<PAGE>   1
 
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
   
                                  FORM 10-Q/A
    
   
                                AMENDMENT NO. 1
    
 
                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                                       OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                     FOR THE QUARTER ENDED JANUARY 1, 1999
                         COMMISSION FILE NO. 000-23169
 
                             SEAGATE SOFTWARE, INC.
                                  (REGISTRANT)
 
                            ------------------------
 
                     INCORPORATED IN THE STATE OF DELAWARE
                I.R.S. EMPLOYER IDENTIFICATION NUMBER 77-0397623
                915 DISC DRIVE, SCOTTS VALLEY, CALIFORNIA 95066
                           TELEPHONE: (831) 438-6550
 
                            ------------------------
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]
 
The number of shares outstanding of the registrant's Common Stock as of January
1, 1999 was 1,058,906.
 
--------------------------------------------------------------------------------
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<PAGE>   2
 
                                     INDEX
 
                             SEAGATE SOFTWARE, INC.
 
   
<TABLE>
<CAPTION>
                                                                        PAGE NO.
                                                                        --------
<S>       <C>                                                           <C>
PART I    FINANCIAL INFORMATION
Item 1.   Financial Statements (unaudited)
          Condensed Consolidated Balance Sheets as of January 1, 1999
            (unaudited) and July 3, 1998..............................       2
          Condensed Consolidated Statements of Operations for the
            three and six months ended January 1, 1999 and January 2,
            1998 (unaudited)..........................................       3
          Condensed Consolidated Statements of Cash Flows for the six
            months ended January 1, 1999 and January 2, 1998
            (unaudited)...............................................       4
          Notes to the Condensed Consolidated Financial Statements
            (unaudited)...............................................       5
Item 2.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations.................................      13
Item 3.   Quantitative and Qualitative Disclosures about Market
            Risks.....................................................      29
 
PART II   OTHER INFORMATION
Item 1.   Legal Proceedings...........................................    II-1
Item 6.   Exhibits and Reports on Form 8-K............................    II-2
          SIGNATURES..................................................    II-3
</TABLE>
    
 
                                        1
<PAGE>   3
 
                             SEAGATE SOFTWARE, INC.
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
   
<TABLE>
<CAPTION>
                                                              JANUARY 1,    JULY 3,
                                                                 1999         1998
                                                              -----------   --------
                                                              (UNAUDITED)     (1)
<S>                                                           <C>           <C>
                           ASSETS
Cash........................................................   $     848    $ 15,130
Accounts receivable, net....................................      59,292      46,564
Inventories.................................................       1,261       1,117
Loan receivable from Seagate Technology.....................      18,276          --
Other current assets........................................       5,863       2,474
                                                               ---------    --------
          Total current assets..............................      85,540      65,285
                                                               ---------    --------
Equipment and leasehold improvements, net...................      17,031      16,876
Goodwill and other intangibles, net.........................      44,677      56,836
                                                               ---------    --------
          Total assets......................................   $ 147,248    $138,997
                                                               =========    ========
 
                        LIABILITIES
Loan payable to Seagate Technology..........................   $      --    $ 16,054
Accounts payable............................................      12,250      10,994
Accrued employee compensation...............................      17,266      14,365
Accrued expenses............................................      19,438      15,339
Accrued income taxes........................................       6,759       5,562
Deferred revenue............................................      17,952      13,714
                                                               ---------    --------
          Total current liabilities.........................      73,665      76,028
Deferred income taxes.......................................       1,021       1,691
Other liabilities...........................................         280         255
                                                               ---------    --------
          Total liabilities.................................      74,966      77,974
 
Commitments and Contingencies
 
Common stock subject to repurchase..........................       3,685       3,917
 
                    STOCKHOLDERS' EQUITY
Convertible preferred stock.................................          55          55
Common stock................................................          --          --
Additional paid-in capital..................................     346,650     343,526
Accumulated deficit.........................................    (277,731)   (286,218)
Accumulated other comprehensive income......................        (377)       (257)
                                                               ---------    --------
          Total stockholders' equity........................      68,597      57,106
                                                               ---------    --------
          Total liabilities and stockholders' equity........   $ 147,248    $138,997
                                                               =========    ========
</TABLE>
    
 
---------------
(1) The information in this column was derived from Seagate Software's audited
    consolidated balance sheet as of July 3, 1998.
 
   
           See notes to condensed consolidated financial statements.
    
                                        2
<PAGE>   4
 
                             SEAGATE SOFTWARE, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (In thousands, except share and per share data)
                                  (Unaudited)
 
   
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                            ------------------------    -------------------------
                                            JANUARY 1,    JANUARY 2,    JANUARY 1,     JANUARY 2,
                                               1999          1998          1999           1998
                                            ----------    ----------    -----------    ----------
<S>                                         <C>           <C>           <C>            <C>
Revenues:
Licensing.................................     $74,791       $60,183       $133,462     $111,980
Licensing from Seagate Technology.........       1,850         1,433          4,006        2,433
Maintenance, support and other............      15,414        10,728         29,462       20,953
                                            ----------    ----------    -----------     --------
          Total revenues..................      92,055        72,344        166,930      135,366
 
Cost of revenues:
Licensing.................................       3,225         3,704          6,160        8,673
Licensing from Seagate Technology.........         145            86            274          371
Maintenance, support and other............       5,887         4,675         12,317        9,275
Amortization of developed technologies....       2,847         3,037          5,713        6,979
                                            ----------    ----------    -----------     --------
          Total cost of revenues..........      12,104        11,502         24,464       25,298
                                            ----------    ----------    -----------     --------
 
Gross profit..............................      79,951        60,842        142,466      110,068
 
Operating expenses:
Sales and marketing.......................      39,889        31,761         75,896       60,458
Research and development..................      13,554        11,778         26,341       23,171
General and administrative................       8,325        10,414         17,265       19,493
Amortization of goodwill and other
  intangibles.............................       3,343         5,741          6,736        9,392
                                            ----------    ----------    -----------     --------
          Total operating expenses........      65,111        59,694        126,238      112,514
                                            ----------    ----------    -----------     --------
 
Income (loss) from operations.............      14,840         1,148         16,228       (2,446)
 
Interest expense..........................         (46)         (358)          (202)        (658)
Other, net................................         871           301          1,339          466
                                            ----------    ----------    -----------     --------
          Interest expense and other,
            net...........................         825           (57)         1,137         (192)
                                            ----------    ----------    -----------     --------
 
Income (loss) before income taxes.........      15,665         1,091         17,365       (2,638)
Benefit from (provision for) income
  taxes...................................      (7,835)        1,067         (8,878)       1,686
                                            ----------    ----------    -----------     --------
Net income (loss).........................     $ 7,830       $ 2,158       $  8,487     $   (952)
                                            ==========    ==========    ===========     ========
Net income (loss) per common share:
Basic.....................................      $31.98        $14.03         $36.11       $(7.42)
Diluted...................................      $ 0.13        $ 0.04         $ 0.14       $(7.42)
Number of shares used in per share
  computations:
Basic.....................................     244,867       153,777        235,012      128,326
Diluted...................................  62,564,936    56,933,790     61,572,394      128,326
</TABLE>
    
 
           See notes to condensed consolidated financial statements.
                                        3
<PAGE>   5
 
                             SEAGATE SOFTWARE, INC.
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (Unaudited)
 
   
<TABLE>
<CAPTION>
                                                                  SIX MONTHS ENDED
                                                              ------------------------
                                                              JANUARY 1,    JANUARY 2,
                                                                 1999          1998
                                                              ----------    ----------
<S>                                                           <C>           <C>
OPERATING ACTIVITIES
Net income (loss)...........................................  $   8,487     $    (952)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
  Depreciation and amortization.............................     17,199        20,688
  Deferred income taxes.....................................       (670)       (2,821)
  Write-offs of goodwill and intangibles....................         --         1,900
  Changes in operating assets and liabilities:
     Accounts receivable....................................    (12,728)      (11,284)
     Inventories............................................       (144)          849
     Other current assets...................................     (3,389)           69
     Accounts payable.......................................      1,256         1,348
     Accrued employee compensation..........................      2,901         3,041
     Accrued expenses.......................................      4,099         4,420
     Accrued income taxes...................................      1,663        (2,953)
     Deferred revenue.......................................      4,238         2,162
     Other liabilities......................................         25           (31)
                                                              ---------     ---------
  Net cash provided by operating activities.................     22,937        16,436
INVESTING ACTIVITIES
Acquisition of equipment and leasehold improvements, net....     (4,910)       (3,193)
Acquisition of intangibles..................................       (289)           --
                                                              ---------     ---------
  Net cash used in investing activities.....................     (5,199)       (3,193)
FINANCING ACTIVITIES
Sale of common stock........................................        461           346
Borrowings from Seagate Technology..........................    121,837       110,131
Payments to Seagate Technology..............................   (154,202)     (124,082)
                                                              ---------     ---------
  Net cash used in financing activities.....................    (31,904)      (13,605)
Effect of exchange rate changes on cash.....................       (116)         (258)
                                                              ---------     ---------
  Decrease in cash..........................................    (14,282)         (620)
Cash at the beginning of the period.........................     15,130        12,085
                                                              ---------     ---------
Cash at the end of the period...............................  $     848     $  11,465
                                                              =========     =========
SUPPLEMENTAL CASH FLOW INFORMATION
  Cash paid for interest....................................  $      --     $      36
  Cash paid for income taxes................................      6,346         3,975
</TABLE>
    
 
           See notes to condensed consolidated financial statements.
                                        4
<PAGE>   6
 
                             SEAGATE SOFTWARE, INC.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     BASIS OF PRESENTATION. The consolidated condensed financial statements have
been prepared by Seagate Software, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. Seagate Software believes the
disclosures included in the unaudited condensed consolidated financial
statements, when read in conjunction with the consolidated financial statements
of Seagate Software as of July 3, 1998 and notes thereto, are adequate to make
the information presented not misleading.
 
