
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|                                                                                                         |                                                                            |                                   | Net cash used in operating activities from continuing operations |        |           | (494    | )       |        |         | (1,895  | )
|                                                                                                         |                                                                            |                                   | Net cash flow used in discontinued operations                    |        |           |        |         |        |         | (680    | )
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|                                                                                                         |                                                                            |                                   | Net cash used in operating activities                            |        |           | (494    | )       |        |         | (2,575  | )
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|Cash Flows from Investing Activities:                                                                    |                                                                            |                                   |                                                                  |        |           |         |         |       
|Proceeds from sale of property, plant and equipment                                                      |                                                                            |                                   | 1                                                                |        |           |         | 720     |       
|Purchase of property, plant and equipment                                                                |                                                                            |                                   | (25,816                                                          | )      |           |         | (52,176 | )     
|Decrease (increase) in restricted assets                                                                 |                                                                            |                                   | 27,627                                                           |        |           |         | (8,512  | )     
|Proceeds from sale of marketable securities                                                              |                                                                            |                                   | 28,283                                                           |        |           |         | 12,920  |       
|Purchase of marketable securities                                                                        |                                                                            |                                   | (13,900                                                          | )      |           |         | (14,289 | )     
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|                                                                                                         |                                                                            |                                   | Net cash provided by (used in) investing activities              |        |           | 16,195  |         |        |         | (61,337 | )
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|Cash Flows from Financing Activities:                                                                    |                                                                            |                                   |                                                                  |        |           |         |         |       
|Proceeds from issuance of debt, including short-term borrowings                                          |                                                                            |                                   |                                                                 |        |           |         | 24,655  |       
|Principal payments of debt including short-term borrowings                                               |                                                                            |                                   | (27,567                                                          | )      |           |         | (3,391  | )     
|Principal payments under capital lease obligations                                                       |                                                                            |                                   | (1,132                                                           | )      |           |         | (4,225  | )     
|Payment of receivable-backed borrowing                                                                   |                                                                            |                                   |                                                                 |        |           |         | (50,000 | )     
|Proceeds from issuance of common stock from employee stock
    purchase plan and stock options exercised |                                                                            |                                   | 10,540                                                           |        |           |         | 9,718   |       
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|                                                                                                         |                                                                            |                                   | Net cash used in financing activities                            |        |           | (18,159 | )       |        |         | (23,243 | )
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|Net change in cash and cash equivalents                                                                  |                                                                            |                                   | (2,458                                                           | )      |           |         | (87,155 | )     
|Cash and cash equivalents at beginning of period                                                         |                                                                            |                                   | 378,065                                                          |        |           |         | 530,816 |       
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|Cash and cash equivalents at end of period                                                               |                                                                            | $                                 | 375,607                                                          |        |           | $       | 443,661 |       
|                                                                                                         |                                                                            |                                   |                                                                  |        |           |        
|Supplemental Disclosures of Cash Flow Information:                                                       |                                                                            |                                   |                                                                  |        |           |         |         |       
|                                                                                                         | Cash paid during the period for:                                           |                                   |                                                                  |        |           |         |         |        |        
|                                                                                                         |                                                                            | Interest                          |                                                                  | $      | 4,013     |         |         | $      | 4,168   |        
|                                                                                                         |                                                                            | Income taxes                      |                                                                  | $      | 647       |         |         | $      | 2,146   |        
|Schedule of Non-Cash Investing and Financing Activities:                                                 |                                                                            |                                   |                                                                  |        |           |         |         |       
|                                                                                                         | Purchase of property, plant and equipment financed by accounts
    payable |                                   | $                                                                | 6,252  |           |         | $       | 2,966  |        
|                                                                                                         | Retirement of debt in exchange for bond redemption                         |                                   | $                                                                | 5,000  |           |         | $       | 5,000  |        
|                                                                                                         | Change in unrealized loss on investments                                   |                                   | $                                                                | (1,637 | )         |         | $       | (897   | )      



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MAXTOR CORPORATION





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




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



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





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





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





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





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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Disclosures about Segments of an Enterprise and
Related Information,






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



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                                                              |                             |                    |         |         |           |   |       |       | 
|------------------------------------------------------------------------------------------------------------- | --------------------------- | ------------------ | ------- | ------- | --------- | - | ----- | ----- | 
|                                                                                                              |                             | Three Months Ended |        
|                                                                                                              |                             |                    |        
|                                                                                                              |                             | April 2,           |         |         | March 27, |  
|                                                                                                              |                             | 2005               |         |         | 2004      |  
|                                                                                                              |                             |                    |         |         |           |  
|                                                                                                              |                             | Restated(1)        |         |         |          
|Net income (loss) applicable to common stockholders, as reported                                              |                             | $                  | (20,161 | )       |           | $ | 8,730 |      
|Add: Stock-based employee compensation expense included in
    reported net income (loss)                     |                             |                    | 13      |         |           |   | 144   |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value method for all awards |                             |                    | 3,917   |         |           |   | 5,491 |      
|                                                                                                              |                             |                    |         |         |           |  
|                                                                                                              | Pro forma net income (loss) |                    | $       | (24,065 | )         |   | $     | 3,383 | 
|                                                                                                              |                             |                    |         |         |           |  
|Net income (loss) per share                                                                                   |                             |                    |         |         |           |   |       |      
|                                                                                                              | As reported  basic         |                    | $       | (0.08   | )         |   | $     | 0.04  | 
|                                                                                                              | Pro forma  basic           |                    | $       | (0.10   | )         |   | $     | 0.01  | 
|                                                                                                              | As reported  diluted       |                    | $       | (0.08   | )         |   | $     | 0.03  | 
|                                                                                                              | Pro forma  diluted         |                    | $       | (0.10   | )         |   | $     | 0.01  | 






