Amended Registration Statement

As filed with the Securities and Exchange Commission on November 18, 2002.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 2

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of The Securities Exchange Act of 1934

SEAGATE TECHNOLOGY HOLDINGS

Cayman Islands		98-0232277

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

P.O. Box 309GT Ugland House, South Church Street George Town, Grand Cayman Cayman Islands		N/A

(Address of Principal Executive Offices)		(Zip Code)

(345) 949-8066

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: Common shares, par value $0.00001 per share.

TABLE OF CONTENTS


ITEM 1.	BUSINESS	3

ITEM 2.	FINANCIAL INFORMATION	32

ITEM 3.	PROPERTIES	65

ITEM 4.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	66

ITEM 5.	DIRECTORS AND EXECUTIVE OFFICERS	69

ITEM 6.	EXECUTIVE COMPENSATION	73

ITEM 7.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	82

ITEM 8.	LEGAL PROCEEDINGS	90

ITEM 9.	MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS	91

ITEM 10.	RECENT SALES OF UNREGISTERED SECURITIES	92

ITEM 11.	DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED	93

ITEM 12.	INDEMNIFICATION OF DIRECTORS AND OFFICERS	94

ITEM 13.	FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA	94

ITEM 14.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	94

ITEM 15.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	95

ITEM 16.	FINANCIAL STATEMENTS AND EXHIBITS	95

ITEM 1. BUSINESS

Preliminary Information

Seagate Technology Holdings was incorporated as an exempt company with limited liability under the laws of the Cayman Islands on August 10, 2000. Seagate Technology Holdings maintains its registered and principal executive office in the Cayman Islands at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The telephone number at that address is (345) 949-8066. For ease of reference, throughout this registration statement, unless otherwise evident from the context, the following terms have the following meanings:

“ we ,” “ us ” and “ our ” refer to Seagate Technology Holdings and, unless it is otherwise evident from the context, its subsidiaries;

“ Seagate Delaware ” refers to Seagate Technology, Inc., a Delaware corporation, and, unless the context otherwise indicates, its subsidiaries;

“ our 8% senior notes ” refers to the $400 million aggregate principal amount of 8% senior notes due 2009 issued by Seagate Technology HDD Holdings and unconditionally guaranteed on a senior unsecured basis by Seagate Technology Holdings;

“ our new senior secured credit facilities ” refers to the $500 million senior secured credit facilities (comprised of a $350 term loan facility that has been drawn in full and a $150 million revolving credit facility that has not been drawn upon) entered into by Seagate Technology HDD Holdings and Seagate Technology (US) Holdings, Inc., as co-borrowers, on May 13, 2002, and guaranteed on a senior secured basis by Seagate Technology Holdings, Seagate Technology HDD Holdings (with respect to the obligations of Seagate Technology (US) Holdings, Inc.), Seagate Technology (US) Holdings, Inc. (with respect to the obligations of Seagate Technology HDD Holdings) and certain other existing and subsequently organized subsidiaries of Seagate Technology HDD Holdings;

“ November 2000 transactions ” refers to the series of transactions through which New SAC acquired the capital stock and operating assets of Seagate Delaware’s subsidiaries (for a more detailed description of the November 2000 transactions, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—November 2000 Transactions” section under Item 2 of this registration statement); and

“ refinancing ” refers to the refinancing of all of our outstanding indebtedness that occurred in May of 2002, including the sale of our 8% senior notes and the formation of our new senior secured credit facilities (for a more detailed description of the refinancing, see the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—The Refinancing” section under Item 2 of this registration statement).

New SAC, an exempt company with limited liability under the laws of the Cayman Islands, is the direct parent company of Seagate Technology Holdings. Seagate Technology HDD Holdings is a direct and wholly-owned subsidiary of Seagate Technology Holdings. Seagate Technology (US) Holdings, Inc. is a direct and wholly-owned subsidiary of Seagate Technology HDD Holdings.

Overview

We are the worldwide leader in the design, manufacturing and marketing of rigid disc drives. Rigid disc drives, which are commonly referred to as hard drives, are used as the primary medium for storing electronic information in systems ranging from desktop computers and consumer electronics to data centers delivering information over corporate networks and the Internet. As of June 28, 2002, we were the largest manufacturer of rigid disc drives in terms of unit shipments. We produce a broad range of rigid disc drive products that make us a leader in both the enterprise sector of our industry, where our products are primarily used in enterprise servers, mainframes and workstations, and the personal storage sector of our industry, where our products are used in PCs and consumer electronics.

We have achieved our leadership position through ownership of critical component technologies, a commitment to advanced research and development and a focus on manufacturing and supply chain efficiency and flexibility. We believe our current industry leadership in technology and manufacturing efficiency has been achieved through the successful ongoing execution of our long-term strategic plan developed in 1998. This long-term plan involves:

increasing our commitment to investment in fundamental research and technological innovation;

introducing a disciplined methodology for commercializing our technological innovations in an effort to consistently be first to market with new products;

instituting common technology platforms throughout our product portfolio to allow us to efficiently leverage our component technology advancements across multiple products;

streamlining our operations by rationalizing our manufacturing processes to eliminate redundant facilities, focusing on strategic competencies and enhancing our supply chain management;

improving the efficiency of our manufacturing processes through our “Factory of the Future” initiative, a program involving the reconfiguration of production lines and increased automation to allow us to close facilities and reduce headcount while increasing overall unit production; and

implementing a highly disciplined quality management and process optimization methodology company wide known as Six Sigma, which relies on the rigorous use of statistical techniques to assess process variability and defects.

We believe that our business strategy will allow us to continue to gain market share, extend our industry leadership and improve our financial performance.

Our industry requires significant investments in technology. We believe our industry leading scale and product breadth enable us to commit more resources to research and development and capital investment than our competitors. In addition, our ownership of critical component technologies enables us to better control our product roadmap and provides us with a significant advantage over manufacturers who rely on merchant component suppliers for key elements of their technological innovation.

We sell our rigid disc drives primarily to major original equipment manufacturers, or OEMs, with whom we have longstanding relationships. These customers include Dell, EMC, Hewlett-Packard, IBM and Sun Microsystems. We also have key relationships with major distributors, who sell our rigid disc drive products to small OEMs, dealers, system integrators and retailers throughout most of the world.

Industry

Demand for Electronic Data Storage Continues to Increase

We expect the amount of data stored and accessed electronically to grow exponentially in the foreseeable future. We believe there are a number of key factors driving this expected growth, including:

the rapid expansion of the Internet as a medium for information technology infrastructure related to business management, for broadband communication and for entertainment, particularly music and video;

the widespread adoption of enterprise software applications, such as supply chain management, customer relationship management, enterprise resource management and data warehousing;

a broader deployment of information storage systems that allow rapid recovery of data following a disaster and that increase data availability to end users by creating multiple distributed copies; and

the continuing growth in software applications, such as databases and computer aided design programs, used by individuals and small groups that are delivered over a network from shared data servers.

Rigid disc drives are the primary devices used for storing, managing and protecting the electronic data associated with all of these applications.

There are currently two areas, in particular, where demand for rigid disc drives is rapidly expanding:

Growth of Storage Area Networks and Network Attached Storage . The need to address the dramatic expansion in data storage management requirements has spurred the evolution of new storage and data management technologies. Enterprises are increasingly offloading network traffic to dedicated storage area networks, or SANs. In addition, many enterprises are moving away from the use of server-attached storage to network-attached storage, or NAS. These solutions combine high-performance storage products that are comprised principally of rigid disc drives with sophisticated software and communications technologies. We expect that the market for these solutions will grow rapidly and will result in greater opportunities for the sale of high-performance, high-capacity rigid disc drives.

Growth in Rigid Disc Drives for Consumer Electronics . High-performance computing and communications functions and, increasingly, rigid disc drives are being incorporated into consumer electronics such as video game consoles, including Microsoft’s Xbox, digital video recorders and advanced television set-top boxes. In addition, faster connections to the Internet and increased broadband capacity have encouraged consumers to download greater amounts of text, video and audio data, expanding the market for rigid disc drives for use in new consumer and entertainment appliances. The adoption and rapid growth of the use of rigid disc drives in these applications will be facilitated by the development of low-cost rigid disc drives that meet the pricing requirements of the consumer electronics market.