     The condensed consolidated financial statements reflect, in the opinion of
management, all normal recurring adjustments necessary to summarize fairly the
consolidated financial position, results of operations and cash flows for such
periods.
 
     The results of operations for the six months ended January 1, 1999 are not
necessarily indicative of the results that may be expected for the fiscal year
ending July 2, 1999.
 
   
     Seagate Software operates and reports financial results on a fiscal year of
52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1998
was 53 weeks and ended on July 3, 1998 and fiscal 1999 will be 52 weeks and will
end on July 2, 1999. All references to years in this Form 10-Q/A represent
fiscal years unless otherwise noted.
 
     RESTATEMENT OF FINANCIAL STATEMENTS. Seagate Software had previously
allocated a portion of goodwill to developed technology and evaluated the
impairment of goodwill based on the revenues from related software. Using this
method, Seagate Software recorded write-downs and write-offs of goodwill in
fiscal 1997 in the amount of $10,259,000. Seagate Software has re-evaluated its
methodology and determined that goodwill should not be allocated to developed
technology under Accounting Principles Board Opinion 17, "Intangible Assets". As
a result, Seagate Software has made adjustments to decrease the amounts of
goodwill previously written-down and written-off from $10,259,000 to $6,173,000
in fiscal 1997. The additional goodwill of $4,086,000 is being amortized over
the remaining estimated useful lives of approximately 5 years.
 
     The effect of this adjustment on previously reported consolidated financial
statements as of and for the three months ended January 1, 1999 and January 2,
1998 is as follows (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                    AS REPORTED                 AS RESTATED
                                              ------------------------    ------------------------
                                              JANUARY 1,    JANUARY 2,    JANUARY 1,    JANUARY 2,
                                                 1999          1998          1999          1998
                                              ----------    ----------    ----------    ----------
<S>                                           <C>           <C>           <C>           <C>
Amortization of goodwill and other
  intangibles...............................  $   3,148     $   5,546     $   3,343     $   5,741
Income(loss) from operations................     15,035         1,343        14,840         1,148
Net income (loss)...........................      8,025         2,353         7,830         2,158
Basic income (loss) per share...............      32.77         15.30         31.98         14.03
Diluted income (loss) per share.............       0.13          0.04          0.13          0.04
Goodwill and other intangible assets, net...     42,110        59,146        44,677        62,493
Accumulated deficit.........................   (280,298)     (281,247      (277,731)     (277,900)
</TABLE>
 
                                        5
<PAGE>   7
                             SEAGATE SOFTWARE, INC.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
     The effect of this adjustment on previously reported consolidated financial
statements as of and for the six months ended January 1, 1999 and January 2,
1998 is as follows (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                    AS REPORTED                 AS RESTATED
                                              ------------------------    ------------------------
                                              JANUARY 1,    JANUARY 2,    JANUARY 1,    JANUARY 2,
                                                 1999          1998          1999          1998
                                              ----------    ----------    ----------    ----------
<S>                                           <C>           <C>           <C>           <C>
Amortization of goodwill and other
  intangibles...............................  $   6,346     $   9,002     $   6,736     $   9,392
Income(loss) from operations................     16,618        (2,056)       16,228        (2,446)
Net income (loss)...........................      8,877          (562)        8,487          (952)
Basic income (loss) per share...............      37.77         (4.38)        36.11         (7.42)
Diluted income (loss) per share.............       0.14         (4.38)         0.14         (7.42)
Goodwill and other intangible assets, net...     42,110        59,146        44,677        62,493
Accumulated deficit.........................   (280,298)     (281,247)     (277,731)     (277,900)
</TABLE>
 
     REVENUE RECOGNITION. Seagate Software's revenues are primarily derived from
the sale of product licenses, software maintenance, technical support, training
and consulting. During the first quarter of 1999, Seagate Software began
recognizing license revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position 97-2, "Software Revenue
Recognition". Revenues from software license agreements are generally recognized
at the time of product delivery, provided that fees are fixed or determinable,
evidence of an arrangement exists, collectibility is probable and the Company
has vendor-specific objective evidence of fair value. Service revenues from
customer maintenance fees for ongoing customer support and product updates are
recognized ratably over the maintenance term, which is typically 12 months.
Service revenues from training and consulting are recognized when such services
are performed.
 
     Revenues from resellers including VARs, OEMs, distributors and Seagate
Software's parent company, Seagate Technology, Inc. ("Seagate Technology"), are
primarily recognized at the time of product shipment to the reseller. Seagate
Software's policy is to defer such revenues if resale contingencies exist.
Factors considered in the determination of whether such contingencies exist,
include but are not limited to payment terms, collectibility and past history
with the customer.
 
     Product returns are reserved for in accordance with SFAS 48. Such returns
are estimated based on historical return rates. Seagate Software considers other
factors such as fixed and determinable fees, resale contingencies, arms length
contract terms and the ability to reasonably estimate returns to insure
compliance with SFAS 48. Additionally, Seagate Software continually reviews its
estimated product return provisions to ensure that they are reasonable in
relation to actual product returns, which are quantified based on approved
return authorization forms received prior to fiscal cutoff dates. Historically,
Seagate Software's estimated product return rates have not varied materially
from actual product return rates.
 
     NET INCOME (LOSS) PER SHARE. Basic net income (loss) per common share is
computed using the weighted average number of shares of common stock outstanding
during the period. For periods in which Seagate Software had losses, common
equivalent shares from stock options, shares subject to repurchase and
convertible preferred stock are excluded from the computation of diluted net
loss per share, as their effect is
 
                                        6
<PAGE>   8
                             SEAGATE SOFTWARE, INC.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
antidilutive. Below is a reconciliation of the numerator and denominator used to
calculate basic and diluted earnings per share (in thousands, except share and
per share data):
 
<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED            SIX MONTHS ENDED
                                  --------------------------    -------------------------
                                  JANUARY 1,     JANUARY 2,     JANUARY 1,     JANUARY 2,
                                     1999           1998           1999           1998
                                  -----------    -----------    -----------    ----------
<S>                               <C>            <C>            <C>            <C>
Basic net income (loss) per
  share computation:
  Numerator:
       Net income (loss)........  $     7,830    $     2,158    $     8,487     $   (952)
                                  -----------    -----------    -----------     --------
  Denominator:
     Weighted average number of
       common shares outstanding
       during the period........      244,867        153,777        235,012      128,326
                                  -----------    -----------    -----------     --------
          Net income (loss) per
            share -- basic......  $     31.98    $     14.03    $     36.11     $  (7.42)
                                  ===========    ===========    ===========     ========
Diluted net income (loss) per
  share computation:
  Numerator:
       Net income (loss)........  $     7,830    $     2,158    $     8,487     $   (952)
                                  -----------    -----------    -----------     --------
  Denominator:
     Weighted average number of
       common shares outstanding
       during the period........      244,867        153,777        235,012      128,326
     Convertible preferred
       stock....................   54,633,333     54,633,333     54,633,333           --
     Incremental common shares
       attributable to exercise
       of outstanding options
       and shares subject to
       repurchase (assuming
       proceeds would be used to
       purchase treasury
       stock)...................    7,686,736      2,146,680      6,704,049           --
                                  -----------    -----------    -----------     --------
                                   62,564,936     56,933,790     61,572,394      128,326
                                  -----------    -----------    -----------     --------
          Net income (loss) per
            share -- diluted....  $      0.13    $      0.04    $      0.14     $  (7.42)
                                  ===========    ===========    ===========     ========
</TABLE>
 
     For the six months ended January 2, 1998, 711,032 shares of common stock
subject to repurchase at an average price of $5.33 per share and options to
purchase 9,544,747 shares of common stock at an average exercise price of $6.75
per share were excluded from the computation of diluted earnings per share
because the effect would have been antidilutive.
 
     ACCOUNTS RECEIVABLE. Accounts receivable are summarized below, in
thousands:
 
<TABLE>
<CAPTION>
                                                            JANUARY 1,   JULY 3,
                                                               1999       1998
                                                            ----------   -------
<S>                                                         <C>          <C>
Accounts receivable.......................................   $60,887     $48,200
Less allowance for non-collection.........................    (1,595)     (1,636)
                                                             -------     -------
                                                             $59,292     $46,564
                                                             =======     =======
</TABLE>
 
                                        7
<PAGE>   9
                             SEAGATE SOFTWARE, INC.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
     OTHER CURRENT ASSETS. Other current assets included prepaid merger costs
that will be expensed upon the closing of Seagate Software's contribution of its
Network & Storage Management Group business ("NSMG") to Veritas Holding
Corporation ("New Veritas"). See "Notes to Condensed Consolidated Financial
Statements -- Veritas Transaction" below. These prepaid merger costs amounted to
approximately $2.2 million as of January 1, 1999 and consisted of legal fees,
accounting fees, banking fees, government filing fees and other expenses
directly related to this proposed transaction.
 