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





|                               |  |                    |           |   |           |  |           |  
|------------------------------ |  | ------------------ | --------- | - | --------- |  | --------- | -
|                               |  | Three Months Ended |          
|                               |  |                    |          
|                               |  | April 2,           |           |   | March 27, | 
|                               |  | 2005               |           |   | 2004      | 
|                               |  |                    |           |   |           | 
|Risk-free interest rate        |  |                    | 3.89      | % |           |  | 3.02      | %
|Weighted average expected life |  |                    | 4.5 years |   |           |  | 4.5 years |  
|Volatility                     |  |                    | 74        | % |           |  | 75        | %
|Dividend yield                 |  |                    |          |   |           |  |          |  

9



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                    |           |   |           |  |           |  
|------------------------------ |  | ------------------ | --------- | - | --------- |  | --------- | -
|                               |  | Three Months Ended |          
|                               |  |                    |          
|                               |  | April 2,           |           |   | March 27, | 
|                               |  | 2005               |           |   | 2004      | 
|                               |  |                    |           |   |           | 
|Risk-free interest rate        |  |                    | 2.86      | % |           |  | 1.01      | %
|Weighted average expected life |  |                    | 0.5 years |   |           |  | 0.5 years |  
|Volatility                     |  |                    | 74        | % |           |  | 76        | %
|Dividend yield                 |  |                    |          |   |           |  |          |  





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







|                                  |  |                     |            |   |             |   |            |  
|--------------------------------- |  | ------------------- | ---------- | - | ----------- | - | ---------- | -
|                                  |  | As of April 2, 2005 |           
|                                  |  |                     |           
|Changes to Condensed Consolidated |  | (In thousands)      |           
|Balance Sheet                     |  | As Reported         |            |   | As Restated |  
|                                  |  |                     |            |   |             |  
|Inventories                       |  | $                   | 226,993    |   |             | $ | 231,028    |  
|Accumulated deficit               |  | $                   | (1,819,379 | ) |             | $ | (1,815,344 | )

|                                  |  |                       |         |   |             |   |         |  
|--------------------------------- |  | --------------------- | ------- | - | ----------- | - | ------- | -
|                                  |  | Three Months Ended    |        
|                                  |  | April 2, 2005         |        
|                                  |  |                       |        
|                                  |  | (In thousands, expect |        
|Changes to Condensed Consolidated |  | per share)            |        
|Statements of Operations          |  | As Reported           |         |   | As Restated |  
|                                  |  |                       |         |   |             |  
|Cost of revenues                  |  | $                     | 957,232 |   |             | $ | 953,197 |  
|Gross profit                      |  | $                     | 112,369 |   |             | $ | 116,404 |  
|Net loss                          |  | $                     | (24,196 | ) |             | $ | (20,161 | )
|Net loss per share  basic        |  | $                     | (0.10   | ) |             | $ | (0.08   | )
|Net loss per share  diluted      |  | $                     | (0.10   | ) |             | $ | (0.08   | )

10



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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

|                                               |                                                 |                |           |         |              |   |           |         | 
|---------------------------------------------- | ----------------------------------------------- | -------------- | --------- | ------- | ------------ | - | --------- | ------- | 
|                                               |                                                 | April 2,       |           |         | December 25, |  
|                                               |                                                 | 2005           |           |         | 2004         |  
|                                               |                                                 |                |           |         |              |  
|                                               |                                                 | (In thousands) |          
|Inventories:                                   |                                                 |                |           |         |              |   |           |        
|                                               | Raw materials                                   |                | $         | 75,699  |              |   | $         | 79,904  | 
|                                               | Work-in-process                                 |                |           | 48,899  |              |   |           | 57,800  | 
|                                               | Finished goods (Restated)(1)                    |                |           | 106,430 |              |   |           | 91,706  | 
|                                               |                                                 |                |           |         |              |  
|                                               |                                                 | $              | 231,028   |         |              | $ | 229,410   |        
|                                               |                                                 |                |           |         |              |  
|Prepaid expenses and other:                    |                                                 |                |           |         |              |   |           |        
|                                               | Investments in equity securities, at fair value |                | $         | 3,776   |              |   | $         | 10,042  | 
|                                               | Asset held for sale                             |                |           | 8,200   |              |   |           | 8,200   | 
|                                               | Prepaid expenses and other                      |                |           | 19,415  |              |   |           | 18,094  | 
|                                               |                                                 |                |           |         |              |  
|                                               |                                                 | $              | 31,391    |         |              | $ | 36,336    |        
|                                               |                                                 |                |           |         |              |  
|Property, plant and equipment, at cost:        |                                                 |                |           |         |              |   |           |        
|                                               | Buildings                                       |                | $         | 159,271 |              |   | $         | 155,172 | 
|                                               | Machinery and equipment                         |                |           | 663,146 |              |   |           | 659,324 | 
|                                               | Software                                        |                |           | 86,282  |              |   |           | 86,014  | 
|                                               | Furniture and fixtures                          |                |           | 27,718  |              |   |           | 27,604  | 
|                                               | Leasehold improvements                          |                |           | 91,675  |              |   |           | 91,571  | 
|                                               |                                                 |                |           |         |              |  
|                                               |                                                 | $              | 1,028,092 |         |              | $ | 1,019,685 |        
|Less accumulated depreciation and amortization |                                                 |                | (689,840  | )       |              |   | (671,751  | )      
|                                               |                                                 |                |           |         |              |  
|Net property, plant and equipment              |                                                 | $              | 338,252   |         |              | $ | 347,934   |        
|                                               |                                                 |                |           |         |              |  
|Accrued and other liabilities:                 |                                                 |                |           |         |              |   |           |        
|                                               | Income taxes payable                            |                | $         | 7,508   |              |   | $         | 7,605   | 
|                                               | Accrued payroll and payroll-related expenses    |                |           | 52,039  |              |   |           | 59,524  | 
|                                               | Accrued warranty                                |                |           | 206,006 |              |   |           | 185,940 | 
|                                               | Restructuring liabilities, short-term           |                |           | 21,942  |              |   |           | 9,707   | 
|                                               | Accrued expenses                                |                |           | 58,399  |              |   |           | 61,593  | 
|                                               |                                                 |                |           |         |              |  
|                                               |                                                 | $              | 345,894   |         |              | $ | 324,369   |        
|                                               |                                                 |                |           |         |              |  
|Other liabilities                              |                                                 |                |           |         |              |   |           |        
|                                               | Tax indemnification liability                   |                | $         | 8,760   |              |   | $         | 8,760   | 
|                                               | Restructuring liabilities, long-term            |                |           | 42,538  |              |   |           | 43,911  | 
|                                               | Other                                           |                |           | 14,150  |              |   |           | 14,024  | 
|                                               |                                                 |                |           |         |              |  
|                                               |                                                 | $              | 65,448    |         |              | $ | 66,695    |        
|                                               |                                                 |                |           |         |              |  