Success in Our Industry Depends on Technology and Manufacturing Leadership

The design and manufacturing of rigid disc drives depends on highly advanced technology and manufacturing techniques, especially in the areas of read/write heads and recording media. Rigid disc drive manufacturers are distinguished by their level of integration, which is the degree to which they control the technology used in their products, and by whether they are captive, producing rigid disc drives for their own computer systems, or independent. Integrated manufacturers are companies that design and produce the critical technologies, including read/write heads and recording media, used in their rigid disc drives. An integrated approach enables them to lower manufacturing costs and to improve the functionality of components so that they work together efficiently. In contrast, manufacturers that are not integrated purchase most of their components from third-party suppliers, upon whom they depend for key elements of their technological innovation and differentiation. This can limit their ability to coordinate technology roadmaps and optimize the component design process for manufacturing efficiency and product reliability while making them reliant on the technology investment decisions of their suppliers. Independent manufacturers can enjoy a competitive advantage over captive manufacturers in working with OEMs because they do not compete with OEMs for computer system sales.

Due to the significant challenges posed by the need to continually innovate and improve manufacturing efficiency, the rigid disc drive industry continues to undergo significant consolidation as manufacturers and merchant component suppliers merge with other companies or exit the industry. For instance, IBM recently agreed to combine its rigid disc drive business with that of Hitachi. Consolidation is likely to continue in our industry as the technological challenges and the associated levels of required investment grow, increasing the competitive necessity of large-scale operations. We believe the competitive dynamics of the rigid disc drive industry favor integrated, independent manufacturers with the scale to make substantial technology investments and apply them across a broad product portfolio and set of customers.

Competitive Strengths

We believe our industry leadership is the direct result of our technological innovation and our manufacturing flexibility, which enable us to meet the needs of our customers. Our key competitive strengths include:

Technology Leadership. We believe that we invest substantially more in research and development, particularly on read/write heads and recording media, than any of our independent competitors or their component suppliers while maintaining our strong financial performance. To increase the commercial value we

derive from our research investment, we use a disciplined technology review and portfolio management process for guiding new technology innovations from the research stage to product introduction. We believe our research and development strategy enhances our technology leadership, which allows us to bring products to market more rapidly than other manufacturers. Recent examples of our success in technology innovation include being first to market with rigid disc drives with rotational speeds of 15,000 revolutions per minute as well as the first to demonstrate storage density of 100 gigabits per square inch, using both horizontal and perpendicular recording technology.

Technology Leverage. Our size and market leadership enable us to apply our research and development investments over a broad product portfolio and to make timely improvements in product and component design as well as manufacturing efficiency. We have divided the elements that comprise a rigid disc drive into separate technology platforms that we have standardized over a broad portion of our product portfolio. This approach allows us to invest in the advancement of the platform rather than a single product. In addition, the scale of our research and development organization provides us with numerous benefits. For example, through our substantial investment in fundamental research in magnetic storage we are able to create technology that we can use to penetrate new markets, including consumer electronics and notebook computers. Our innovations in manufacturing technology also enable us to improve our efficiency and flexibility through increased automation. Moreover, the close coordination of our research and development organization with our manufacturing group enhances our ability to rapidly achieve volume production.

Control Over the Design and Manufacture of Critical Components . We internally design and/or manufacture several of the components used in our rigid disc drives that are essential to meeting the technology requirements for rapidly improving performance and storage capacity. We believe that our control of key technologies, including read/write heads and recording media, combined with our innovations in manufacturing, enable us to achieve product performance and time-to-market advantages. We believe that close coordination of development efforts between our research groups provides us with an advantage in efficiently improving the design of our rigid disc drive products to increase performance, reliability and manufacturing yields while reducing costs. Additionally, our control over critical components reduces our dependence on the research and development efforts of component suppliers, who in some cases have lagged the market or failed to develop needed technologies. Overall, our control of critical components enables us to offer greater value to our customers by enhancing the quality of our products, meeting their precise requirements and reducing our costs. This control also enhances our supply chain management and the operation of our just-in-time inventory centers.

Manufacturing and Supply Chain Efficiency . During the past several years we have made significant improvements to our manufacturing efficiency through our Factory of the Future initiative. As part of this manufacturing effort, we increased the degree of automation in our manufacturing operations while closing 14 facilities, reducing headcount by approximately 40,000 and reconfiguring our production lines to handle multiple products. We achieved this transition without operating disruption while increasing overall unit production and realizing a three-fold increase in unit production per manufacturing employee. Currently, we manufacture substantially all of our enterprise and high-end desktop products on our automated manufacturing lines. We believe our improved efficiency enables us to maintain our financial flexibility during industry downturns. Our use of automation has increased our manufacturing flexibility, enabling us to improve our responsiveness to customers and take advantage of unforecasted customer demand to deliver products on short notice. In addition, through the introduction of a Six Sigma quality management program, we have reduced the process variations in our manufacturing facilities, resulting in improved quality, reliability and performance of our rigid disc drives. Six Sigma is a highly disciplined quality management and process optimization methodology that relies on the rigorous use of statistical techniques to assess process variability and defects. Taken together, we believe these improvements make us a manufacturing and supply chain efficiency leader in our industry.

Broad Product Offering . We produce a broad range of enterprise and desktop rigid disc drive products that extends from high-performance to low-cost applications. Our broad product range contributes to our market leadership and enables us to achieve leverage in our research and development efforts, global distribution

channels and manufacturing capacity. We endeavor to design and develop our product lines to meet the precise and changing requirements of our customers, who must deliver to their end users the appropriate storage solutions based on application and cost. We continue to deliver new rigid disc drive products in high-growth areas such as SAN and NAS applications as well as consumer electronics. We are also extending our technology to address the market for smaller sized rigid disc drives used in portable computers.

Longstanding, Strong Customer Relationships . Our rigid disc drives are essential components of the PCs, workstations, mainframe computers and networked storage subsystems manufactured by our customers. Our customers include many of the world’s leading computer OEMs and distributors. We believe that we have established strong relationships with nearly all of the leading enterprise and desktop OEMs by focusing on increased responsiveness to their needs and by providing them valuable services through joint development projects. We collaborate with many of our OEM customers in developing new and advanced storage solutions for their new products. Increasingly, we are becoming integrated into our customers’ supply chain management, which provides us with increased manufacturing visibility and our customers with improved inventory management capabilities.

Experienced Management Team . Our seven most senior executive officers have an average of 20 years of experience in the information storage industry. Our management team has successfully implemented manufacturing efficiency plans resulting in increased unit production per employee and has facilitated the acquisition and integration of complementary businesses, technologies and strategic component manufacturers.

Business Strategy

To enhance our position as the leading designer and manufacturer of rigid disc drives and increase our market share, we intend to pursue the following business strategies:

Continue to Lead Technological Innovation . We intend to strengthen our industry leading position by continuing to make substantial investments in research and development while leveraging our integrated manufacturing operations. To this end, we established Seagate Research to conduct fundamental research in magnetic and other storage technologies. We also established our Advanced Concepts Laboratory to apply our research in magnetic storage to intermediate-term technologies. We believe that our commitment to research positions us to consistently be a leader in the introduction of new technologies and higher performance products. Additionally, by focusing on innovation and manufacturing together through our newly introduced Design for Six Sigma initiative, we are able to optimize the performance of our read/write heads and recording media along with the way our rigid disc drives are assembled and our components operate together. Design for Six Sigma is a systematic methodology utilizing tools, training and measurements to enable us to design products and processes that meet customer expectations and improve manufacturability. This is a key factor in our ability to meet the technological challenges posed by increasing storage capacity and performance requirements while at the same time reducing costs and accelerating time to market for new products. We believe that we have been able to consistently capture additional market share due to our time-to-market leadership with new products.