     EQUIPMENT AND LEASEHOLD IMPROVEMENTS. Equipment and leasehold improvements
consisted of the following, in thousands:
 
<TABLE>
<CAPTION>
                                                            JANUARY 1,   JULY 3,
                                                               1999       1998
                                                            ----------   -------
<S>                                                         <C>          <C>
Equipment.................................................   $36,011     $30,999
Leasehold improvements....................................     9,040       9,424
                                                             -------     -------
                                                              45,051      40,423
Less accumulated depreciation and amortization............   (28,020)    (23,547)
                                                             -------     -------
                                                             $17,031     $16,876
                                                             =======     =======
</TABLE>
 
     GOODWILL AND OTHER INTANGIBLES. Goodwill and other intangibles consisted of
the following, in thousands:
 
<TABLE>
<CAPTION>
                                                            JANUARY 1,   JULY 3,
                                                               1999       1998
                                                            ----------   -------
<S>                                                         <C>          <C>
Goodwill..................................................   $49,139     $49,039
Developed technology......................................    48,239      48,049
Trademarks................................................     9,972       9,972
Assembled workforce.......................................     4,596       4,596
Distribution network......................................     2,925       2,925
Other intangibles.........................................    13,813      13,813
                                                             -------     -------
                                                             128,684     128,394
Accumulated amortization..................................   (84,007)    (71,558)
                                                             -------     -------
Goodwill and other intangibles............................   $44,677     $56,836
                                                             =======     =======
</TABLE>
 
     COMMON STOCK SUBJECT TO REPURCHASE. Current employees and directors of
Seagate Software and of Seagate Technology have exercised 692,872 shares of
common stock under the 1996 Stock Option Plan (the "Option Plan"). At January 1,
1999, 267,072 shares were vested and 425,800 shares were unvested. At the option
of the employee or director, within 30 days of termination such vested and
unvested shares may be sold back to Seagate Software at the original issue
price. In addition, upon termination, unvested shares are subject to repurchase
at the option of Seagate Software at the original issue price. Because of the
obligation to repurchase vested and unvested shares of common stock, Seagate
Software has excluded the amounts associated with the repurchase obligation from
Stockholders' Equity in the accompanying balance sheet.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     Seagate Software intends to adopt Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") during fiscal 1999. This standard will require
additional disclosure, but will not have a material effect on Seagate Software's
financial position or results of operations. SFAS 131 changes the way companies
report segment information and requires segments to be determined based on how
management measures performance and makes decisions about
 
                                        8
<PAGE>   10
                             SEAGATE SOFTWARE, INC.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
allocating resources. SFAS 131 will first be reflected in Seagate Software's
1999 Annual Report on Form 10-K.
 
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance on capitalization of the costs incurred for computer software developed
or obtained for internal use. It also provides guidance for determining whether
computer software is internal-use software and on accounting for the proceeds of
computer software originally developed or obtained for internal use and then
subsequently sold to the public. Seagate Software has not yet determined the
impact, if any, of adopting this statement. The disclosures prescribed by SOP
98-1 will be effective for Seagate Software's consolidated financial statements
for the fiscal year ending June 30, 2000.
 
     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that derivatives
be recognized in the balance sheet at fair value and specifies the accounting
for changes in fair value. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999, and will be effective for Seagate
Software's fiscal year 2000. Seagate Software generally does not use derivative
financial instruments.
 
STOCKHOLDERS' EQUITY
 
     Shares authorized and outstanding are as follows:
 
<TABLE>
<CAPTION>
                                                          SHARES OUTSTANDING
                                                        -----------------------
                                                        JANUARY 1,    JULY 3,
                                                           1999         1998
                                                        ----------   ----------
<S>                                                     <C>          <C>
Preferred stock, par value $.001 per share, 73,000,000
  shares authorized...................................  54,633,333   54,633,333
Common stock, par value $.001 per share, 95,600,000
  shares authorized...................................     366,034      235,502
</TABLE>
 
INCOME TAXES
 
     The effective tax rate used to record the provision for income taxes for
the six month period ended January 1, 1999 was 51% compared with a 64% effective
tax rate used to record the benefit from income taxes for the six month period
ended January 2, 1998. The effective tax rate used to record the provision for
taxes for the six month period ended January 1, 1999 exceeds the U.S. statutory
rate primarily due to the amortization of goodwill and certain other purchased
intangible assets that is not deductible for tax purposes, and foreign taxes on
certain earnings generated in higher tax rate jurisdictions. The effective tax
rate used to record the benefit from income taxes for the six month period ended
January 2, 1998 was based on the expected annual effective tax rate applicable
to anticipated fiscal 1998 operating income as adjusted for the amortization of
nondeductible goodwill. Seagate Software expects its annual effective tax rate
on anticipated operating income for fiscal 1999 to approximate 50% absent the
effects, if any, of its anticipated contribution of NSMG to New Veritas. The
projected effective tax rate exceeds the U.S. statutory rate primarily due to
the amortization of goodwill and certain other purchased intangible assets that
is not deductible for tax purposes and foreign taxes on certain earnings
generated in higher tax rate jurisdictions.
 
     Seagate Software is included in the consolidated federal and certain
combined and consolidated state and foreign income tax returns of Seagate
Technology, Seagate Software's majority stockholder. Seagate Technology and
Seagate Software have entered into a tax sharing agreement (the "Tax Allocation
Agreement"). Pursuant to certain terms of the Tax Allocation Agreement, Seagate
Software's ability to recognize the tax benefits of certain net operating loss
carryforwards and foreign and domestic tax credits can
 
                                        9
<PAGE>   11
                             SEAGATE SOFTWARE, INC.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
be impacted by Seagate Technology's anticipated operating income for fiscal
1999. Accordingly, Seagate Software's expected annual effective tax rate of 50%
on anticipated operating income may be subject to adjustment in future quarters.
 
COMPREHENSIVE INCOME
 
     As of July 4, 1998 Seagate Software adopted Statement of Financial
Accounting Standards No. 130 ("SFAS 130"), Reporting Comprehensive Income. SFAS
130 establishes new rules for the reporting and display of comprehensive income
and its components; however, the adoption of SFAS 130 had no impact on Seagate
Software's net income or stockholders' equity. SFAS 130 requires that foreign
currency translation adjustments, which prior to adoption were reported
separately in stockholders' equity, be included in accumulated other
comprehensive income. The differences between Seagate Software's comprehensive
income and net income for the periods presented are not material.
 
CONTRIBUTION OF NSMG TO NEW VERITAS
 
     Seagate Software, Seagate Technology and NSMG announced on October 5, 1998
that they had entered into an Agreement and Plan of Reorganization (the "Plan")
as of such date with Veritas Software Corporation ("Veritas") and a newly-formed
holding company, Veritas Holding Corporation ("New Veritas"). The Plan provides
for the contribution by Seagate Software of those assets used primarily in the
network and storage management business of Seagate Software (the "NSMG
Business"), in consideration for the issuance of shares of Common Stock of New
Veritas to Seagate Software and the offer by New Veritas to grant options to
purchase Common Stock of New Veritas to certain of Seagate Software's employees
who become employees of New Veritas. New Veritas will also assume certain
liabilities of the NSMG Business. In addition, Veritas will become a
wholly-owned subsidiary of New Veritas. This contribution of NSMG to New Veritas
is structured to qualify as a tax-free exchange and will be accounted for as a
non-monetary transaction and Seagate Software will record a substantial gain and
a step-up in basis for its investment in New Veritas as more fully disclosed
below.
 
     In connection with the contribution of NSMG to New Veritas, New Veritas
will issue shares of Common Stock to Seagate Software equal to 40% of the fully
diluted Common Stock equivalent equity interests in New Veritas (assuming
conversion of all convertible securities, including the Veritas convertible
debentures, and exercise of all dilutive options and warrants) less that number
of shares of New Veritas Common Stock issuable upon exercise of New Veritas
options issued to Seagate Software employees who surrender their outstanding
options to purchase shares of Seagate Software's Common Stock. In addition, the
former security holders of Veritas will be issued New Veritas securities
representing approximately 60% of the fully diluted Common Stock equivalent
equity interests in New Veritas.
 
     The contribution of NSMG to New Veritas is subject to a number of
conditions, including but not limited to the effectiveness of a Registration
Statement on Form S-4 to be filed by New Veritas with the Securities and
Exchange Commission, approval by the stockholders of Veritas and Seagate
Software, the expiration or termination of the waiting period (and any extension
thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and other customary closing conditions.
 
     Seagate Software anticipates recording a substantial gain and certain
expenses in connection with the contribution of NSMG to New Veritas. The gain
will be recorded in fiscal 1999. However, because Seagate Software will own
approximately 41% (computed on an outstanding shares basis) of New Veritas,
including the Network & Storage Management Group after the exchange, it will not
recognize a gain on 100% of the contribution of the NSMG to New Veritas. Seagate
Software will record a gain on the exchange equivalent to the difference between
approximately 59% of the fair value of the New Veritas stock received and
approximately 59% of Seagate Software's basis in the net NSMG business assets
exchanged. Seagate
                                       10
<PAGE>   12
                             SEAGATE SOFTWARE, INC.
 
      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
Software will account for its investment in New Veritas using the equity method.
Seagate Software will allocate the difference between the recorded amount of its
investment in New Veritas and the amount of its underlying equity in the net
assets of New Veritas based upon the fair value of the underlying assets and
liabilities of New Veritas. Subsequent to the combination, Seagate Software's
operating results will include approximately 41% of the operating results of New
Veritas, adjusted to amortize the difference between the recorded amount of
Seagate Software's investment and the amount of its underlying equity in the net
assets of New Veritas. The expenses will include a substantial one-time
write-off of in-process research and development during fiscal 1999 as well as
amortization of goodwill and intangibles over the next four years. The magnitude
of the gain and expenses to be recorded will depend on several factors,
including the price of New Veritas common stock, the number of shares of stock
exchanged, and the number of options to purchase Seagate Software common stock
that are surrendered by employees of NSMG who receive New Veritas options.
 
     NSMG comprised approximately 54% of consolidated assets, 60% of
consolidated revenues, and contributed $2.9 million in profit to the total
consolidated net loss of $9.3 million for the fiscal year ended 1998 (65% of
consolidated assets, 64% of consolidated revenues, and 119% of consolidated net
income at and for the second fiscal quarter of 1999). If the transaction with
New Veritas is consummated along the lines currently contemplated, it will
result in a substantial reduction in ongoing consolidated revenues and will
result in net losses in periods subsequent to the exchange resulting from the
amortization of intangible assets and goodwill associated with New Veritas.

     Seagate Technology, the Company's parent, anticipates that it will offer to
purchase outstanding vested and unvested shares of Seagate Software in exchange
for shares of Seagate Technology common stock. The exchange ratio of Seagate
Software shares for Seagate Technology shares will be determined based on the
estimated fair value of the Seagate Software shares divided by the fair market
value of Seagate Technology common stock. The estimated fair value of the
Seagate Software shares will be determined based upon the sum of the fair value
of the NSMG business (as measured by the fair value of the shares to be received
from New Veritas), plus the estimated fair value for the Information Management
Group as determined by the Seagate Software Board of Directors, plus the assumed
proceeds from the exercise of all stock options, divided by the number of fully
converted shares of Seagate Software.
 