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



11



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





|                              |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |          |        |          |   |         |   |   |   |         |       |   | 
|----------------------------- | -------------------- | -------- | - | -------------- | -------- | - | ------- | ------------ | ----------------- | - | ---------- | ------ | -------------- | --- | ------- | -------- | ------ | - | ----------- | ------------ | - | ----- | ---------- | ----- | ------- | --- | -------- | ------ | -------- | - | ------- | - | - | - | ------- | ----- | - | 
|                              |                      |          |   | April 2, 2005  |          |   |         |              | December 25, 2004 |  
|                              |                      |          |   |                |          |   |         |              |                   |  
|                              |                      | Useful   |   |                | Gross    |   |         |              |                   |   |            | Gross  |                |     |        
|                              |                      | Life     |   |                | Carrying |   |         | Accumulated  |                   |   | Asset      |        |                |     |         | Carrying |        |   | Accumulated |              |   | Asset |            |       |        
|                              |                      | (Years)  |   |                | Amount   |   |         | Amortization |                   |   | Impairment |        |                | Net |         |          | Amount |   |             | Amortization |   |       | Impairment |       |         | Net |         
|                              |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |         
|                              |                      |          |   | (In thousands) |          |   |         |              |                   |   |            |        | (In thousands) |     |         |         
|Goodwill                      |                      |          |   |                |          | $ | 489,482 |              |                   |   |           |        |                |     |        |          |        | $ | 489,482     |              |   | $     | 489,482    |       |         |     |         |        |          |   |        |   |   | $ | 489,482 |      
|                              |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |         
|Quantum HDD                   |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |          |        |          |   |         |   |   |   |         |      
|Existing Technology           |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |          |        |          |   |         |   |   |   |         |      
|Core technology               |                      |          | 5 |                |          | $ | 96,700  |              |                   | $ | (72,525    | )      |                | $   | (24,175 | )        |        | $ |            |              |   | $     | 96,700     |       |         | $   | (72,525  | )      |          | $ | (24,175 | ) |   | $ |        |      
|                              | Consumer electronics |          |   | 3              |          |   |         | 8,900        |                   |   |            | (8,900 | )              |     |         |         |        |   |             |             |   |       |            | 8,900 |         |     |          | (8,900 | )        |   |         |  |   |   |         |      |  
|                              |                      | High-end |   |                | 3        |   |         |              | 75,500            |   |            |        | (75,500        | )   |         |          |       |   |             |              |  |       |            |       | 75,500  |     |          |        | (75,500  | ) |         |   |  |   |         |       |  | 
|                              |                      | Desktop  |   |                | 3        |   |         |              | 105,000           |   |            |        | (105,000       | )   |         |          |       |   |             |              |  |       |            |       | 105,000 |     |          |        | (105,000 | ) |         |   |  |   |         |       |  | 
|MMC Technology                |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |          |        |          |   |         |   |   |   |         |      
|                              | Existing technology  |          |   | 5              |          |   |         | 4,350        |                   |   |            | (3,117 | )              |     |         |         |        |   |             | 1,233        |   |       |            | 4,350 |         |     |          | (2,900 | )        |   |         |  |   |   |         | 1,450 |  
|                              |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |         
|Total other intangible assets |                      |          |   |                |          | $ | 290,450 |              |                   | $ | (265,042   | )      |                | $   | (24,175 | )        |        | $ | 1,233       |              |   | $     | 290,450    |       |         | $   | (264,825 | )      |          | $ | (24,175 | ) |   | $ | 1,450   |      
|                              |                      |          |   |                |          |   |         |              |                   |   |            |        |                |     |         |          |        |   |             |              |   |       |            |       |         |     |         

12



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                                                 |  |          |         |   |              |   |         |  
|------------------------------------------------ |  | -------- | ------- | - | ------------ | - | ------- | -
|                                                 |  | April 2, |         |   | December 25, |  
|                                                 |  | 2005     |         |   | 2004         |  
|                                                 |  |          |         |   |              |  
|6.8% Convertible Senior Notes due April 30, 2010 |  | $        | 230,000 |   |              | $ | 230,000 |  
|5.75% Subordinated Debentures due March 1, 2012  |  |          | 59,311  |   |              |   | 59,311  |  
|Economic Development Board of Singapore Loans    |  |          |        |   |              |   | 27,148  |  
|Manufacturing Facility Loan, Suzhou China        |  |          | 60,000  |   |              |   | 60,000  |  
|Mortgages                                        |  |          | 32,163  |   |              |   | 32,582  |  
|Equipment Loans and Capital Leases               |  |          | 4,958   |   |              |   | 6,090   |  
|Receivables-backed Borrowings                    |  |          | 50,000  |   |              |   | 50,000  |  
|                                                 |  |          |         |   |              |  
|                                                 |  |          | 436,432 |   |              |   | 465,131 |  
|Less amounts due within one year                 |  |          | (72,469 | ) |              |   | (82,561 | )
|                                                 |  |          |         |   |              |  
|                                                 |  | $        | 363,963 |   |              | $ | 382,570 |  
|                                                 |  |          |         |   |              |  