Increase Manufacturing and Supply Chain Efficiency and Flexibility . We intend to continue our manufacturing improvement and cost reduction efforts. We have already significantly improved efficiency, reduced our operating expenses and enhanced the quality of the products we manufacture by decreasing manufacturing defects and improving product reliability, all while increasing total unit production. We intend to further integrate our manufacturing processes, which will allow us to produce any of our rigid disc drive models on any of the lines at our manufacturing facilities. We expect to realize additional cost efficiencies by extending our manufacturing automation to include testing and packaging. Moreover, by further integrating our operations with our suppliers and customers, we believe that we can continue to reduce our working capital needs and improve our responsiveness to customer requirements.

Expand and Deepen Relationships with Customers . We intend to increase the strength and broaden the scope of our customer relationships by expanding our design and engineering services to become an integrated

part of our customers’ supply chains. To implement this strategy, we intend to continue to collaborate with our major customers at the design and development stage of new products and to seek to add value to their end-user applications. We believe our improved manufacturing flexibility and the resulting ability to consistently fulfill product requests on short notice will lead our customers to rely on us as a strategic supplier. In addition, we have established just-in-time inventory centers near many of our largest customers’ production facilities and have placed design engineers on site with several of our largest customers.

Capitalize on Emerging Storage Demand and Increase Market Share . We are dedicated to being the industry leader in all markets for rigid disc drives. Growth in electronic data requirements is increasing the demand for rigid disc drives in our enterprise and desktop markets. We believe that through our focus on technology innovation and manufacturing efficiency, we will continue to grow our market share. In addition, we believe that we have significant opportunities to address new, high-growth markets. For example, we are currently shipping rigid disc drives for consumer electronics products, including Microsoft’s Xbox and personal video recorders, and believe we can continue to further the use of rigid disc drives in new applications and markets by introducing advanced low-cost rigid disc drive products. We also intend to leverage our continuing investment in technology to bring new products to the mobile rigid disc drive market during calendar year 2003.

Continue to Pursue Select Alliances, Acquisitions and Investments . We will continue to evaluate and selectively pursue strategic alliances, acquisitions and investments that are complementary to our business. We will continue to seek opportunities that provide us with enhanced technological expertise, new markets for rigid disc drive sales, a stronger product portfolio, increased market share, new products and a diversification of risk.

Overview of Rigid Disc Drive Technology

All rigid disc drives incorporate the same basic technology although individual products vary. One or more rigid discs are attached to a spindle assembly powered by a spindle motor that rotates the discs at a high constant speed around a hub. The discs, or recording media, are the components on which data is stored and from which it is retrieved. Each disc typically consists of a substrate of finely machined aluminum or glass with a layer of a thin-film magnetic material. Read/write heads, mounted on an arm assembly similar in concept to that of a record player, fly extremely close to each disc surface and record data on and retrieve it from concentric tracks in the magnetic layers of the rotating discs. The read/write heads are mounted vertically on an e-shaped assembly. The e-block and the recording media are mounted inside a metal casing, called the base casting.

Upon instructions from the drive’s electronic circuitry, a head positioning mechanism, or actuator, guides the heads to the selected track of a disc where the data is recorded or retrieved. Application specific integrated circuits, or ASICs, and ancillary electronic control chips are collectively mounted on printed circuit boards. ASICs move data to and from the read/write head and the internal controller, or interface, which communicates with the host computer. Rigid disc drive manufacturers typically use one or more of several industry standard interfaces such as advanced technology architecture, or ATA, small computer system interface, or SCSI, and Fibre Channel.

Rigid disc drive performance is commonly assessed by five key characteristics:

storage capacity, commonly expressed in megabytes, gigabytes or terabytes, which is the amount of data that can be stored on the disc;

spindle rotation speed, commonly expressed in revolutions per minute, which has an effect on speed of access to data;

interface transfer rate, commonly expressed in megabytes per second, which is the rate at which data moves between the rigid disc drive and the computer controller;

average seek time, commonly expressed in milliseconds, which is the time needed to position the heads over a selected track on the disc surface; and

media data transfer rate, commonly expressed in megabytes per second, which is the rate at which data is transferred to and from the disc.

Areal density is a measure of storage capacity per square inch on the recording surface of a disc. Current areal densities are sufficient to meet the requirements of most applications today. We expect, however, the long-term demand for increased drive capacities to continue to grow as audio and visual data require many multiples of the storage capacity of simple text. We have pursued, and expect to continue to pursue, a range of technologies to increase areal densities across the entire range of our products to increase drive capacities and to allow the elimination of components at a stated capacity as areal density increases, thus reducing costs.

Manufacturing

We pursue an integrated business strategy based on the ownership of critical component technologies. This strategy allows us to maintain control over our product roadmap and component cost, quality and availability. Our manufacturing efficiency and flexibility is a critical element of our integrated business strategy. During the past several years we have made significant improvements in our manufacturing efficiency by:

consolidating the number of facilities we operate and reducing the number of personnel we employ;

expanding manufacturing automation to enhance our efficiency and flexibility through our Factory of the Future initiative;

applying Six Sigma to improve product quality and reliability and reduce costs;

integrating our supply chain with suppliers and customers to enhance our demand visibility and reduce our working capital requirements; and

coordinating between our manufacturing group and our research and development organization to rapidly achieve volume manufacturing and enhance our product quality and reliability.

Manufacturing our rigid disc drives is a complex process that begins with the production of individual components and ends with a fully assembled unit. We design, assemble and/or manufacture a number of the most important components found in our rigid disc drives, including read/write heads, recording media, printed circuit boards, spindle motors and ASICs.

Read/Write Heads . The function of the read/write head is to scan across the disc as it spins, magnetically recording or reading information. The tolerances of recording heads are extremely demanding and require state-of-the-art equipment and processes. Our read/write heads are manufactured with thin-film and photolithographic processes similar to those used to produce semiconductor integrated circuits. Beginning with six inch round ceramic wafers, we process more than 25,000 head elements at one time. Each of these head elements goes through more than 300 steps, all in clean room environments. Our read/write heads require highly advanced processes with tolerances approaching the thickness of a single atom. We perform all primary stages of design and manufacture of read/write heads at our facilities. Although the percentage of our requirements for read/write heads that we produce internally varies from quarter to quarter, we currently manufacture almost all of our read/write heads. Our strategy is to purchase no more than 20% of our read/write head requirements from third-party suppliers in any given quarter.

Recording Media . The function of the recording media is to magnetically store information. The domains where each bit of magnetic code is stored are extremely small and precisely placed. As a result, the manufacturing of recording media requires sophisticated thin-film processes. Each disc is a sequentially processed set of layers that consist of structural, magnetic, protective and lubricating materials. Once complete, the disc must have a high degree of physical uniformity to assure reliable and error-free storage. We purchase aluminum substrate blanks for recording media production from third parties, mainly in Japan. These blanks are machined, plated and polished to produce finished substrates at our plant in Northern Ireland. Although the percentage of our requirements for recording media that we produce internally varies from quarter to quarter, we currently manufacture almost all of our recording media requirements. Our strategy is to purchase no more than 20% of our recording media requirements from third-party suppliers in any given quarter.

Printed Circuit Boards . We assemble and test a significant portion of the printed circuit boards used in our rigid disc drives. Printed circuit boards are the boards that contain the electronic circuitry and ASICs that provide the electronic controls of the rigid disc drive and on which the head-disc assembly is mounted. We assemble printed circuit boards at our facilities in Malaysia and Singapore.

Spindle Motors . We design most of our spindle motors and purchase them principally from outside vendors in Asia, whom we have licensed to use our intellectual property and technology.

ASICs . We participate in the design of many of the ASICs used in our rigid disc drives for motor and actuator control, such as interface controllers, read/write channels and pre-amplifiers. We do not manufacture any ASICs but, rather, buy them from third-party suppliers.

Following the production of the individual components of the rigid disc drive, the first step in the manufacture of a rigid disc drive itself is the assembly of the actuator arm, read/write heads, discs and spindle motor in a housing to form the head-disc assembly. The production of the head-disc assembly involves a largely automated processes. After the head-disc assembly is produced, a pattern is magnetically recorded on the disc surfaces. Printed circuit boards are then mated to the head-disc assembly and the completed unit is tested prior to packaging and shipment. Final assembly and test operations of our rigid disc drives occur primarily at facilities located in China and Singapore. We perform subassembly and component manufacturing operations at our facilities in Malaysia, Northern Ireland, Singapore, Thailand and, in the United States, in California and Minnesota. In addition, third parties manufacture and assemble components for us in various Asian countries, including China, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Thailand, and in Europe and the United States.