     The fair value of shares purchased less the original price paid by the
employees will be recorded as compensation expense by Seagate Software for those
shares outstanding or vested less than six months. The purchase of Seagate
Software shares that have been outstanding and vested more than six months will
be accounted by Seagate Software as the purchase of minority interest and,
accordingly, the fair value of the shares exchanged will be allocated to all of
the identifiable tangible and intangible assets, including in-process research
and development and goodwill, and liabilities of Seagate Software. The amounts
allocated to in-process research and development will be expensed in the period
in which the shares are exchanged.
 
    
LITIGATION
 
     See Part II, Item 1 of this Form 10-Q for a description of legal
proceedings.
 
                                       11
<PAGE>   13
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
CERTAIN FORWARD-LOOKING INFORMATION
 
   
     Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") are forward-looking
statements based on current expectations, and entail various risks and
uncertainties that could cause actual results to differ from those projected in
such forward-looking statements. Certain of these risks and uncertainties are
set forth below in the sections entitled "Results of Operations," "Liquidity and
Capital Resources" and "Factors Affecting Future Operating Results." Certain
sections in this Quarterly Report on Form 10-Q/A have been identified as
containing forward-looking statements. The reader is cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
    
 
OVERVIEW
 
     Seagate Software develops and markets software products and provides
related services enabling business users and information technology ("IT")
professionals to manage enterprise information. Headquartered in Scotts Valley,
California, Seagate Software has over 40 offices and operations in 17 countries
worldwide. Seagate Software is a majority-owned and consolidated subsidiary of
Seagate Technology, Inc. ("Seagate Technology"), a data technology company that
provides products for storing, managing and accessing digital information on
computer systems. As of January 1, 1999, Seagate Technology and one of its
subsidiaries held 99.4% of Seagate Software's outstanding capital stock. On a
fully converted basis, the outstanding minority interests of Seagate Software
amounted to approximately 18.0%, which consisted of Common Stock, options to
purchase its Common Stock issued pursuant to the 1996 Stock Option Plan (the
"Option Plan") and Common Stock subject to repurchase. Such options and stock
are held by certain current and former employees, directors and consultants of
Seagate Software and Seagate Technology.
 
     Seagate Software was incorporated in Delaware in November 1993 and
commenced operations in May 1994 pursuant to Seagate Technology's merger with
Crystal Computer Services, Inc., a company engaged in developing and marketing
report writing software. From August 1994 to June 1996, Seagate Technology
acquired eight software companies, which were engaged in developing and
marketing business intelligence ("BI") or network and/or storage management
software products. In February 1996, Seagate Technology merged with Conner
Peripherals, Inc. ("Conner") in a transaction accounted for as a
pooling-of-interests. In connection with the merger, Seagate Technology
purchased the outstanding minority interests in Conner's storage management
software operations under Arcada Holdings, Inc. ("Arcada") for $85.1 million,
which resulted in allocations to goodwill and other intangibles for $47.4
million, write-off of in-process research and development of $43.9 million and a
deferred tax liability of $6.2 million. In April 1996, Seagate Technology
consolidated its software operations into Seagate Software. In June 1998,
Seagate Software acquired Eastman Software Storage Management Group, Inc.
("Eastman"), a company engaged in developing, producing and marketing
hierarchical storage management ("HSM") products for the Windows NT platform.
The purchase price of approximately $10,000,000 was paid in cash which resulted
in allocations to goodwill and other intangibles of $3.2 million and a write-off
of in-process research and development of $6.8 million. Seagate Software
accounted for the acquisition using the purchase method, and the results of
operations of Eastman are only included in Seagate Software's operations since
the acquisition was completed.
 
     On October 5, 1998, Seagate Software signed a definitive agreement to
contribute its Network & Storage Management Group business ("NSMG") to a
newly-formed holding company, Veritas Holding Corporation ("New Veritas"), which
will also acquire Veritas Software Corporation ("Veritas"). See "Notes to
Condensed Consolidated Financial Statements -- Veritas Transaction."
 
     Seagate Software expects to incur certain expenses in connection with the
contribution of NSMG to New Veritas. These expenses include a substantial
one-time write-off of in-process research and development during fiscal 1999, as
well as amortization of goodwill and intangibles over the next four years
related to the Company's investment in New Veritas. Seagate Software also
expects to record a substantial gain on the
 
                                       12
<PAGE>   14
 
contribution of NSMG to New Veritas.* The magnitude of the expenses and the gain
will depend on several factors, including the price of Veritas common stock, the
number of shares of stock exchanged, and the number of options to purchase
Seagate Software common stock that are surrendered by employees of NSMG who
receive New Veritas options.
 
     NSMG comprised approximately 54% of consolidated assets, 60% of
consolidated revenues, and contributed $2.9 million in profit to the total
consolidated net loss of $9.3 million for the fiscal year ended 1998 (65% of
consolidated assets, 64% of consolidated revenues, and 119% of consolidated net
income at and for the second fiscal quarter of 1999). If the transaction with
New Veritas is consummated along the lines currently contemplated, it will
result in a substantial reduction in ongoing consolidated revenues and will
result in net losses in periods subsequent to the exchange resulting from the
amortization of intangible assets and goodwill.
 
     Seagate Software operates and reports financial results on a fiscal year of
52 or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 1998
was 53 weeks and ended on July 3, 1998 and fiscal 1999 will be 52 weeks and will
end on July 2, 1999. All references to years in this Form 10-Q/A represent
fiscal years unless otherwise noted.
 
RESTATEMENT OF FINANCIAL STATEMENTS
 
     Seagate Software had previously allocated a portion of goodwill to
developed technology and evaluated the impairment of goodwill based on the
revenues from related software. Using this method, Seagate Software recorded
write-downs and write-offs of goodwill in fiscal 1997 in the amount of
$10,259,000. Seagate Software has re-evaluated its methodology and determined
that goodwill should not be allocated to developed technology under Accounting
Principles Board Opinion 17, "Intangible Assets". As a result, Seagate Software
has made adjustments to decrease the amounts of goodwill previously written-down
and written-off from $10,259,000 to $6,173,000 in fiscal 1997. The additional
goodwill of $4,086,000 is being amortized over the remaining estimated useful
lives of approximately 5 years.
 
     The effect of this adjustment on previously reported consolidated financial
statements as of and for the three months ended January 1, 1999 and January 2,
1998 is as follows (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                          AS REPORTED               AS RESTATED
                                                    -----------------------   -----------------------
                                                    JANUARY 1,   JANUARY 2,   JANUARY 1,   JANUARY 2,
                                                       1999         1998         1999         1998
                                                    ----------   ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>          <C>
Amortization of goodwill and other intangibles....  $   3,148    $   5,546    $   3,343    $   5,741
Income (loss) from operations.....................     15,035        1,343       14,840        1,148
Net income (loss).................................      8,025        2,353        7,830        2,158
Basic income (loss) per share.....................      32.77        15.30        31.98        14.03
Diluted income (loss) per share...................       0.13         0.04         0.13         0.04
Goodwill and other intangible assets, net.........     42,110       59,146       44,677       62,493
Accumulated deficit...............................   (280,298)    (281,247)    (277,731)    (277,900)
</TABLE>
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       13
<PAGE>   15
 
     The effect of this adjustment on previously reported consolidated financial
statements as of and for the six months ended January 1, 1999 and January 2,
1998 is as follows (in thousands except per share amounts):
 
   
<TABLE>
<CAPTION>
                                                          AS REPORTED               AS RESTATED
                                                    -----------------------   -----------------------
                                                    JANUARY 1,   JANUARY 2,   JANUARY 1,   JANUARY 2,
                                                       1999         1998         1999         1998
                                                    ----------   ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>          <C>
Amortization of goodwill and other intangibles....  $   6,346    $   9,002    $   6,736    $   9,392
Income (loss) from operations.....................     16,618       (2,056)      16,228       (2,446)
Net income (loss).................................      8,877         (562)       8,487         (952)
Basic income (loss) per share.....................      37.77        (4.38)       36.11        (7.42)
Diluted income (loss) per share...................       0.14        (4.38)        0.14        (7.42)
Goodwill and other intangible assets, net.........     42,110       59,146       44,677       62,493
Accumulated deficit...............................   (280,298)    (281,247)    (277,731)    (277,900)
</TABLE>
    
 
RESULTS OF OPERATIONS
 
     REVENUES. Seagate Software's revenues are primarily derived from the sale
of product licenses, software maintenance, technical support, training and
consulting. During the first quarter of 1999, Seagate Software began recognizing
license revenues in accordance with the American Institute of Certified Public
Accountants Statement of Position 97-2, "Software Revenue Recognition". Revenues
from software license agreements are generally recognized at the time of product
delivery, provided that fees are fixed or determinable, evidence of an
arrangement exists, collectibility is probable and Seagate Software has
vendor-specific objective evidence of fair value. Service revenues from customer
maintenance fees for ongoing customer support and product updates are recognized
ratably over the maintenance term, which is typically 12 months. Service
revenues from training and consulting are recognized when such services are
performed.
 
     Total revenues increased 27% and 23% over the comparable year-ago quarter
and the comparable year-ago six month period, respectively. Licensing revenues
increased 24% to $76.6 million and 20% to $137.5 million for the three and six
months ended January 1, 1999 as compared to the three and six months ended
January 2, 1998. The increase in licensing revenues over the comparable year-ago
periods was primarily due to a net increase in the number of NSMG product
licenses sold for sales of NSMG's Backup Exec for Windows NT and Desktop
Management Suite and IMG's Crystal Info products. Maintenance, support, and
other revenues increased 44% to $15.4 million and 41% to $29.5 million for the
three and six months ended January 1, 1999 from $10.7 million and $21.0 million
for the three and six months ended January 2, 1998. The increase in maintenance,
support and other revenues over the comparable year-ago quarter was primarily
due to increases in maintenance, training and consulting revenues resulting from
a larger installed customer base. Additionally, Seagate Software continued to
expand both its indirect and direct sales channels. Revenues from indirect sales
channels increased 28% to $65.4 million and 27% to $118.3 million in the three
and six months ended January 1, 1999 from $50.9 million and $93.1 million for
the comparable three and six month year-ago periods. Revenues from direct sales
channels increased 25% to $26.7 million and 15% to $48.6 million in the three
and six months ended January 1, 1999 from $21.4 million and $42.2 million in the
three and six months ended January 2, 1998.
 