13



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








14



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














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



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





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



15



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                    |         |     |           |   |         |     
|------------------------------ |  | ------------------ | ------- | --- | --------- | - | ------- | ----
|                               |  | Three Months Ended |        
|                               |  |                    |        
|                               |  | April 2,           |         |     | March 27, |  
|                               |  | 2005               |         |     | 2004      |  
|                               |  |                    |         |     |           |  
|Balance at beginning of period |  | $                  | 185,940 |     |           | $ | 209,426 |     
|Charges to operations          |  |                    | 52,419  |     |           |   | 39,431  |     
|Settlements                    |  |                    | (47,341 | )   |           |   | (56,507 | )   
|Changes in estimates           |  |                    | 14,987  | (2) |           |   | (1,025  | )(1)
|                               |  |                    |         |     |           |  
|Balance at end of period       |  | $                  | 206,006 |     |           | $ | 191,325 |     
|                               |  |                    |         |     |           |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Primarily related to product expirations.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | The increase in warranty liability was primarily attributed to a
    change in estimate of $14.9 million which is comprised of a
    $14.5 million reserve to cover specific claims received
    from customers for additional warranty costs and an increase in
    the estimated Annual Return Rate of $5.0 million which was
    partially offset by a decrease in the estimated cost of future
    repair of $4.4 million. Expirations for the period amounted
    to $0.2 million.







|   |              
|-- | -------------
|7. | Restructuring





16



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














|                             |  |                    |      |   |           |   |      |       |  |   |      |  
|---------------------------- |  | ------------------ | ---- | - | --------- | - | ---- | ----- |  | - | ---- | -
|                             |  | Facilities-Related |      |   | Severance |   |      |      
|                             |  | Restructuring      |      |   | and       |   |      |      
|                             |  | Charge             |      |   | Benefits  |   |      | Total | 
|                             |  |                    |      |   |           |   |      |       | 
|                             |  | (In millions)      |     
|Balance at December 25, 2004 |  | $                  | 51.3 |   |           | $ | 2.2  |       |  | $ | 53.5 |  
|Amounts paid                 |  |                    | (1.2 | ) |           |   | (1.7 | )     |  |   | (2.9 | )
|Adjustments                  |  |                    |     |   |           |   | (0.3 | )     |  |   | (0.3 | )
|2005 accrual                 |  |                    |     |   |           |   | 14.2 |       |  |   | 14.2 |  
|                             |  |                    |      |   |           |   |      |       | 
|Balance at April 2, 2005     |  | $                  | 50.1 |   |           | $ | 14.4 |       |  | $ | 64.5 |  
|                             |  |                    |      |   |           |   |      |       | 

17



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                    
|-- | -------------------
|8. | Asset Held for Sale





|   |                            
|-- | ---------------------------
|9. | Net Income (Loss) Per Share



|                                                   |                                         |                    |             |   |           |   |             |            | 
|-------------------------------------------------- | --------------------------------------- | ------------------ | ----------- | - | --------- | - | ----------- | ---------- | 
|                                                   |                                         | Three Months Ended |            
|                                                   |                                         |                    |            
|                                                   |                                         | April 2,           |             |   | March 27, |  
|                                                   |                                         | 2005               |             |   | 2004      |  
|                                                   |                                         |                    |             |   |           |  
|                                                   |                                         | Restated(1)        |             |   |          
|Numerator  Basic and Diluted                      |                                         |                    |             |   |           |   |             |           
|Net income (loss)                                  |                                         | $                  | (20,161     | ) |           | $ | 8,730       |           
|                                                   |                                         |                    |             |   |           |  
|Net income (loss) available to common stockholders |                                         | $                  | (20,161     | ) |           | $ | 8,730       |           
|                                                   |                                         |                    |             |   |           |  
|Denominator                                        |                                         |                    |             |   |           |   |             |           
|Basic weighted average common shares outstanding   |                                         |                    | 251,595,181 |   |           |   | 246,590,255 |           
|Effect of dilutive securities:                     |                                         |                    |             |   |           |   |             |           
|                                                   | Common stock options                    |                    |             |  |           |   |             | 10,304,899 | 
|                                                   | Restricted shares subject to repurchase |                    |             |  |           |   |             | 65,000     | 
|                                                   |                                         |                    |             |   |           |  
|Diluted weighted average common shares             |                                         |                    | 251,595,181 |   |           |   | 256,960,154 |           
|                                                   |                                         |                    |             |   |           |  
|Net income (loss) per share  basic                |                                         | $                  | (0.08       | ) |           | $ | 0.04        |           
|                                                   |                                         |                    |             |   |           |  
|Net income (loss) per share  diluted              |                                         | $                  | (0.08       | ) |           | $ | 0.03        |           
|                                                   |                                         |                    |             |   |           |  