Products

Rigid Disc Drives

We offer a broad range of rigid disc drive products for both the enterprise and desktop sectors of the rigid disc drive industry. We offer more than one product within each product family, and differentiate products on the basis of price/performance and form factor, or the dimensions of the rigid disc drive. Because of rapid advancements in rigid disc drive technology, product life cycles have been as short as six months. To address this issue, we introduce new products and enhancements to our product families as we develop new technology. We list in the table below our main rigid disc drive products.


Enterprise Storage Rigid Disc Drive Products

Product Name	Fiscal Quarter Introduced	Storage Capacity (gigabytes)	Rotation Speed (RPM)	Interface
Barracuda 180	2 ^nd Qtr 2001	180	7,200	SCSI/Fibre Channel
Cheetah 73LP	3 ^rd Qtr 2001	73	10,000	SCSI/Fibre Channel
Cheetah 36ES	1 ^st Qtr 2002	18 and 36	10,000	SCSI/Fibre Channel
Cheetah 10K.6	4 ^th Qtr 2002	36, 73 and 146	10,000	SCSI/Fibre Channel
Cheetah X15 36LP	2 ^nd Qtr 2002	18 and 36	15,000	SCSI/Fibre Channel
Cheetah 15K.3	1 ^st Qtr 2003	18, 36 and 73	15,000	SCSI/Fibre Channel

Personal Storage Rigid Disc Drive Products

Product Name	Fiscal Quarter Introduced	Storage Capacity (gigabytes)	Rotation Speed (RPM)	Interface
U-6 Series	4 ^th Qtr 2001	20, 30, 40, 60 and 80	5,400	ATA
U Series X20	1 ^st Qtr 2003	10 and 20	5,400	ATA
Barracuda ATA IV	4 ^th Qtr 2001	20, 40, 60 and 80	7,200	ATA
Barracuda ATA V	1 ^st Qtr 2003	40, 60, 80 and 120	7,200	ATA

Barracuda Family . Commercial uses for Barracuda rigid disc drives include workstations, mainframes and supercomputers, network file servers, digital audio and video image processing and high-performance desktop PCs.

Cheetah Family . Commercial uses for Cheetah rigid disc drives include Internet and e-commerce servers, data mining and data warehousing, mainframes and supercomputers, department/enterprise servers and workstations, transaction processing, professional video and graphics and medical imaging.

U-Series Family . Commercial uses for the U-Series rigid disc drives include entry-level desktop PCs running popular office applications, entry-level PCs for government and education environments and desktop PCs connected to a mainframe server. Consumer uses for the U-Series family include entry-level PCs, home PCs purchased as second or third systems and discounted PCs sold in conjunction with an Internet service provider or other service provider. The U-Series family of rigid disc drives are also used in new markets, including television set-top boxes, printers, copiers and arcade and other dedicated gaming uses. Recently, we introduced our U Series X rigid disc drives for consumer electronics applications utilizing a single read/write head and a thinner profile in order to lower cost, improve performance and increase durability. In the fiscal quarter ending December 27, 2002, we intend to announce our 80 gigabyte per disc U-Series IX personal storage product.

Barracuda ATA Family . Commercial and consumer uses for the Barracuda ATA family include desktop PCs used in businesses and consumer PCs used for gaming, other entertainment applications, digital photo and video editing, viewing and capturing television images and advanced spreadsheet modeling and graphics. Recently, we introduced our Barracuda ATA V 7,200 revolutions per minute rigid disc drive with the industry’s first 60 gigabyte per disc design. In the quarter ending December 27, 2002, we intend to announce our 80 gigabyte per disc Barracuda ATA VI personal storage product.

Customers

We sell our rigid disc drive products primarily to major OEMs and distributors. OEM customers incorporate our rigid disc drives into computer systems and storage systems for resale. Distributors typically sell our rigid disc drives to small OEMs, dealers, system integrators and other resellers. Shipments to OEMs were approximately 66%, 70% and 65% of our revenue in fiscal years 2002, 2001 and 2000, respectively. Shipments to distributors were approximately 34%, 30% and 35% of our revenue in fiscal years 2002, 2001 and 2000, respectively. In May 2002, Hewlett-Packard completed its acquisition of Compaq. Sales to Hewlett-Packard and Compaq together accounted for approximately 20%, 21% and 25% of our rigid disc drive revenue in each of fiscal years 2002, 2001 and 2000, respectively. Sales to EMC accounted for 13% of our rigid disc drive revenue for fiscal year 2001. No other customer accounted for 10% or more of our rigid disc drive revenue in fiscal years 2002, 2001 or 2000.

OEM customers typically enter into master purchase agreements with us. These agreements provide for pricing, volume discounts, order lead times, product support obligations and other terms and conditions. The term of these agreements is usually 12 to 36 months, although our product support obligations generally extend substantially beyond this period. These master agreements typically do not commit the customer to buy any minimum quantity of products, or create exclusive relationships. Deliveries are scheduled only after receipt of purchase orders. In addition, with limited lead time, customers may cancel or defer most purchase orders without significant penalty. Anticipated orders from many of our customers have in the past failed to materialize or OEM delivery schedules have been deferred or altered as a result of changes in their business needs.

Our distributors generally enter into non-exclusive agreements for the redistribution of our products. They typically furnish us with a non-binding indication of their near-term requirements and product deliveries are generally scheduled based on a weekly confirmation by the distributor of its requirements for that week. The agreements typically provide the distributors with price protection with respect to their inventory of our rigid disc drives at the time of a reduction by us in our selling price for the rigid disc drives and also provide limited rights to return the product.

Sales and Marketing

Our sales organization focuses on deepening our relationship with our customers. As of June 28, 2002, our sales organization included approximately 445 employees, which are divided into two groups. The global OEM sales group focuses on our key worldwide OEM customers. The worldwide sales group focuses on geographic coverage of OEMs and distributors throughout most of the world. The worldwide sales group is organized regionally among the United States, Japan, Asia-Pacific (excluding Japan) and Europe, Africa and the Middle East. In addition, we have a sales operations group which focuses on aligning our production levels with customers’ product requirements. Our sales force works directly with our marketing organization to coordinate our OEM and distribution channel relationships. We maintain sales offices throughout the United States and in Australia, China, England, France, Germany, India, Ireland, Japan, Singapore and Taiwan.

Our marketing organization works to increase demand for our rigid disc drive products through strategic collaboration with key OEM customers to align our respective product roadmaps and to build our brand and end-customer relationships. As of June 28, 2002, our marketing organization had approximately 345 employees. This organization is comprised of our strategic marketing, business development and marketing communications groups. Our strategic marketing group coordinates with our research and development group to align our product development roadmap to meet key OEM customers’ technology requirements over the long term. Our business development group coordinates the qualification of new products with OEMs, determines product pricing and provides product service and support. Our marketing communications group focuses on building the Seagate brand name among our OEM and distribution channel customers.

Foreign sales are subject to foreign exchange controls and other restrictions, including, in the case of some countries, approval by the Office of Export Administration of the U.S. Department of Commerce and other U.S. governmental agencies.

Competition

The rigid disc drive industry is intensely competitive, with manufacturers competing for a limited number of major customers. A significant portion of our recent success is a result of our increasing our market share at the expense of our competitors. Our current market share may be negatively affected by our customers’ preference to diversify their sources of supply or if they decide to meet their requirements by manufacturing rigid disc drives themselves, particularly in the enterprise sector. Maintaining or improving market share is fundamental to succeeding in our industry, and any significant increase in market share by one of our competitors would likely result in a decline in our market share. Some of the principal factors used by customers to differentiate among rigid disc drive manufacturers are:

storage capacity;

price per unit and price per megabyte;

storage/retrieval access times;

data transfer rates;

product quality and reliability;

production volume capability;

form factor; and

responsiveness to customer preferences and demands.

We believe that our products are generally competitive with respect to each of these factors in the markets that we currently address. We summarize below our principal competitors, the effect of competition on price erosion for our products and product life cycles and technology.