     COST OF REVENUES. The cost of revenues consists of amortization of acquired
developed technology, royalties, product packaging, documentation, duplication,
production and the cost of maintenance, consulting support and other services.
Acquired developed technology is amortized based on the greater of the straight-
line method over its estimated useful life (30 to 48 months) or the ratio of
current revenues to total current and anticipated future revenues. The total
cost of revenues as a percentage of total revenues decreased 3% and 4% over the
comparable year-ago quarter and the comparable year-ago six month period,
respectively. The primary reasons for the improved gross margins were a decline
in the amortization of developed technology for the three and six months ended
January 1, 1999 as a result of intangible assets that were fully amortized
during or at the start of the first quarter of fiscal 1999 and one time
write-offs of obsolete inventory during the first quarter of 1998. Additionally,
the cost of license revenues as a percentage of related revenues continues to
decline due to lower product packaging and documentation costs resulting from
higher licensing and royalty
 
                                       14
<PAGE>   16
 
based revenues. The gross margins from maintenance, support and other revenues
increased 6% and 2% over the comparable year-ago quarter and the comparable
year-ago six month period, respectively, primarily due to an increase in higher
margin maintenance revenues.
 
     SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel-related expenses, advertising, sales and marketing promotions and
customer technical support costs. Total sales and marketing expenses increased
26% for the three and six months ended January 2, 1999 over the comparable
year-ago periods. The increase in sales and marketing expenses over the
comparable year-ago periods was primarily due to expansion of Seagate Software's
sales force and increases in advertising, promotion and technical support costs
necessary to support revenue growth, particularly outside of North America. As a
percent of total revenues, total sales and marketing expenses were 43% and 44%
for the three months ended January 1, 1999 and January 2, 1998, respectively.
Total sales and marketing expenses as a percent of total revenues remained at
45% for the six months ended January 1, 1999 and January 2, 1998, respectively.
 
     RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of personnel-related expenses, depreciation of development equipment
and facilities and occupancy costs. In accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed," software development costs are expensed
as incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release to
customers. To date, the establishment of technological feasibility of Seagate
Software's products and general release of such software has substantially
coincided. As a result, software development costs qualifying for capitalization
have been insignificant. Total research and development expenses increased 15%
to $13.6 million in the three months ended January 1, 1999 from $11.8 million in
the three months ended January 2, 1998 and increased 14% to $26.3 million in the
six months ended January 1, 1999 from $23.2 million in the comparable year-ago
six month period. The increase in research and development expenses over the
comparable year-ago quarter was primarily due to increases in personnel and
related expenses, including those specifically related to the Eastman
acquisition, the support of new product development and localization costs. As a
percentage of total revenues, research and development expenses were 15% and 16%
in the three months ended January 1, 1999 and January 2, 1998, respectively and
16% and 17% in the six months ended January 1, 1999 and January 2, 1998,
respectively.
 
     GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel-related expenses for finance, legal, information
technology, human resources and general management, fixed asset depreciation and
outside services. Total general and administrative expenses decreased 20% to
$8.3 million in the three months ended January 1, 1999 from $10.4 million in the
three months ended January 2, 1998. A decrease in total general and
administrative expenses of 11% to $17.3 million occurred in the six month period
ended January 1, 1999 when compared to the comparable year-ago period. The
decrease over the comparable year-ago quarter was primarily due to management's
efforts to reduce general management and administrative costs. As a percentage
of total revenues, general and administrative expenses were 9% and 14% in the
three months ended January 1, 1999 and January 2, 1998, respectively. These same
expenses were 10% and 14% in the six months ended January 1, 1999 and January 2,
1998, respectively.
 
     AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents the
excess of the purchase price of acquired companies over the estimated fair
values of the tangible and intangible net assets acquired. Goodwill is amortized
on a straight-line basis over six to seven years. Other intangible assets
consist of acquired trademarks, assembled workforces, distribution networks,
developed technology, customer bases, and covenants not to compete. Amortization
of other intangibles, other than acquired developed technology, which is
included in the cost of revenues, is provided based on the straight-line method
over the respective useful lives of the assets ranging from one to five years.
Total amortization of goodwill and other intangibles decreased 42% to $3.3
million in the three months ended January 1, 1999 from $5.7 million in the three
months ended January 2, 1998. Amortization of goodwill and other intangibles
decreased 28% to $6.7 million during the six months ended January 1, 1999 from
$9.4 million for the six months ended January 2, 1998. The decrease in the
amortization of goodwill and other intangibles over the comparable year-ago
three and six month periods was primarily due to decreases in amortization
expense based on certain amounts becoming fully amortized during or as of the
start of the first fiscal quarter of 1999, partially offset by increases in
amortization expense
                                       15
<PAGE>   17
 
due to goodwill acquired as part of the Eastman acquisition. As a percentage of
total revenues, amortization of goodwill and other intangibles was 4% and 8% in
the three months ended January 1, 1999 and January 2, 1998, respectively and 4%
and 7% in the six months ended January 1, 1999 and January 2, 1998,
respectively.
 
     INTEREST EXPENSE AND OTHER, NET. Interest expense was $46,000 and $202,000
for the three and six months ended January 1, 1999, a decrease of 87% and 69%
from the comparable three and six month year-ago periods. The decrease in
interest expense over the comparable year-ago quarter was primarily due to
repayments on the revolving loan to Seagate Technology as a result of increased
cash flow generated from operations. Other income, net increased $570,000 and
$873,000 for the three and six months ended January 1, 1999 as compared to the
three and six months ended January 2, 1998 primarily due to foreign currency
translation gains resulting from Seagate Software's Canadian operations.
 
     INCOME TAXES. The effective tax rate used to record the provision for
income taxes for the six month period ended January 1, 1999 was 51% compared
with a 64% effective tax rate used to record the benefit from income taxes for
the six month period ended January 2, 1998. The effective tax rate used to
record the provision for taxes for the six month period ended January 1, 1999
exceeds the U.S. statutory rate primarily due to the amortization of goodwill
and certain other purchased intangible assets that is not deductible for tax
purposes, and foreign taxes on certain earnings generated in higher tax rate
jurisdictions. The effective tax rate used to record the benefit from income
taxes for the six month period ended January 2, 1998 was based on the expected
annual effective tax rate applicable to anticipated fiscal 1998 operating income
as adjusted for the amortization of nondeductible goodwill. Seagate Software
expects its annual effective tax rate on anticipated operating income for fiscal
1999 to approximate 50% absent the effects, if any, of its anticipated
contribution of NSMG to New Veritas. The projected effective tax rate exceeds
the U.S. statutory rate primarily due to the amortization of goodwill and
certain other purchased intangible assets that is not deductible for tax
purposes and foreign taxes on certain earnings generated in higher tax rate
jurisdictions.
 
     Seagate Software is included in the consolidated federal and certain
combined and consolidated state and foreign income tax returns of Seagate
Technology, Seagate Software's majority stockholder. Seagate Technology and
Seagate Software have entered into a tax sharing agreement (the "Tax Allocation
Agreement"). Pursuant to certain terms of the Tax Allocation Agreement, Seagate
Software's ability to recognize the tax benefits of certain net operating loss
carryforwards and foreign and domestic tax credits can be impacted by Seagate
Technology's anticipated operating income for fiscal 1999. Accordingly, Seagate
Software's expected annual effective tax rate of 50% on anticipated operating
income may be subject to adjustment in future quarters.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Seagate Software's total cash was $848,000 and $15.1 million as of January
1, 1999 and July 3 1998, respectively. The decrease in cash was primarily due to
loan repayments to Seagate Technology of $154.2 million and purchases of
equipment, leasehold improvements and intangible assets of $5.2 million,
partially offset by borrowings from Seagate Technology of $121.8 million, cash
flows from operating activities of $22.9 million and the sale of common stock
for $461,000. Seagate Software's cash is maintained in highly liquid operating
accounts and primarily consists of bank deposits.
 
     Seagate Software's operations have been financed by cash flows from
operating activities and borrowings from the Seagate Technology. Such borrowings
are available to Seagate Software under a Revolving Loan Agreement between
Seagate Software and Seagate Technology. Under the Revolving Loan Agreement,
Seagate Technology finances certain of Seagate Software's working capital
requirements. The Revolving Loan Agreement, which provides for maximum
borrowings of up to $60,000,000, is renewable every two years and expires on
July 3, 2000. Interest is paid at the LIBOR rate plus 2% per annum on such
borrowings (7.063% at January 1, 1999). The loan balance was $0 as of January 1,
1999.
 
     In addition to the Revolving Loan Agreement with Seagate Technology,
certain foreign subsidiaries have line of credit facilities with third party
financial institutions. These line of credit facilities provide for additional
borrowings of up to an equivalent of approximately $1,139,000 at January 1,
1999. Interest rates payable on
 
                                       16
<PAGE>   18
 
borrowings are based on local bank prime interest rates. At January 1, 1999,
there were $639,000 of outstanding borrowings under one line of credit.
 