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



|                                                                                                   |  |                    |            |  |           |  |            | 
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- |  | --------- |  | ---------- | 
|                                                                                                   |  | Three Months Ended |           
|                                                                                                   |  |                    |           
|                                                                                                   |  | April 2,           |            |  | March 27, | 
|                                                                                                   |  | 2005               |            |  | 2004      | 
|                                                                                                   |  |                    |            |  |           | 
|Common stock options                                                                               |  |                    | 13,466,798 |  |           |  | 2,880,733  | 
|Restricted shares subject to repurchase                                                            |  |                    | 20,000     |  |           |  |           | 
|As-if converted shares related to 6.8% Convertible Senior
    Notes due 2010 issued on May 7, 2003 |  |                    | 18,756,362 |  |           |  | 18,756,362 | 

18



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                            
|--- | ---------------------------
|10. | Comprehensive Income (Loss)



|                                                                                    |  |                    |         |   |           |   |       |  
|----------------------------------------------------------------------------------- |  | ------------------ | ------- | - | --------- | - | ----- | -
|                                                                                    |  | Three Months Ended |        
|                                                                                    |  |                    |        
|                                                                                    |  | April 2,           |         |   | March 27, |  
|                                                                                    |  | 2005               |         |   | 2004      |  
|                                                                                    |  |                    |         |   |           |  
|                                                                                    |  | Restated(1)        |         |   |          
|Net income (loss)                                                                   |  | $                  | (20,161 | ) |           | $ | 8,730 |  
|Unrealized loss on investments in securities                                        |  |                    | (1,920  | ) |           |   | (865  | )
|Less: reclassification adjustment for gain (loss) included in
    net income (loss) |  |                    | (283    | ) |           |   | 32    |  
|                                                                                    |  |                    |         |   |           |  
|Comprehensive income (loss)                                                         |  | $                  | (21,798 | ) |           | $ | 7,833 |  
|                                                                                    |  |                    |         |   |           |  






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



|    |                                        
|--- | ---------------------------------------
|11. | Segment and Major Customers Information







19



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##### Table of Contents



MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                           |  |                    |           |  |           |   |           | 
|---------------------------------------------------------- |  | ------------------ | --------- |  | --------- | - | --------- | 
|                                                           |  | Three Months Ended |          
|                                                           |  |                    |          
|                                                           |  | April 2,           |           |  | March 27, |  
|                                                           |  | 2005               |           |  | 2004      |  
|                                                           |  |                    |           |  |           |  
|United States                                              |  | $                  | 332,278   |  |           | $ | 318,647   | 
|Asia Pacific and Japan                                     |  |                    | 323,311   |  |           |   | 306,837   | 
|Europe, Middle East and Africa (excluding the Netherlands) |  |                    | 285,002   |  |           |   | 307,391   | 
|The Netherlands                                            |  |                    | 117,212   |  |           |   | 73,843    | 
|Latin America and other                                    |  |                    | 11,798    |  |           |   | 12,970    | 
|                                                           |  |                    |           |  |           |  
|Total                                                      |  | $                  | 1,069,601 |  |           | $ | 1,019,688 | 
|                                                           |  |                    |           |  |           |  



|                               |  |          |         |  |              |   |         | 
|------------------------------ |  | -------- | ------- |  | ------------ | - | ------- | 
|                               |  | April 2, |         |  | December 25, |  
|                               |  | 2005     |         |  | 2004         |  
|                               |  |          |         |  |              |  
|United States                  |  | $        | 688,288 |  |              | $ | 696,317 | 
|Asia Pacific and Japan         |  |          | 152,119 |  |              |   | 172,002 | 
|Europe, Middle East and Africa |  |          | 541     |  |              |   | 444     | 
|Latin America and other        |  |          |        |  |              |   | 271     | 
|                               |  |          |         |  |              |  
|Total                          |  | $        | 840,948 |  |              | $ | 869,034 | 
|                               |  |          |         |  |              |  





|    |              
|--- | -------------
|12. | Contingencies



| |                  
| | -----------------
| | Legal Proceedings







20



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                      
| | ---------------------
| | Investment Commitment



21



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MAXTOR CORPORATION


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                           
|--- | --------------------------
|13. | Related Party Transactions



22



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





Restatement










23



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Background








Executive Overview








24



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Critical Accounting Policies




25



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| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | revenue recognition;                                                          
|
| |  | sales returns, other sales allowances and allowance for doubtful
    accounts;
|
| |  | valuation of intangibles, long-lived assets and goodwill;                     
|
| |  | warranty;                                                                     
|
| |  | inventory reserves;                                                           
|
| |  | income taxes; and                                                             
|
| |  | restructuring liabilities, litigation and other contingencies.                



Results of Operations




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

|                                |  |                    |         |    |           |   |         |        |  |   |       |  
|------------------------------- |  | ------------------ | ------- | -- | --------- | - | ------- | ------ |  | - | ----- | -
|                                |  | Three Months Ended |         |    |          
|                                |  |                    |         |    |          
|                                |  | April 2,           |         |    | March 27, |   |         |       
|                                |  | 2005               |         |    | 2004      |   |         | Change | 
|                                |  |                    |         |    |           |   |         |        | 
|                                |  | (In millions)      |        
|Total revenues                  |  | $                  | 1,069.6 |    |           | $ | 1,019.7 |        |  | $ | 49.9  |  
|Gross profit (Restated)(1)      |  | $                  | 116.4   |    |           | $ | 155.1   |        |  | $ | (38.7 | )
|Net income (loss) (Restated)(1) |  | $                  | (20.2   | )  |           | $ | 8.7     |        |  | $ | (28.9 | )
|As a percentage of revenue:     |  |                    |         |    |           |   |         |        |  |   |       |  
|Total revenues                  |  |                    | 100.0   | %  |           |   | 100.0   | %      |  |   |       |  
|Gross profit (Restated)(1)      |  |                    | 10.9    | %  |           |   | 15.2    | %      |  |   |       |  
|Net income (loss) (Restated)(1) |  |                    | (1.9    | )% |           |   | 0.9     | %      |  |   |       |  






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

Net Revenues.