Principal Competitors . We have experienced and expect to continue to experience intense competition from a number of domestic and foreign companies, some of which have greater financial and other resources than we have. These competitors include other independent rigid disc drive manufacturers such as Maxtor and Western Digital as well as large captive manufacturers such as Fujitsu, Hitachi/IBM, Samsung and Toshiba. Because they produce complete computer systems, captive manufacturers can derive a greater portion of their operating margins from other components, which reduces their need to realize a profit on the rigid disc drives included in their computer systems and allows them to sell rigid disc drives to third parties at very low margins. Many captive manufacturers are also formidable competitors because they have more substantial resources and greater access to their internal customers than we do. We also face indirect competition from present and potential customers, who evaluate from time to time whether to manufacture their own rigid disc drives and other information storage products or purchase them from outside sources other than us. These manufacturers also sell rigid disc drives to third parties, which results in direct competition with us. We expect that continued consolidation both among independent manufacturers and among captive manufacturers will increase the threat posed to our business by these competitors.

Price Erosion . Our competitors have historically offered new or existing products at lower prices as part of a strategy to gain or retain market share and customers, and we expect these practices to continue. Even during periods when demand for rigid disc drives is stable, our industry is price competitive and vendors experience price erosion over the life of a product. We expect that price erosion in our industry will continue for the foreseeable future. To remain competitive, we believe it will be necessary to continue to reduce our prices. We established production facilities in China, Malaysia, Singapore and Thailand to achieve cost reductions.

Product Life Cycles and Changing Technology . Competition and changing customer preference and demand in the rigid disc drive industry have shortened product life cycles and caused an acceleration in the development and introduction of new technology. We believe that our future success will depend upon our ability to develop, manufacture and market products of high quality and reliability which meet changing user needs and which successfully anticipate or respond to changes in technology and standards on a cost-effective and timely basis.

Research and Development

We believe that our success depends on our ability to develop products that meet changing user needs and to anticipate and respond to changes in technology on a cost-effective and timely basis. Accordingly, we are committed to developing new component technologies and products and to continually evaluating alternative technologies. During fiscal year 2000, we spent $664 million on product development. Including $116 million in product development allocated compensation expense related to the November 2000 transactions, we had combined product development expenses of $797 million for fiscal year 2001. During fiscal year 2002, we had product development expenses of $698 million. We develop new rigid disc drive products, and the processes to produce them, at three locations: Longmont, Colorado; Shakopee, Minnesota; and Singapore.

We have increased our focus on research and development and realigned our rigid disc drive development process. This structured product process is designed to bring new products to market through predictable and repeatable methodologies. In 1998, we established Seagate Research based in Pittsburgh, Pennsylvania, which is dedicated to extending the capacity of magnetic and optical recording and exploring alternative data storage technologies, including perpendicular recording technology and heat assisted magnetic recording technology. Perpendicular recording technology involves a different orientation for the magnetic field than is currently used in rigid disc drives, and heat assisted magnetic recording technology uses heat generated by a laser to improve storage capacity. In fiscal year 1998, we established our Advanced Concepts Laboratory, which focuses rigid disc drive and component research on recording subsystems, including read/write heads and recording media, market-specific product technology as well as technology focused towards new business opportunities. The primary purpose of our Advanced Concepts Laboratory is to ensure timely availability of mature component technologies to our product development teams as well as allowing us to leverage and coordinate those technologies across our products.

Patents and Licenses

As of June 28, 2002, we had approximately 1,725 U.S. patents and 640 patents issued in various foreign jurisdictions as well as approximately 1,437 U.S. and 1,365 foreign patent applications pending. The number of patents and patent applications will vary at any given time as part of our ongoing patent portfolio management activity. Due to the rapid technological change that characterizes the information storage industry, we believe that the improvement of existing products, reliance upon trade secret law, the protection of unpatented proprietary know-how and development of new products are generally more important than patent protection in establishing and maintaining a competitive advantage. Nevertheless, we believe that patents are valuable to our business and intend to continue our efforts to obtain patents, where available, in connection with our research and development program.

The information storage industry is characterized by significant litigation relating to patent and other intellectual property rights. Because of rapid technological development in the information storage industry, some of our products have been, and in the future could be, alleged to infringe existing patents of third parties. From time to time, we receive claims that our products infringe patents of third parties. Although we have been able to resolve some of those claims or potential claims by obtaining licenses or rights under the patents in question without a material adverse affect on us, other claims have resulted in adverse decisions or settlements. In addition, other claims are pending which if resolved unfavorably to us could have a material adverse effect on our business and results of operations. The costs of engaging in intellectual property litigation may be substantial regardless of the merit of the claim or the outcome. We have patent cross-licenses with a number of companies. Additionally, as part of our normal intellectual property practices, we are engaged in negotiations with other major rigid disc drive companies and component manufacturers with respect to ongoing patent cross-licenses.

Backlog

In view of customers’ rights to cancel or defer orders with little or no penalty, we believe backlog in the rigid disc drive industry may be of limited indicative value in estimating future performance and results. Our backlog includes only those orders for which the customer has specified a delivery schedule. Because many customers place large orders for delivery throughout the year, and because of the possibility of customer cancellation of orders or changes in delivery schedules, our backlog as of any particular date is not indicative of our potential sales for any succeeding fiscal period. Our order backlog at June 28, 2002 was approximately $1.093 billion compared with approximately $917 million at June 29, 2001.

Employees

At June 28, 2002, we employed approximately 46,000 persons worldwide, of which approximately 34,000 employees were located in our Asian operations. In addition, we make use of temporary employees, principally in manufacturing, who are hired on an as-needed basis. We believe that our future success will depend in part on our ability to attract and retain qualified employees at all levels, and even then we cannot assure you of any such success. We believe that our employee relations are good.

Environmental Matters

Our operations are subject to comprehensive U.S. and foreign laws and regulations relating to the protection of the environment, including those governing discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities.

We believe that our operations are currently in substantial compliance with all environmental laws, regulations and permits. We incur operating and capital costs on an ongoing basis to comply with environmental

laws. If additional or more stringent requirements are imposed on us in the future, we could incur additional operating costs and capital expenditures.

Some environmental laws, such as the U.S. federal superfund law and similar state statutes, can impose liability for the cost of cleanup of contaminated sites upon any of the current or former site owners or operators or upon parties who sent waste to these sites, regardless of whether the owner or operator owned the site at the time of the release of hazardous substances or the lawfulness of the original disposal activity. We have been identified as a potentially responsible party at several superfund sites. At each of these sites, the government has assigned to us a portion of the financial liability based on the type and amount of hazardous substances disposed of by each party at the site and the number of financially viable parties.

Some of our current and former sites have a history of commercial and industrial operations, including the use of hazardous substances. Groundwater and soil contamination resulting from historical operations has been identified at several of our current and former facilities and we are addressing the cleanup of these sites in cooperation with the relevant government agencies.

While our ultimate costs in connection with these sites is difficult to predict with complete accuracy, based on our current estimates of cleanup costs and our expected allocation of these costs, we do not expect costs in connection with these superfund sites and contaminated sites to be material.

Recent Developments

On October 11, 2002, we filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of our common shares. If the offering is completed, a portion of the shares will be offered by us, and a portion will be offered by New SAC, our parent company, as the selling shareholder. We will not receive any of the proceeds from the sale of common shares by New SAC. We expect to conduct the offering only at such time as market conditions permit.

Immediately prior to the closing of the proposed offering, we intend to pay a return of capital distribution of approximately $261 million to our existing shareholders, including New SAC. We have been informed by New SAC that it intends to distribute its proceeds from this return of capital distribution to the holders of its preferred shares. In addition, New SAC is the selling shareholder in the proposed offering and expects to receive a significant portion of the net proceeds from the offering. New SAC has further informed us that it intends to distribute its net proceeds from the offering to the holders of its preferred and ordinary shares. If New SAC makes the distributions described above, we will have an obligation to make payments of up to approximately $147 million to the participants in our deferred compensation plan. We expect our sources of cash, including our net proceeds from the proposed offering, to be adequate to fund the return of capital distribution and the deferred compensation payments. The extent to which we will need to use sources of cash other than our net proceeds from the proposed offering to make the distributions and payments described above will depend on, among other things, the allocation between us and New SAC of the shares to be offered, which has not yet been determined.