     During the three months ended January 1, 1999, Seagate Software made
investments totaling approximately $4.3 million for new office facilities,
leasehold improvements, computers, furniture and office equipment. Seagate
Software presently anticipates it will make investments in 1999 of approximately
$15.0 million in equipment and leasehold improvements. * Additionally, product
development activities may include cash to acquire technology.* Seagate Software
expects that such investments will be funded from existing cash balances and
cash flows from operations.*
 
   
     Seagate Software anticipates that the proposed contribution of NSMG to New
Veritas will have a significant impact on its cash flows from continuing
operations with respect to the exclusion of NSMG's operations. However, Seagate
Software believes its current cash balances, its available borrowings from
Seagate Technology and cash flows generated from Seagate Software's operations
will be sufficient to meet its anticipated cash needs for working capital and
capital expenditures for at least the next 12 months.* Furthermore, Seagate
Software anticipates that future operating and investing activities may be
financed by additional borrowings from Seagate Technology, equity financing or
other sources.* Seagate Software believes that additional financing from Seagate
Technology will be available at a reasonable cost.*
    
 
YEAR 2000 READINESS
 
     The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including, among other things,
a temporary inability to process transactions, send invoices, or engage in
normal business activities.*
 
     We consider a product to be "Year 2000 Ready" if the product's performance
and functionality are unaffected by processing of dates prior to, during and
after the year 2000, but only if all products (for example hardware, firmware,
and software) used with the products properly exchange accurate date data with
it.
 
     Seagate Software's Products
 
     Our products are used in numerous operating environments. We have assessed
our products to determine whether or not they are Year 2000 Ready. Although we
believe certain of our software products are Year 2000 Ready, we have determined
that certain of our software products are not and will not be Year 2000 Ready.
Our products that are not Year 2000 Ready are not material to our business,
financial condition or results of operations. The inability of one or more of
our products to properly manage and manipulate dates related to the Year 2000
could result in a material adverse effect on our business, financial condition
or results of operations, including increased warranty costs, customer
satisfaction issues and potential lawsuits. We are taking measures to inform our
customers that those products are not and will not be Year 2000 Ready. To assist
our customers in evaluating their Year 2000 issues, we have developed a list of
those products that are Year 2000 Ready as stand-alone products. The list is
located on Seagate Software's World Wide Web page and is periodically updated
when we make additional product assessments.
 
     We anticipate that substantial litigation may be brought against vendors,
including Seagate Software, of all software components of systems in which
another vendor's component products are unable to properly manage data related
to the Year 2000. Our customer agreements typically contain provisions designed
to limit our liability for such claims. As a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions, it
is possible that these measures will not provide us with protection from
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       17
<PAGE>   19
 
liability claims.* If any such claims are brought against us, regardless of
their merit, our business, financial condition and results of operations could
be materially adversely affected from factors that include increased warranty
costs, customer satisfaction issues and the costs of potential lawsuits.
 
     Our Systems
 
     We have also initiated a comprehensive program to address Year 2000
readiness in our internal systems and in those of our customers and suppliers.
Our program has been designed to address our most critical internal systems
first and to gather information regarding the Year 2000 compliance of products
supplied to Seagate Software and into which our products are integrated. The
scope of our internal Year 2000 readiness project includes information
technology, non-information technology and embedded technology for all critical
systems, and includes all offices worldwide, critical vendors, suppliers,
customers and partners. We currently expect to be Year 2000 ready by December
31, 1999.
 
     We are using the following phased approach to Year 2000 readiness:
inventory, assessment, testing, remediation and contingency planning.
Anticipated dates of completion for our two lines of business are as follows:
 
   
<TABLE>
<CAPTION>
                                               NETWORK & STORAGE       INFORMATION
                                                MANAGEMENT GROUP     MANAGEMENT GROUP
                                               ------------------    ----------------
<S>                                            <C>                   <C>
1. Inventory.................................  Complete              March 1, 1999
2. Assessment................................  April 30, 1999        April 1, 1999
3. Testing...................................  June 1, 1999          July 1, 1999
4. Remediation...............................  September 30, 1999    December 1, 1999
5. Contingency Planning......................  September 30, 1999    August 1, 1999
</TABLE>
    
 
     These activities are intended to encompass all major categories of systems
in use by Seagate Software, including operations, technical support,
engineering, sales, finance and human resources. To date, we have not incurred
material costs related to assessment and remediation of Year 2000 readiness. We
are still in the process of conducting our Year 2000 audit. We currently
estimate the cost of internal Year 2000 issues will be less than $3.0 million.
However, if the costs of future remediation exceed such amount, then the costs
required to address the Year 2000 issue could have a material adverse effect on
our business, financial condition or results of operations.
 
     Our material third party relationships include relationships with
fulfillment houses, banks, payroll services vendors, utilities, distribution
partners and key customers. These relationships have been inventoried, and we
are now assessing the risks relating to these relationships. We believe that
certain of these relationships are of significant importance to our future
operations.* We have contacted our significant suppliers and have received
assurances of Year 2000 compliance from a number of those contacted. However,
most of our suppliers are under no contractual obligation to provide such
information to us. We do not currently have reason to believe that any such
third parties have significant internal Year 2000 problems that will not
remediated.* However, in the event any such third parties were to have an
unremediated Year 2000 problem, it could have a material adverse effect on our
business, financial condition or results of operations.
 
     Customer Purchasing Patterns
 
     We believe that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct or patch their current software systems for Year 2000
readiness or defer purchases of new systems to avoid encountering additional
unforeseen Year 2000 problems. Additional short-term expenditures for
remediation of existing Year 2000 problems may result in
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectation. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       18
<PAGE>   20
 
reduced funds available to purchase products such as those offered by Seagate
Software, which could have a material adverse effect on our business, operating
results or financial condition.*
 
     We believe that a most likely worst case Year 2000 scenario would result in
a disruption of infrastructure, including the possible loss of power and
disruption of transportation systems. We believe that no effective contingency
planning for such disruption is possible. We also believe that additional
elements of the most likely worst case Year 2000 scenario include the loss of
fulfillment services, banking services, and/or distribution services. Although
discussions of contingency planning for these problems has begun, no contingency
plan is yet in place. We currently expect to complete contingency planning by
September 30, 1999.* We could experience material adverse effects on our
business if we fail to successfully implement a contingency plan. Those material
adverse effects could include delays in the delivery or sale of our products.
 
FACTORS AFFECTING FUTURE OPERATING RESULTS
 
RISKS FROM THE CONTRIBUTION OF OUR NETWORK & STORAGE MANAGEMENT GROUP
 
     Seagate Technology consolidated its software businesses into a single
entity called Seagate Software in 1996. Seagate Software's business currently
consists of two primary divisions, NSMG and the Information Management Group.
Seagate Software announced on October 5, 1998 that it will contribute NSMG to
New Veritas. Seagate Software and Seagate Software optionees who will become
employees of New Veritas will receive approximately 40% of the fully-diluted
equity in New Veritas.
 
     Seagate Software faces a number of risks prior to and after the closing of
the contribution of NSMG to New Veritas including:
 
     - our management personnel may be distracted from day to day operations by
       the transaction;
 
     - employees of the Information Management Group may be distracted by
       concerns about whether we will continue to operate that business or spin
       it off;
 
     - NSMG's customers may delay or cancel orders due to uncertainty about the
       transaction;
 
     - the ongoing original equipment manufacturer ("OEM") relationship between
       NSMG and Seagate Technology's tape drive operations may be disrupted;
 
     - we have agreed not to compete in certain storage management software
       businesses for a specified period of time after the closing and may not
       be able to benefit from future opportunities in that market;
 
     - we will not have control over the management of New Veritas, although
       initially we will have two representatives on its board of directors;
 
     - we will only be permitted to sell our interest in New Veritas in limited
       increments in compliance with certain SEC rules or to bear the expense in
       filing a registration statement; and
 
     - our Information Management Group has shared certain employees with NSMG
       who have provided accounting, legal, information technology, and other
       services to us. Many of these employees will become employees of New
       Veritas. The Information Management Group may experience delay and
       difficulty in conducting its day to day operations until replacement
       services have been fully implemented.
 
POTENTIAL FLUCTUATIONS IN ANNUAL AND/OR QUARTERLY OPERATING RESULTS
 
     We often experience a high volume of sales at the end of our fiscal
quarter. Therefore, it may be late in the quarter before we are able to
determine that our costs are too high in relation to our actual sales. If this
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       19
<PAGE>   21
 
were to happen, we would not be able to reduce these costs and, consequently,
our net income would be reduced or our net loss increased.* In addition, our
operating results have been and may, in the future, be subject to significant
quarterly fluctuations as a result of a number of other factors including:
 
     - the timing of orders from and shipment of products to major customers,
       primarily distributors such as Ingram Micro Inc. ("Ingram");
 
     - our ability to develop, introduce, and market new products and product
       enhancements in a timely fashion, particularly with respect to Seagate
       Backup Exec, Seagate Info and Seagate Crystal Reports;
 
     - changes in the prices of our products and our competitors' products;
 
     - our customers' preference for competing technologies in lieu of our
       products such as Seagate Backup Exec, Seagate Info and Seagate Crystal
       Reports;
 
     - our inability to reduce our costs in relation to our revenues (because we
       ship our products shortly after we receive orders and operate with no
       backlog);
 
     - the impact of changes in foreign currency exchange rates on the cost of
       our products and the effective price of such products to foreign
       consumers; and
 
     - competition and consolidation in our industry.
 
REVENUE CONCENTRATION
 
     Our new products must be accepted by customers in order for us to be
successful. If our products are not purchased as a result of competition,
technological change or other factors, then our business, operating results and
financial condition would be materially adversely affected.
 
     Our software products have a fixed life cycle that is difficult to
estimate. If we do not develop and introduce new products before our existing
products have completed their life cycles, then we will be unable to sustain or
increase our level of sales.* We cannot be sure that we will continue to be
successful in marketing our key products or any new products, applications or
product enhancements.
 
     We currently obtain most of our revenue from a limited number of software
products and anticipate this to be the case in the foreseeable future.* Sales to
a small number of customers generate a disproportionate amount of our revenues.
For example, Seagate Software derived 21% of its revenues from sales to Ingram
in the six months ended January 1, 1999. If Ingram, or any other significant
customer, reduces its purchases from us, our business, financial condition, and
results of operations would be materially adversely affected unless we
substantially increased sales to other customers. Because our contracts with
Ingram (or any other customer) do not require them to purchase any specified
number of software licenses from us, we cannot be sure that our significant
customers will continue to purchase our products at their current levels.
 