26



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Cost of Revenues; Gross Profit.






| |                   
| | ------------------
| | Operating Expenses

|                                    |  |                    |      |   |           |   |      |        |  |   |       |  
|----------------------------------- |  | ------------------ | ---- | - | --------- | - | ---- | ------ |  | - | ----- | -
|                                    |  | Three Months Ended |      |   |          
|                                    |  |                    |      |   |          
|                                    |  | April 2,           |      |   | March 27, |   |      |       
|                                    |  | 2005               |      |   | 2004      |   |      | Change | 
|                                    |  |                    |      |   |           |   |      |        | 
|                                    |  | (In millions)      |     
|Research and development            |  | $                  | 78.5 |   |           | $ | 85.1 |        |  | $ | (6.6  | )
|Selling, general and administrative |  | $                  | 37.3 |   |           | $ | 32.5 |        |  | $ | 4.8   |  
|Amortization of intangible assets   |  | $                  | 0.2  |   |           | $ | 20.8 |        |  | $ | (20.6 | )
|Restructuring charge                |  | $                  | 13.9 |   |           | $ |     |        |  | $ | 13.9  |  
|As a percentage of revenue:         |  |                    |      |   |           |   |      |        |  |   |       |  
|Research and development            |  |                    | 7.3  | % |           |   | 8.3  | %      |  |   |       |  
|Selling, general and administrative |  |                    | 3.5  | % |           |   | 3.2  | %      |  |   |       |  
|Amortization of intangible assets   |  |                    | 0.0  | % |           |   | 2.0  | %      |  |   |       |  
|Restructuring charge                |  |                    | 1.3  | % |           |   | 0.0  | %      |  |   |       |  

Research and Development. (R&D).


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


Restructuring Charge.


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Amortization of Intangible Assets.






| |                                                            
| | -----------------------------------------------------------
| | Interest Expense, Interest Income and Other Gain
    (Loss)

|                            |  |                    |      |    |           |   |      |        |  |   |      |  
|--------------------------- |  | ------------------ | ---- | -- | --------- | - | ---- | ------ |  | - | ---- | -
|                            |  | Three Months Ended |      |    |          
|                            |  |                    |      |    |          
|                            |  | April 2,           |      |    | March 27, |   |      |       
|                            |  | 2005               |      |    | 2004      |   |      | Change | 
|                            |  |                    |      |    |           |   |      |        | 
|                            |  | (In millions)      |     
|Interest expense            |  | $                  | (8.4 | )  |           | $ | (8.9 | )      |  | $ | 0.5  |  
|Interest income             |  | $                  | 2.4  |    |           | $ | 1.3  |        |  | $ | 1.1  |  
|Other gain (loss)           |  | $                  | (0.3 | )  |           | $ |     |        |  | $ | (0.3 | )
|As a percentage of revenue: |  |                    |      |    |           |   |      |        |  |   |      |  
|Interest expense            |  |                    | (0.8 | )% |           |   | (0.9 | )%     |  |   |      |  
|Interest income             |  |                    | 0.2  | %  |           |   | 0.1  | %      |  |   |      |  
|Other gain (loss)           |  |                    | 0.0  | %  |           |   | 0.0  | %      |  |   |      |  

Interest Expense.


Interest Income.


Other Gain (Loss).


29



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

|                                                              |  |                    |       |   |           |   |     |        |  |   |       |  
|------------------------------------------------------------- |  | ------------------ | ----- | - | --------- | - | --- | ------ |  | - | ----- | -
|                                                              |  | Three Months Ended |       |   |          
|                                                              |  |                    |       |   |          
|                                                              |  | April 2,           |       |   | March 27, |   |     |       
|                                                              |  | 2005               |       |   | 2004      |   |     | Change | 
|                                                              |  |                    |       |   |           |   |     |        | 
|                                                              |  | (In millions)      |      
|Income (loss) before provision for income taxes (Restated)(1) |  | $                  | (19.8 | ) |           | $ | 9.0 |        |  | $ | (28.8 | )
|Provision for income taxes                                    |  | $                  | 0.3   |   |           | $ | 0.3 |        |  | $ |      |  






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







Liquidity and Capital Resources




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



|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |         |        |  |   |         |        | 
|------------------------- | ----------------- | ----- | --------- | --------- | ------ | - | ------- | --------- |  | - | --------------- | ------ |  | ------------- | ------- | ------ |  | - | ------- | ------ | 
|                          |                   |       |           | Less Than |        |   |         |           |  |   | More Than       |       
|                          |                   | Total |           |           | 1 Year |   |         | 1-3 Years |  |   | 3-5 Years(1)(2) |        |  | 5 Years(1)(2) |        
|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |        
|Long-term Debt            |                   | $     | 431,474   |           |        | $ | 68,170  |           |  | $ | 28,993          |        |  | $             | 70,000  |        |  | $ | 264,311 |       
|                          | Interest Payments |       |           | 121,026   |        |   |         | 23,588    |  |   |                 | 42,870 |  |               |         | 40,710 |  |   |         | 13,858 | 
|Capital Lease Obligations |                   |       | 4,958     |           |        |   | 4,299   |           |  |   | 652             |        |  |               | 7       |        |  |   |        |       
|                          | Interest Payments |       |           | 135       |        |   |         | 130       |  |   |                 | 5      |  |               |         |       |  |   |         |       | 
|Operating Leases(3)       |                   |       | 268,566   |           |        |   | 34,542  |           |  |   | 65,453          |        |  |               | 61,598  |        |  |   | 106,973 |       
|Purchase Obligations(4)   |                   |       | 743,450   |           |        |   | 735,170 |           |  |   | 8,280           |        |  |               |        |        |  |   |        |       
|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |        
|Total                     |                   | $     | 1,569,609 |           |        | $ | 865,899 |           |  | $ | 146,253         |        |  | $             | 172,315 |        |  | $ | 385,142 |       
|                          |                   |       |           |           |        |   |         |           |  |   |                 |        |  |               |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 drawdown under the
    facilities described under footnote (1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | Includes future minimum annual rental commitments, including
    amounts accrued as restructuring liabilities as of April 2,
    2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(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.