Forward-Looking Statements and Certain Factors That May Affect Our Business

We have included in this registration statement forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to our operations that are based on our current expectations, estimates and projections. Words such as “anticipate,” “expect,” “intend,” “plan,” “project,” “believe,” “could,” “would,” “will,” “may,” “should,” “estimate” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. The

reasons for this include changes in general economic and political conditions, including fluctuations in exchange rates, and the factors described in the “Risk Factors” section below.

Risk Factors

Competition—Our industry is highly competitive and our products have experienced significant price erosion.

Even during periods when demand is stable, the rigid disc drive industry is intensely competitive and vendors typically experience substantial price erosion over the life of a product. Our competitors have historically offered new or existing products at lower prices as part of a strategy to gain or retain market share and customers, and we expect these practices to continue. We also expect that price erosion in the rigid disc drive industry will continue for the foreseeable future. Because maintaining or improving market share is fundamental to succeeding in our industry, we may need to reduce our prices to retain our market share, which could adversely affect our results of operations. Moreover, a significant portion of our recent success is a result of increasing our market share at the expense of our competitors. Our current market share may be negatively affected by our customers’ preference to diversify their sources of supply or if they decide to meet their requirements by manufacturing rigid disc drives themselves, particularly in the enterprise sector. Any significant increase in market share by one of our competitors would likely result in a decline in our market share, which could adversely affect our result of operations.

Principal Competitors—We compete with both captive manufacturers, who do not depend solely on sales of rigid disc drives to maintain their profitability, and independent manufacturers, whose primary focus is producing technologically advanced rigid disc drives.

We have experienced and expect to continue to experience intense competition from a number of domestic and foreign companies, including other independent rigid disc drive manufacturers and large captive manufacturers such as:

Captive		Independent
Fujitsu Limited		Maxtor Corporation
Hitachi, Ltd./International Business Machines Corporation		Western Digital Corporation
Samsung Electronics Incorporated
Toshiba Corporation

The term “independent” in this context refers to manufacturers that primarily produce rigid disc drives as a stand-alone product, and the term “captive” refers to rigid disc drive manufacturers that produce complete computer or other systems that contain rigid disc drives or other information storage products. Captive manufacturers are formidable competitors because they have the ability to determine pricing for complete systems without regard to the margins on individual components. Because components other than rigid disc drives generally contribute a greater portion of the operating margin on a complete computer system than do rigid disc drives, captive manufacturers do not necessarily need to realize a profit on the rigid disc drives included in a computer system and, as a result, may be willing to sell rigid disc drives to third parties at very low margins. Many captive manufacturers are also formidable competitors because they have more substantial resources and greater access to customers than we do. To the extent we are not successful competing with captive or independent rigid disc drive manufacturers, our results of operations will be adversely affected.

In addition, in response to customer demand for high-quality, high-volume and low-cost rigid disc drives, manufacturers of rigid disc drives have had to develop large, in some cases global, production facilities with highly developed technological capabilities and internal controls. The development of large production facilities and industry consolidation can contribute to the intensification of competition. We also face indirect competition from present and potential customers who evaluate from time to time whether to manufacture their own rigid disc drives or other information storage products.

Industry Consolidation—Consolidation among captive manufacturers may serve to increase their resources and improve their access to customers, thereby making them more formidable competitors.

Consolidation among captive manufacturers may provide them with competitive advantages over independent manufacturers, including us. For example, IBM recently announced that it has agreed to merge its disc drive business with the disc drive business of Hitachi through the formation of a separate company that initially will be 70% owned by Hitachi. As part of this transaction, each of IBM and Hitachi announced that it has agreed to multi-year supply commitments with the new company. Because IBM is one of our most significant customers and Hitachi is one of our most significant competitors, there is a significant risk that IBM will decrease the number of rigid disc drives purchased from us and increase the number purchased from the new company. Moreover, economies of scale and the combination of the two companies’ technological capabilities, particularly in the enterprise sector of our industry, could make the new company a more formidable competitor than IBM or Hitachi operating alone. We face risks that captive manufacturers will enter into agreements with our customers to supply those customers’ rigid disc drive requirements as part of more expansive agreements.

Volatility of Quarterly Results—Our quarterly operating results fluctuate significantly from period to period.

In the past, our quarterly revenue and operating results fluctuated significantly from period to period. We expect this fluctuation to continue for a variety of reasons, including:

changes in the demand for the computer systems, storage subsystems and consumer electronics that contain our rigid disc drives;

changes in purchases from period to period by our primary customers;

competitive pressures resulting in lower selling prices, a condition that is exacerbated when competitors exit the industry and liquidate their excess inventory;

adverse changes in the level of economic activity in the United States and other major regions in which we do business;

our high proportion of fixed costs, including research and development expenses;

delays or problems in the introduction of our new products;

announcements of new products, services or technological innovations by us or our competitors;

increased costs or adverse changes in availability of supplies; and

the ability of our competition to regain their recent market share losses, particularly with respect to enterprise products, through the introduction of technologically advanced products and their ability to improve their operational execution.

As a result, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance.

Industry Demand—Slowdown in demand for computer systems and storage subsystems has caused and may continue to cause a decline in demand for our products.

Our rigid disc drives are components in computer systems and storage subsystems. The demand for these products has been volatile. In a weak economy, consumer spending tends to decline and retail demand for PCs tends to decrease, as does enterprise demand for computer systems and storage subsystems. Currently, demand for rigid disc drives in the enterprise sector is being adversely impacted as a result of the weakened economy and because enterprises have shifted their focus from making new equipment purchases to more efficiently using their

existing information technology infrastructure through, among other things, adopting new storage architectures. Unexpected slowdowns in demand for computer systems and storage subsystems have generally caused sharp declines in demand for rigid disc drive products. During economic slowdowns such as the one that occurred in 2001, our industry has experienced periods in which the supply of rigid disc drives has exceeded demand.

Additional causes of declines in demand for our products in the past have included announcements or introductions of major operating system or semiconductor improvements. We believe these announcements and introductions have from time to time caused consumers to defer their purchases and made inventory obsolete. Whenever an oversupply of rigid disc drives causes participants in our industry to have higher than anticipated inventory levels, we experience even more intense price competition from other rigid disc drive manufacturers than usual.

Seasonality—Because we experience seasonality in the sales of our products, our results of operations will generally be adversely impacted during the summer months.

Because sales of computer systems, storage subsystems and consumer electronics tend to be seasonal, we expect to continue to experience seasonality in our business as we respond to variations in our customers’ demand for rigid disc drives. In particular, we anticipate that sales of our products will continue to be lower during the summer months than the rest of the year. In the desktop computer and consumer electronics sectors of our business, this seasonality is partially attributable to our customers’ increased sales during the winter holiday season of PCs and consumer electronics. In the enterprise sector of our business, our sales are seasonal because of the capital budgeting and purchasing cycles of our end users. Because our working capital needs peak during periods in which we are increasing production in anticipation of orders that have not yet been received, our operating results will fluctuate seasonally even if the forecasted demand for our products proves accurate. Furthermore, it is difficult for us to evaluate the degree to which this seasonality may adversely affect our business in future periods because our overall growth may have reduced the impact of this seasonality in recent periods.

Difficulty in Predicting Quarterly Demand—If we fail to predict demand accurately for our products in any quarter, we may not be able to recapture the cost of our investments.