RELIANCE ON SALES STAFF, CHANNEL PARTNERS AND STRATEGIC RELATIONSHIPS
 
     We sell and support our products through:  our sales staff, third party
distributors, and OEMs. We also have a strategic relationship with Microsoft
that enables us to bundle our products with Microsoft's products, and we have
developed and are developing certain utilities and products to be a part of
Microsoft's products.* If Microsoft reduces the nature and quantity of its
relationship with us, our business, operating results and financial condition
would be materially adversely affected.
 
     We have made significant expenditures in recent years to expand our sales
and marketing force. We intend to continue to expand our Information Management
Group sales and marketing force after the closing
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       20
<PAGE>   22
 
of the contribution of NSMG to New Veritas.* Our future success will depend in
part upon the productivity of our Information Management Group sales and
marketing force.* During the second quarter of fiscal 1999, we experienced
significant turnover in our Information Management Group's sales personnel
management. We believe that our ability to continue to attract, integrate,
train, motivate and retain new sales and marketing personnel will also affect
our success.* We face intense competition for sales and marketing personnel in
the software industry, and we cannot be sure that we will be successful in
hiring and retaining such personnel in accordance with our plans. Even if we
hire and train sufficient numbers of sales and marketing personnel, we cannot be
sure that our recent and other planned expenses will generate enough additional
revenue to exceed these costs. In the event that the contribution of NSMG to New
Veritas does not close, we would also continue to expand NSMG's sales and
marketing force.*
 
     We generate a substantial portion of our revenue by selling our products to
distributors and OEMs. Our distributors and OEMs decide whether or not to
include our products with those they sell and generally can carry and sell
product lines that are competitive with ours. Because OEMs and distributors
carry other product lines and are not required to make a specified level of
purchases from us, we cannot be sure that they will prioritize selling our
products. These distributors and OEMs are also generally entitled to terminate
their relationship with us without cause. Our business, financial results and
operating condition would be materially adversely affected if some or all of our
current distributors and OEMs discontinued selling our products and we failed to
find comparable replacements.*
 
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
 
     Our products are used in combination with other software and computer
hardware systems. The market for our products is characterized by rapidly
changing technology, changing customer needs, evolving industry standards and
frequent new product introductions. Our future success will therefore depend on
our ability to design, develop, test and support new software products and
enhancements on a timely and cost effective basis.*
 
     If we do not respond to changing market conditions and customer
requirements by developing and introducing new products in a timely manner, then
our business, operating results or financial condition could be materially
adversely affected.*
 
     COMPETITION
 
     Our industry, including the business intelligence market in which the
Information Management Group participates and the network and storage management
software market in which NSMG participates, is intensely competitive and is
characterized by rapidly changing technology and evolving standards. We expect
additional competition from other established and/or emerging companies and as a
result of future software industry consolidations.* We expect that our
competitors will offer new and existing products at lower prices, if necessary,
to gain or retain market share and customers.* We have experienced and expect to
continue to experience intense competition from a number of domestic and foreign
companies. Increased competition can be expected to cause price reductions,
reduced gross margins and loss of market share, any of which could have a
material adverse effect on our business, operating results or financial
condition.* Current and potential competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the development, promotion, sale and support of
their products than we are able to do.*
 
     It is possible that new competitors or alliances among our competitors may
emerge and rapidly acquire significant market share. In addition, network
operating system vendors could introduce new or upgrade existing operating
systems or environments that could render our products obsolete and
unmarketable.
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       21
<PAGE>   23
 
     In connection with the contribution of NSMG to New Veritas, we have agreed
not to re-enter some of the segments in which NSMG participates for a specified
period of time. We may not be able to compete effectively with other companies
that can offer solutions in the business intelligence software segment and the
areas in which we have agreed not to re-enter.*
 
     We also face indirect competition from present and potential customers,
including Microsoft or other strategic partners, that continuously evaluate
whether to develop their own software products and components internally or
obtain them from outside sources. If our strategic partners decide to develop
the utilities and other products we have in the past provided, it could have a
material adverse effect on our business, results of operations and financial
condition.*
 
     There can be no assurance that we will be able to compete successfully
against current or future competitors. If we fail to compete successfully, our
business, operating results and financial condition may be materially adversely
affected.*
 
ACQUISITION RELATED ACCOUNTING CHARGES WILL REDUCE OUR PROFITS
 
     We intend to continue our expansion of the Information Management Group
through internal growth as well as acquisitions.* Acquisitions involve numerous
risks including:
 
     - the difficulties of integrating the operations and products of the
       acquired businesses,
 
     - the potential loss of key employees or customers of the acquired
       businesses.
 
     We expect that we will continue to incur substantial expenses as we acquire
other businesses including charges for the write-off of in-process research and
development.* Our operating results have fluctuated in the past and may
fluctuate in the future because of the timing of such write-offs.* For example,
we incurred a charge to operations in the fourth quarter of fiscal 1998 of
approximately $7 million for the write-off of in-process research and
development related to our acquisition of Eastman Software Storage Management
Group, Inc.
 
THE SECURITIES AND EXCHANGE COMMISSION'S COMMENTS REGARDING IN-PROCESS RESEARCH
AND DEVELOPMENT MAY RESULT IN RESTATEMENTS OF OUR HISTORICAL FINANCIAL
STATEMENTS
 
     We have accounted for several of our past acquisitions, including the
write-off of in-process research and development activities, in accordance with
established accounting practices and based upon expert third party valuations.
After the fiscal years in which these transactions occurred, the Securities and
Exchange Commission provided additional guidance on the determination of
in-process research and development write-offs in a letter dated October 9, 1998
to the American Institute of Certified Public Accountants. In connection with
filings with the Securities and Exchange Commission regarding the contribution
of the Network & Storage Management Group business to New Veritas and related
transactions, the staff of the Securities and Exchange Commission commented upon
the application of such additional guidance with respect to our historical
financial statements. Until the Securities and Exchange Commission completes its
review and its comments have been resolved, any impact from the application of
the additional guidance can not be quantified.
 
RISKS OF SYSTEMS FAILURES
 
     Our operations are dependent on our ability to protect our computer
equipment and the information stored in our databases from damage by
catastrophic events such as fire, natural disaster, power loss,
telecommunications failures, and unauthorized intrusion. We believe that we have
taken prudent measures to
 
---------------
 
*This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       22
<PAGE>   24
 
reduce the risk of interruption in our operations. However, we cannot be sure
that these measures are sufficient. Any damage or failure that causes
interruptions in our operations could have a material adverse effect on our
business, results of operations and financial condition.
 
RISKS FROM INTERNATIONAL OPERATIONS
 
     We have significant offshore operations including development facilities,
sales personnel and customer support operations. Our offshore operations are
subject to certain inherent risks including:
 
     - fluctuations in currency exchange rates;
 
     - lack of acceptance of localized products;
 
     - longer payment cycles for sales in foreign countries;
 
     - difficulties in staffing and managing international operations;
 
     - seasonal reductions in business activity in the summer months in Europe
       and certain other countries;
 
     - increases in tariffs, duties, price controls, other restrictions on
       foreign currencies or trade barriers imposed by foreign countries;
 
     - management of an enterprise spread over various countries;
 
     - the burden of complying with a wide variety of foreign laws; and
 
     - political unrest, particularly in areas in which we have facilities.
 
     These factors could have a material adverse effect on our business,
operating results and financial condition in the future.
 
     Our products are priced in U.S. dollars even when sold to customers who are
located abroad. The currency instability in the Asian and other financial
markets may make our products more expensive than products sold by other
manufacturers that are priced in one of the effected currencies. Therefore,
foreign customers may reduce purchases of our products.* We anticipate that the
recent turmoil in financial markets and the recent deterioration of the
underlying economic conditions in certain countries, including those in Asia and
the Far East, may have an impact on our sales to customers located in or whose
end-user customers are located in those countries due to:*
 
     - the impact of currency fluctuations on the relative price of Seagate
       Software's products,
 
     - restrictions on government spending imposed by the International Monetary
       Fund in those countries receiving the International Monetary Fund's
       assistance,
 
     - customers' reduced access to working capital to fund software purchases,
       such as our products, due to:
 
        - higher interest rates,
 
        - reduced bank lending due to contractions in the money supply or the
          deterioration in the customer's or its bank's financial condition, or
 
        - the inability to access other financing
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       23
<PAGE>   25
 
DEPENDENCE ON PROPRIETARY TECHNOLOGY
 
     Our success will be heavily dependent on our proprietary technology. We
rely primarily on the following to protect our proprietary rights:
 
     - patents,
 
     - copyrights,
 
     - trademarks and trade secret rights,
 
     - confidentiality procedures,
 
     - employee and third party nondisclosure agreements, and
 
     - licensing restrictions.
 
     Such efforts provide only limited protection.
 
     We also rely in part on shrink-wrap licenses that are not signed by end
users and, therefore, may be unenforceable under the laws of certain
jurisdictions.
 
   
     Even though we take these steps, someone may be able to copy or otherwise
obtain and use our products and technology without authorization. Policing
unauthorized use of our products is difficult. Although we cannot determine the
extent of existing piracy of our products, we expect that software piracy will
be a persistent problem.* Third parties may also develop similar technology
independently. We believe that effective protection of intellectual property
rights is unavailable or limited in certain foreign countries.*
    
 
   
     Our competitors may successfully challenge the validity or scope of our
patents, copyrights and trademarks.* We cannot be sure that our patents,
copyrights and trademarks will provide us with a competitive advantage or that
our competitors will not design around any patents issued to us. We are not
aware that any of our products infringe upon the proprietary rights of third
parties, but, in the future, third parties may claim that our current or future
products infringe that party's rights.* We believe that software product
developers will be increasingly subject to claims of infringement as the
functionality of products in our industry segment overlaps.* If we were subject
to a claim of infringement, regardless of its merit, such claim would have the
following impacts on us that could have a material adverse effect on our
business, operating results or financial condition:
    
 
     - require costly litigation to resolve,
 
     - absorb significant management time, or
 
     - require us to enter into unfavorable royalty or license agreements.
 