32



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33



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CERTAIN FACTORS AFFECTING FUTURE PERFORMANCE


We have a history of significant losses.






| |                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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;                                                   

35



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| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | get to the market with the next generation product faster or
    ramp more effectively; 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.





| |                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



36



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| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our efforts to improve operating efficiencies through
    restructuring activities may not be successful, and the actions
    we take to this end could limit our ability to compete
    effectively.





| |                                                                               
| | ------------------------------------------------------------------------------
| | If we do not expand into new hard drive markets, our
    revenues will suffer.



37



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| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | If we do not successfully introduce new products or
    experience product quality problems, our revenues will
    suffer.





| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



38



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| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | We are subject to new environmental legislation enacted by
    the European Union, if we do not comply our sales could be
    adversely impacted.





| |                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, and these component shortages could result
    in delays of product shipments and damage our business and
    operating results.





| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We purchase most of our components from third party
    suppliers, and may have higher costs or more supply chain risks
    than our competitors who are more vertically integrated.





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| |                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we encounter any problems in qualifying our new China
    manufacturing facility for production with any of our major OEM
    customers, or we have difficulties with transition of
    manufacturing to China or a disaster occurs at one of our
    plants, our business, financial condition and operating results
    could suffer.





| |                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | 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;                                                                                                                              

40



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| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | the availability, and efficient use, of manufacturing capacity;                                                                            
|
| |  | our ability to retain key personnel;                                                                                                       
|
| |  | 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 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;                                                                                                                                                                     
|
| |  | 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;                                                                                                                                                         

41



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| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | seasonality;                                                                                                                                                                  
|
| |  | increased transportation/shipping costs;                                                                                                                                      
|
| |  | credit and access to capital issues faced by our international
    customers; and                                                                                             
|
| |  | compliance with European Union directives implementing strict
    mandates on electronic equipment waste and ban the use of
    certain materials in electronic manufacturing.





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





42



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| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We may need additional capital in the future which may not
    be available on favorable terms or at all.





| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | the rate of our sales growth;                                                                                                               
|
| |  | the level of our profits or losses;                                                                                                         
|
| |  | the timing and extent of our spending to expand manufacturing
    capacity, support facilities upgrades and product development
    efforts;
|
| |  | the timing and size of business or technology acquisitions;                                                                                 
|
| |  | the timing of introductions of new products and enhancements to
    our existing products; and                                              
|
| |  | the length of product life cycles.                                                                                                          





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | We significantly increased our leverage as a result of the
    sale of the 6.8% convertible senior notes.





| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | The asset-backed credit facility of up to
    $100 million has certain financial covenants with which we
    will have to comply to use the facility.



43



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



44



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









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| |                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





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





| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have experienced significant turnover of senior
    management, our current executive management team has been
    together for a limited time and we are continuing to hire new
    senior executives, and these changes may impact our ability to
    develop strategic plans or to execute effectively on our
    business objectives, which could adversely impact our business
    and operating results.



46



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







| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 markets;
|
| |  | 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.                                                                



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results. As a result, current and potential stockholders could
    lose confidence in our financial reporting, which would harm our
    business and the trading price of our stock.



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Internal Control  Integrated
Framework




48



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| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Decreased effectiveness of equity compensation could
    adversely affect our ability to attract and retain employees,
    and proposed changes in accounting for equity compensation could
    adversely affect earnings.





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



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

Derivatives




Investments






|                      |  |          |        |    |          |   |        |            |  |   |        |    |  |         |        |  |          |   |        |          |  |   |        |   |  |   |        |  
|--------------------- |  | -------- | ------ | -- | -------- | - | ------ | ---------- |  | - | ------ | -- |  | ------- | ------ |  | -------- | - | ------ | -------- |  | - | ------ | - |  | - | ------ | -
|                      |  |          |        |    |          |   |        | Fair Value |  |   |        |    |  |         |       
|                      |  |          |        |    |          |   |        | as of      |  |   |        |    |  |         |       
|                      |  |          |        |    |          |   |        | April 2,   |  |   |        |    |  |         |       
|                      |  | +150 bps |        |    | +100 bps |   |        | +50 bps    |  |   | 2005   |    |  | -50 bps |        |  | -100 bps |   |        | -150 bps | 
|                      |  |          |        |    |          |   |        |            |  |   |        |    |  |         |        |  |          |   |        |          | 
|                      |  | ($000)   |       
|Financial Instruments |  | $        | 88,365 |    |          | $ | 88,645 |            |  | $ | 88,925 |    |  | $       | 89,205 |  |          | $ | 89,490 |          |  | $ | 89,773 |   |  | $ | 90,063 |  
|% Change              |  |          | (0.94  | )% |          |   | (0.63  | )%         |  |   | (0.31  | )% |  |         |        |  |          |   | 0.32   | %        |  |   | 0.64   | % |  |   | 0.96   | %



|                             |  |                                |       |       |          |   |       |                                |  |   |       |    |  |   |       |  |  |   |       |   |  |   |       |   |  |   |       |  
|---------------------------- |  | ------------------------------ | ----- | ----- | -------- | - | ----- | ------------------------------ |  | - | ----- | -- |  | - | ----- |  |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                             |  |                                |       |       |          |   |       | Fair Value                     |  |   |       |    |  |   |      
|                             |  |                                |       | as of |          |   |      
|                             |  | Valuation of Security Given X% |       |       | April 2, |   |       | Valuation of Security Given X% | 
|                             |  | Decrease in the Security Price |       |       | 2005     |   |       | Increase in the Security Price | 
|                             |  |                                |       |       |          |   |       |                                | 
|                             |  | ($000)                         |      
|Corporate equity investments |  | $                              | 1,888 |       |          | $ | 2,832 |                                |  | $ | 3,210 |    |  | $ | 3,776 |  |  | $ | 4,342 |   |  | $ | 4,720 |   |  | $ | 5,664 |  
|% Change                     |  |                                | (50   | )%    |          |   | (25   | )%                             |  |   | (15   | )% |  |   |       |  |  |   | 15    | % |  |   | 25    | % |  |   | 50    | %