The rigid disc drive industry operates on quarterly purchasing cycles, with much of the order flow in any given quarter coming at the end of that quarter. Our manufacturing process requires us to make significant product-specific investments in inventory in each quarter for that quarter’s production. Because we typically receive the bulk of our orders late in a quarter after we have made our investments and because of short product life cycles, there is a risk that our orders will not be sufficient to allow us to recapture the costs of our investment before the products resulting from that investment have become obsolete. We cannot assure you that we will be able to accurately predict demand in the future. Other factors that may negatively impact our ability to recapture the cost of investments in any given quarter include:

our inability to reduce our fixed costs to match sales in any quarter because of our vertical manufacturing strategy, which means that we make more capital investments than we would if we were not vertically integrated;

the timing of orders from and shipment of products to key customers, such as Hewlett-Packard and EMC;

our product mix, and the related margins of the various products;

accelerated reduction in the price of our rigid disc drives due to technological advances and an oversupply of rigid disc drives in the market, a condition that is exacerbated when competitors exit the industry and liquidate their excess inventory;

manufacturing delays or interruptions, particularly at our major manufacturing facilities in China, Malaysia, Singapore and Thailand;

variations in the cost of components for our products;

limited access to components that we obtain from a single or a limited number of suppliers;

the impact of changes in foreign currency exchange rates on the cost of producing our products and the effective price of our products to foreign consumers; and

operational issues arising out of the increasingly automated nature of our manufacturing processes.

Short Product Life Cycles—Short product life cycles make it difficult to recover the cost of development and force us to continually qualify new products with our customers.

Over the last several years, the rate of increase of areal density, or the storage capacity per square inch on a disc, has grown at a much more rapid pace than it had previously. Higher areal densities mean that fewer read/write heads and rigid discs are required to achieve a given rigid disc drive storage capacity. In addition, advances in computer hardware and software have led to the demand for successive generations of storage products with increased storage capacity and/or improved performance and reliability. Product life cycles have shortened because of recent rapid increases in areal density. The consequence is more frequent introductions of new generations of rigid disc drives that are more efficient and cost effective than those of previous generations. Shorter product cycles make it more difficult to recover the cost of product development because those costs must be recovered over increasingly shorter periods of time during the life cycles of products. While we believe that the current rate of increases in areal density is lower than the rate of the last several years, we expect that areal density will continue to increase and cannot assure you that we will be able to recover the cost of product development in the future.

Short product life cycles also require us to engage regularly in new product qualifications with our customers and we expect to engage in several competitive product qualifications during the balance of this calendar year and on an ongoing basis in future years. We believe that one consequence of shorter product life cycles is that original equipment manufacturers, or OEMs, will be less likely to qualify multiple sources of supply, thereby increasing our need to develop new products quickly to ensure that we are the primary source of supply for our customers. This means that in order for our products to be considered by our customers for qualification, we must be among the leaders in time-to-market with those new products. Once a product is accepted for qualification testing, any failure or delay in the qualification process can result in our losing sales to that customer until new products are introduced. The effect of missing a product qualification opportunity is magnified by the limited number of high-volume OEMs. These risks are further magnified because we expect cost improvements and competitive pressures to result in declining sales and declining gross margins on our current generation products. We cannot assure you that we will be among the leaders in time-to-market with new products, or that we will be able to successfully qualify new products with our customers in the future.

New Product Offerings—Market acceptance of new product introductions cannot be accurately predicted, and our results of operations will suffer if there is less demand for our new products than is anticipated.

We are continually developing new products in the hope that we will be able to introduce technologically advanced rigid disc drives into the marketplace ahead of our competitors. The success of our new product introductions is dependent on a number of factors, including market acceptance, our ability to manage the risks associated with product transitions, the effective management of inventory levels in line with anticipated product demand, and the risk that our new products will have quality problems or other defects in the early stages of introduction that were not anticipated in the design of those products. Accordingly, we cannot accurately determine the ultimate effect that our new products will have on our sales or results of operations.

Smaller Form Factor Rigid Disc Drives—If we do not successfully develop and market smaller form factor rigid disc drives, our business may suffer.

Increases in sales of notebook computers and in areal density may result in a shift to smaller form factor rigid disc drives for an expanding number of applications, including PCs, enterprise storage applications and

consumer electronics. These applications have typically used rigid disc drives with a 3 ¹ / 2 inch form factor, which we currently manufacture. We do not currently manufacture rigid disc drives for the mobile market, which typically use form factors of 2 ¹ / 2 inches or smaller. If we do not suitably adapt our technology and product offerings to successfully develop and introduce smaller form factor rigid disc drives, customers may decrease the amounts of our products that they purchase. We cannot assure you that we will be able to manufacture smaller form factor rigid disc drives than we now produce.

Importance of Time-to-Market—Our operating results depend on our being among the first-to-market and achieving sufficient production volume with our new products.

To achieve consistent success with our OEM customers, we must be an early provider of new types of rigid disc drives featuring leading, high-quality technology. Our operating results in the past two years have substantially depended, and in the future will substantially depend, upon our ability to be among the first-to-market with new product offerings in the desktop and enterprise markets. Our market share will be adversely affected, which would harm our operating results, if we fail to:

consistently maintain or improve our time-to-market performance with our new products;

produce these products in sufficient volume;

qualify these products with key customers on a timely basis by meeting our customers’ performance and quality specifications; or

achieve acceptable manufacturing yields and costs with these products.

In addition, if delivery of our products is delayed, our OEM customers may use our competitors’ products to meet their production requirements. If the delay of our products causes delivery of those OEMs’ computer systems into which our products are integrated to be delayed, consumers and businesses may purchase comparable products from the OEMs’ competitors.

Moreover, we face the related risk that consumers and businesses may wait to make their purchases if they want to buy a new product that has been shipped or announced, but not yet released. If this were to occur, we may be unable to sell our existing inventory of products that may have become less efficient and cost effective compared to new products. As a result, even if we are among the first-to-market with a given product, subsequent introductions or announcements by our competitors of new products could cause us to lose revenue and not achieve a positive return on our investment in existing products and inventory.

Importance of Reducing Operating Costs—If we do not reduce our operating expenses, we will not be able to compete effectively in our industry.

Our strategy involves, to a substantial degree, increasing revenue while at the same time reducing operating expenses. In furtherance of this strategy, we have engaged in ongoing, company-wide manufacturing efficiency activities intended to increase productivity and reduce costs. These activities have included closures and transfers of facilities, significant personnel reductions and efforts to increase automation. We cannot assure you that our efforts will result in the increased profitability, cost savings or other benefits that we expect. Moreover, the reduction of personnel and closure of facilities may adversely affect our ability to manufacture our products in required volumes to meet customer demand and may result in other disruptions that affect our products and customer service. In addition, the transfer of manufacturing capacity of a product to a different facility frequently requires qualification of the new facility by some of our OEM customers. We cannot assure you that these activities and transfers will be implemented on a cost-effective basis without delays or disruption in our production and without adversely affecting our customer relationships and results of operations.

New Product Development and Technological Change—If we do not develop products in time to keep pace with technological changes, our operating results will be adversely affected.

Our customers have demanded new generations of rigid disc drive products as advances in computer hardware and software have created the need for improved storage products with features such as increased storage capacity, improved performance and reliability of smaller form factors. We and our competitors have developed improved products, and we will need to continue to do so in the future. As a result of these advances, the life cycles of our products have been shortened, and we have been required to constantly develop and introduce new cost-effective products within time-to-market windows that become progressively shorter. Excluding product development allocated compensation expense related to the November 2000 transactions, we would have had combined product development expenses of $681 million for fiscal year 2001. For the fiscal year ended June 28, 2002, we had product development expenses of $698 million. We cannot assure you that we will be able to successfully complete the design or introduction of new products in a timely manner, that we will be able to manufacture new products in sufficient volumes with acceptable manufacturing yields, that we will be able to successfully market these new products or that these products will perform to specifications on a long-term basis.

When we develop new products with higher capacity and more advanced technology, our operating results may decline because the increased difficulty and complexity associated with producing these products increases the likelihood of reliability, quality or operability problems. If our products suffer increases in failures, are of low quality or are not reliable, customers may reduce their purchases of our products and our manufacturing rework and scrap costs and service and warranty costs may increase. In addition, a decline in the reliability of our products may make us less competitive as compared with other rigid disc drive manufacturers.

Impact of Technological Change—Increases in the areal density of disc drives may outpace customers’ demand for storage capacity.

The rate of increase in areal density, or storage capacity per square inch on a disc, may be greater than the increase in our customers’ demand for aggregate storage capacity. As a result, our customers’ storage capacity needs may be satisfied with fewer rigid disc drives. This could decrease our sales, especially when combined with continued price erosion, which could adversely affect our results of operations.