SOFTWARE PRODUCT ERRORS OR DEFECTS
 
   
     Software products as complex as those we offer frequently contain errors or
defects, especially when first introduced or when new versions or enhancements
are released. Despite product testing, our products may contain defects or
software errors.* If our products have errors, they could:
    
 
     - cause a negative customer reaction that could reduce future sales;
 
     - generate negative publicity regarding Seagate Software and our products;
 
     - harm our reputation;
 
     - reduce or limit customer's adoption of our products;
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       24
<PAGE>   26
 
     - require us to make extensive changes to the product; or
 
     - result in customers' delaying their purchase until the errors or defects
       have been remedied, which would cause our revenues to be reduced or
       delayed.
 
     Any of these occurrences could have a material adverse effect upon our
business, operating results or financial condition.
 
     Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. Existing
or future federal, state or local laws or ordinances or unfavorable judicial
decisions may make these provisions ineffective.* Because our products are used
in system management, resource optimization and business intelligence
applications, our liability could be substantial if we receive an unfavorable
judgement, which could have a material adverse effect upon our business,
operating results or financial condition.*
 
DEPENDENCE ON KEY PERSONNEL
 
     Our future performance depends to a significant degree upon the continued
service of our key members of management as well as marketing, sales, and
product development personnel.* The loss of one or more of our key personnel
would have a material adverse effect on our business, operating results and
financial condition.* We believe our future success, particularly with respect
to the Information Management Group after the contribution of NSMG to New
Veritas, will also depend in large part upon our ability to attract and retain
highly skilled management, marketing, sales, and product development personnel.*
We have experienced intense competition for such personnel and there can be no
assurance that we will be able to retain our key employees or that we will be
successful in attracting, assimilating and retaining them in the future.
 
FACING RISKS OF LITIGATION
 
     We are subject to litigation arising in the ordinary course of our
business. While we believe that the ultimate outcome of these actions will not
have a material adverse effect on us, the outcome of these actions is not
determinable, and negative outcomes may adversely effect our financial position,
liquidity, or results of operations. See Part II, Item 1 of this Form 10-Q for a
description of legal proceedings.
 
RISKS FROM CONVERSION TO SINGLE EUROPEAN CURRENCY.
 
     On January 1, 1999, certain member states of the European Economic
Community fixed their respective currencies to a new currency, the Single
European Currency. On that day the Single European Currency became a functional
legal currency within these countries. During the three years beginning on
January 1, 1999, business in these countries will be conducted both in the
existing national currency, such as the French Franc or the Deutsche Mark, as
well as the Single European Currency. Companies operating in or conducting
business in these countries, will need to ensure that their financial and other
software systems are capable of processing transactions and properly handling
the existing currencies and the Single European Currency.
 
     We are still assessing the impact that the introduction and use of the
Single European Currency will have on our internal systems. We will take
corrective actions based on such assessment but do not presently expect that
introduction and use of the Single European Currency will materially affect our
foreign exchange and hedging activities or use of derivative instruments or will
result in any material increase in our costs.* While we will continue to
evaluate the impact of the Single European Currency introduction over time,
based on currently available information, we do not believe that the
introduction of the Single European Currency will have a material adverse impact
on Seagate Software's financial condition or overall trends in results of
operations, nor have the introduction and use of the Single European Currency
had such effects to date.*
 
---------------
 
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that Seagate Software's actual future performance will
meet Seagate Software's current expectations. Readers are cautioned that other
sections and other sentences not so identified may also contain forward-looking
information.
                                       25
<PAGE>   27
 
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
 
     FOREIGN CURRENCY RISK. The local currency is the functional currency for
Seagate Software's foreign operations. Gains and losses on translation into U.S.
dollars of foreign operations are recorded as a separate component of
stockholders' equity. Foreign currency fluctuations have not had a significant
effect on Seagate Software's results of operations, and Seagate Software does
not engage in foreign currency hedging programs.
 
     INTEREST RATE RISK. Seagate Software's exposure to market risk for changes
in interest rates relates primarily to Seagate Software's borrowings under a
Revolving Loan Agreement between Seagate Software and Seagate Technology.
Seagate Software pays interest to Seagate Technology at the LIBOR rate plus 2%
per annum on such borrowings (7.063% at January 1, 1999). Seagate Software
typically uses available cash in excess of amounts required for operating
activities to pay amounts due under the Revolving Loan Agreement. Accordingly,
Seagate Software has not had a significant level of funds available for
investment purposes. Interest rate fluctuations have not had a significant
effect on Seagate Software's results of operations.
 
                                       26
<PAGE>   28
 
                                    PART II
 
                               OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
     On November 10, 1997, Vedatech Corporation commenced an action in the High
Court of Justice Chancery Division in the United Kingdom against Seagate
Software Information Management Group Ltd., our wholly owned subsidiary,
claiming breach of an oral agreement and infringement of a Vedatech U.K.
copyright in the Japanese translation of one of Seagate Software's products and
seeking monetary and injunctive relief. No specific damage amount has yet been
claimed. We have hired local counsel in the U.K., reviewed documents and
conducted interviews. We filed an initial response in the U.K. court on January
13, 1998 and is now in the discovery process.
 
   
     Seagate Software believes this complaint has no merit and intends
vigorously to defend this action. However, if an unfavorable outcome were to
arise, there can be no assurance that such outcome would not have a material
adverse effect on Seagate Software's liquidity, financial position, or results
of operations.
    
 
   
     Furthermore, on December 22, 1998, a former employee commenced an action in
the Superior Court of Santa Cruz county, California, against Seagate Software
claiming promissory fraud and fraudulent inducement to enter a contract, breach
of contract, constructive wrongful discharge and related claims and seeking
monetary and injunctive relief. Specifically, the former employee alleged that a
Seagate Software officer agreed to sell him a division of our Network & Storage
Management Group business. No specific damage amount had been claimed. As of
April 8, 1999, the former employee withdrew this claim and no further action
will be taken.
    
 
   
     In addition to the foregoing, Seagate Software is engaged in legal actions
arising in the ordinary course of its business and believes that the ultimate
outcome of these actions will not have a material adverse effect on Seagate
Software's financial position, liquidity, or results of operations.
    
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
(a) Exhibits
 
     The following exhibits are included herein:
 
   
<TABLE>
    <S>     <C>
    2.1.1   Amended and Restated Agreement and Plan of Reorganization by
            and among VERITAS Holding Corporation, VERITAS Software
            Corporation, Seagate Technology, Inc., Seagate Software,
            Inc. and Seagate Software Network & Storage Management
            Group, Inc.
    4.2     Form of Stockholder Agreement by and among VERITAS Holding
            Corporation, VERITAS Software Corporation, Seagate
            Technology, Inc. and Seagate Software, Inc.
    4.3     Form of Registration Rights Agreement by and among VERITAS
            Holding Corporation and Seagate Software, Inc.
    10.1.1  1996 Stock Option Plan, as amended
    10.15+  Development and License Agreement dated as of October 5,
            1998 by and among Seagate Technology, Inc., VERITAS Holding
            Corporation and VERITAS Software Corporation.
    10.16+  Cross License and Original Equipment Manufacturing Agreement
            dated as of October 5, 1998 by and among Seagate Software
            Information Management Group, Inc., VERITAS Holding
            Corporation and VERITAS Software Corporation.
    27.1    Amended Financial Data Schedule
</TABLE>
    
 
---------------
   
+ Certain information in these exhibits has been omitted and filed separately
  with the Securities and Exchange Commission pursuant to a request for
  confidential treatment filed pursuant to 17 C.F.R. 200.80(b)(4), 200.83 and
  230.24b-2.
    
 
                                      II-1
<PAGE>   29
 
   
  (b) Reports on Form 8-K
    
 
     A report on Form 8-K was filed with the Securities and Exchange Commission
on October 20, 1998 regarding the agreement of Seagate Technology, Seagate
Software, Veritas Software Corporation and Veritas Holding Corporation to
contribute Seagate Software's Network & Storage Management Group business and
Veritas Software Corporation's business to Veritas Holding Corporation.
 
                                      II-2
<PAGE>   30
 
   
                                   SIGNATURES
    
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                         SEAGATE SOFTWARE, INC.
                                              (Registrant)
 
   
 
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<S>                                                       <C>
DATE: April 16, 1999                                      By: /s/ TERENCE R. CUNNINGHAM
                                                          TERENCE R. CUNNINGHAM
                                                          President and Chief Operating Officer
 
DATE: April 16, 1999                                      By: /s/ ELLEN E. CHAMBERLAIN
                                                          ELLEN E. CHAMBERLAIN
                                                          Senior Vice President, Treasurer and
                                                          Chief Financial Officer
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                                      II-3
<PAGE>   31
 
                             SEAGATE SOFTWARE, INC.
 
                               INDEX TO EXHIBITS
 
   
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<S>      <C>
2.1.1    Amended and Restated Agreement and Plan of Reorganization by
         and among VERITAS Holding Corporation, VERITAS Software
         Corporation, Seagate Technology, Inc., Seagate Software,
         Inc. and Seagate Software Network & Storage Management
         Group, Inc.
4.2      Form of Stockholder Agreement by and among VERITAS Holding
         Corporation, VERITAS Software Corporation, Seagate
         Technology, Inc. and Seagate Software, Inc.
4.3      Form of Registration Rights Agreement by and among VERITAS
         Holding Corporation and Seagate Software, Inc.
10.1.1   1996 Stock Option Plan, as amended
10.15(+) Development and License Agreement dated as of October 5,
         1998 by and among Seagate Technology, Inc., VERITAS Holding
         Corporation and VERITAS Software Corporation.
10.16(+) Cross License and Original Equipment Manufacturing Agreement
         dated as of October 5, 1998 by and among Seagate Software
         Information Management Group, Inc., VERITAS Holding
         Corporation and VERITAS Software Corporation.
27.1     Amended Financial Data Schedule
</TABLE>
    
 
---------------
 
   
(+)Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment filed pursuant to 17 C.F.R. 200.90(b)(4), 200.83 and
230.24b-2.