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

Changes in Internal Control Over Financial Reporting




| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Controls over the Application of Generally Accepted
    Accounting Principles to Complex, Non-Routine
    Transactions

Controls and
Procedures


Internal Control  Integrated Framework






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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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52



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##### Table of Contents



Controls Over Accuracy of
Data Entry of Journal Entry For Inventory and Cost of Goods
Sold














53



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##### Table of Contents







Evaluation of Effectiveness of Disclosure Controls and
Procedures




54



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##### Table of Contents






PART II. OTHER INFORMATION







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









55



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##### Table of Contents








|        |                                                                
|------- | ---------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity 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



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##### Table of Contents






SIGNATURES






| |                   
| | ------------------
| | MAXTOR CORPORATION



| |    |                       
| | -- | ----------------------
| | By | /s/ DUSTON M. WILLIAMS

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



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##### Table of Contents



EXHIBIT INDEX


|        |    |        |             |                                                                                                                                                                                                                                                                                         
|------- | -- | ------ | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |        |            
|Number  |    |        | Description
|        |    |        |            
|        | 3  | .1(1)  |             | Amended and Restated Bylaws of Maxtor Corporation, dated
    February 18, 2005.                                                                                                                                                                                                         
|       
|        | 10 | .1(2)  |             | Second Amendment Agreement to the Receivables Loan and Security
    Agreement dated March 4, 2005 among Maxtor Receivables LLC,
    Maxtor Corporation, Merrill Lynch Commercial Finance Corp. and
    U.S. Bank National Association.                                                  
|       
|        | 10 | .2(3)  |             | Amendment to the Employment Offer Letter dated as of
    February 7, 2005 from Maxtor Corporation to Dr. C.S.
    Park.**                                                                                                                                                               
|       
|        | 10 | .3(1)  |             | Amendment to the Employment Offer Letter dated as of
    February 7, 2005 from Maxtor Corporation to
    Mr. Michael J. Wingert.**                                                                                                                                                      
|       
|        | 10 | .4(2)  |             | Forbearance Agreement by and among Maxtor Receivables LLC,
    Maxtor Corporation and Merrill Lynch Commercial Finance
    Corporation, dated as of February 11, 2005.                                                                                                                  
|       
|        | 10 | .5(1)  |             | Employment Offer Letter dated as of February 18, 2005 from
    Maxtor Corporation to Mr. Kurt Richarz.**                                                                                                                                                                                
|       
|        | 10 | .6(4)  |             | Amended and Restated Executive Deferred Compensation Plan,
    effective January 1, 2005.**                                                                                                                                                                                             
|       
|        | 10 | .7(4)  |             | Executive Retention and Severance Plan adopted
    October 30,2003, amended and restated effective
    March 7, 2005,including forms of:(i) Agreement to
    Participate, (ii)General Release of Claims, and
    (iii) Restrictive Covenants Agreement.**                               
|       
|        | 10 | .8(4)  |             | Forms of Agreement to Participate in the Maxtor Corporation
    Executive Retention and Severance Plan, effective
    March 14,2005, by:(i) Dr. C. S. Park;
    (ii) Michael J. Wingert; (iii) Duston M. Williams;
    (iv) Fariba Danesh;(v) David Beaver; and
    (vi) Kurt Richarz.**
|       
|        | 10 | .9(4)  |             | Restricted Stock Unit Plan, as amended and restated through
    March 7, 2005, including forms of:(i) Standard Form of
    Award Agreement and (ii) Designation of Beneficiary.**                                                                                                       
|       
|        | 10 | .10(4) |             | Forms of Restated Restricted Stock Unit Award Agreement,
    effective March 14, 2005, by:(i) Dr. C. S. Park;
    (ii)Michael J. Wingert; (iii) Duston M. Williams;
    (iv) Fariba Danesh;(v) David Beaver; and
    (vi) Kurt Richarz.**                                               
|       
|        | 10 | .11(4) |             | Form of Nonstatutory Stock Option Agreement under the Maxtor
    Corporation Amended and Restated 1996 Stock Option Plan.**                                                                                                                                                             
|       
|        | 31 | .1     |             | Certification of Dr. C.S. Park, Chairman and Chief
    Executive Officer of 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 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 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 Registrant furnished
    pursuant to 18 U.S.C. § 1350, as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.                                              






|   |                                                          
|-- | ---------------------------------------------------------
|** | Management contract, or compensatory plan or arrangement.



|    |                                                                               
|--- | ------------------------------------------------------------------------------
|(1) | Incorporated by reference to exhibits of Form 8-K filed
    February 25, 2005.
|   
|(2) | Incorporated by reference to exhibits of Form 10-K filed
    March 10, 2005.  
|   
|(3) | Incorporated by reference to exhibits of Form 8-K filed
    February 11, 2005.
|   
|(4) | Incorporated by reference to exhibits of Form 10-Q filed
    May 13, 2005.    

58