Changes in Information Storage Products—Future changes in the nature of information storage products may reduce demand for traditional rigid disc drive products.

We expect that in the future new personal computing devices and products will be developed, some of which, such as Internet appliances, may not contain a rigid disc drive. While we are investing development resources in designing information storage products for new applications, it is too early to assess the impact of these new applications on future demand for rigid disc drive products. We cannot assure you that we will be successful in developing other information storage products. In addition, there are currently no widely accepted standards in various technical areas that may be important to the future of our business, including the developing sector of intelligent storage solutions. Products using alternative technologies, such as semiconductor memory, optical storage and other storage technologies could become a significant source of competition to particular applications of our products. For example, semiconductor memory is much faster than rigid disc drives, but currently is volatile in that it is subject to loss of data in the event of power failure and is much more costly than rigid disc drive technologies. Flash EEPROM, a nonvolatile semiconductor memory, is currently much more costly than rigid disc drive technologies and, while it has higher read performance than rigid disc drives, it has lower write performance. Flash EEPROM could become competitive in the near future for applications requiring less storage capacity than is required in traditional markets for our products.

High Fixed Costs—Our vertical integration strategy entails a high level of fixed costs.

Our vertical integration strategy entails a high level of fixed costs and requires a high volume of production and sales to be successful. During periods of decreased production, these high fixed costs have had, and could in the future have, a material adverse effect on our operating results and financial condition. For example, in 1998 our predecessor experienced a significant decrease in the demand for its products, and because our predecessor was unable to adequately reduce its costs to offset this decrease in revenue, its gross and operating margins suffered. In addition, a strategy of vertical integration has in the past and could in the future delay our ability to introduce products containing market-leading technology, because we may not have developed the technology and source of components for our products and do not have access to external sources of supply without incurring substantial costs.

Research and development expenses represent a significant portion of our fixed costs. As part of our vertical integration strategy, we explore a broad range of ways to improve rigid disc drives as well as possible alternatives to rigid disc drives for storing and retrieving electronic data. If we fail to develop new technologies in a timely manner, and our competitors succeed in doing so, our ability to sell our products could be significantly diminished. Conversely, if we over invest in technologies that can never be profitably manufactured and marketed, our results of operations could suffer. By way of example, we have incurred expenses in exploring new technologies for storing electronic data, including perpendicular recording technology, which involves a different orientation for the magnetic field than is currently used in rigid disc drives, and heat assisted magnetic recording technology, which uses heat generated by a laser to improve storage capacity. We believe these new technologies could significantly improve the storage capacity of rigid disc drives over the long-term. To date, we have not yet developed a commercial product based on these technologies. If we have invested too much in these or other technologies, our results of operations could be adversely affected. In addition, as we replace our existing assets with new, higher cost assets, we expect that our depreciation expense will increase, which will contribute to our high level of fixed costs and reduce our earnings.

Dependence on Supply of Equipment and Components—If we experience shortages or delays in the receipt of critical equipment or components necessary to manufacture our products, we may suffer lower operating margins, production delays and other material adverse effects.

The cost, quality and availability of some equipment and components used to manufacture rigid disc drives and other information storage products are critical to the successful manufacture of these products. The equipment we use to manufacture our products is frequently custom made and comes from a few suppliers. Particularly important components include read/write heads, recording media, application specific integrated circuits, or ASICs, spindle motors and printed circuit boards. We rely on sole suppliers and a limited number of suppliers for some of these components, including the read/write heads and recording media that we do not manufacture, ASICs, spindle motors and printed circuit boards. In the past, we have experienced increased costs and production delays when we were unable to obtain the necessary equipment or sufficient quantities of some components and have been forced to pay higher prices for some components that were in short supply in the industry in general. For example, during the months preceding the November 2000 transactions, Seagate Delaware’s ability to satisfy customer demand was constrained by a limited supply of electrical components from external suppliers. Due to the recent downturn in the economy in general and in the technology sector of the economy in particular, the rigid disc drive industry has experienced economic pressure, which has resulted in consolidation among component manufacturers and may result in some component manufacturers exiting the industry or not making sufficient investments in research to develop new components. These events could affect our ability to obtain critical components for our products, which in turn could have a material adverse effect on our financial condition, results of operations and prospects.

If there is a shortage of, or delay in supplying us with, critical components, then:

it is likely that our suppliers would raise their prices and, if we could not pass these price increases to our customers, our operating margin would decline;

we might have to reengineer some products, which would likely cause production and shipment delays, make the reengineered products more costly and provide us with a lower rate of return on these products;

we would likely have to allocate the components we receive to certain of our products and ship less of others, which could reduce our revenues and could cause us to lose sales to customers who could purchase more of their required products from manufacturers that either did not experience these shortages or delays or that made different allocations; and

we might be late in shipping products, causing potential customers to make purchases from our competitors and, thus, causing our revenue and operating margin to decline.

We cannot assure you that we will be able to obtain critical components in a timely and economic manner, or at all.

Dependence on Key Customers—We may be adversely affected by the loss of, or reduced, delayed or cancelled purchases by, one or more of our larger customers.

For fiscal year 2002, our top 10 customers accounted for approximately 63% of our rigid disc drive revenue. Compaq Computer Corporation, together with Hewlett-Packard, accounted for approximately 20% of our rigid disc drive revenue in fiscal year 2002. If any of our key customers were to significantly reduce their purchases from us, our results of operations would be adversely affected. While sales to major customers may vary from period to period, a major customer that permanently discontinues or significantly reduces its relationship with us could be difficult to replace. In line with industry practice, new customers usually require that we pass a lengthy and rigorous qualification process at the customer’s cost. Accordingly, it may be difficult for us to attract new major customers.

Customer Concentration—Consolidation among our customers could cause sales of our products to decline.

Mergers, acquisitions, consolidations or other significant transactions involving our customers generally entail risks to our business. For example, Hewlett-Packard and Compaq, both of which have been key customers, recently merged. We cannot assure you that the combined entity will purchase as many rigid disc drives from us as Hewlett-Packard and Compaq purchased in the aggregate when they were separate companies. Moreover, if the business of the combined entity is adversely impacted either due to difficulties in integrating Compaq and Hewlett-Packard into a single entity or otherwise, sales of our products could decline. In addition, IBM, which is another of our key customers, recently announced that it has agreed to merge its disc drive business with the disc drive business of Hitachi through the formation of a new company with which IBM has entered into a multi-year supply agreement. As a result, IBM may decrease its purchases from us in favor of this new company. If a significant transaction involving any of our key customers results in the loss of or reduction in purchases by these key customers, it could have a materially adverse effect on our business, results of operations, financial condition and prospects.

OEM Purchase Agreements—Our OEM customers are not obligated to purchase our products.

Typically, our OEM purchase agreements permit OEMs to cancel orders and reschedule delivery dates without significant penalties. In the past, orders from many of our OEMs were cancelled and delivery schedules were delayed as a result of changes in the requirements of the OEMs’ customers. These order cancellations and delays in delivery schedules have had a material adverse effect on our results of operations in the past and may do so again in the future. Our OEMs and distributors typically furnish us with non-binding indications of their near term requirements, with product deliveries based on weekly confirmations. If actual orders from distributors and OEMs decrease from their non-binding forecasts, these variances could have a material adverse effect on our business, results of operations, financial condition and prospects.

Economic Risks Associated with International Operations—Our international operations subject us to risks related to currency exchange fluctuations, longer payment cycles for sales in foreign countries, seasonality and disruptions in foreign markets, tariffs and duties, price controls, potential adverse tax consequences, increased costs and our customers’ credit and access to capital.

We have significant operations in foreign countries, including manufacturing facilities, sales personnel and customer support operations. For fiscal year 2002, approximately 31% of our rigid disc drive revenue was from sales to customers located in Europe and approximately 30% was from sales to customers located in the Far East. We have manufacturing facilities in China, Malaysia, Northern Ireland, Singapore and Thailand, in addition to those in the United States. A substantial portion of our desktop rigid disc drive assembly occurs in our facility in China.

Our international operations are subject to economic risks inherent in doing business in foreign countries, including the following:

Disruptions in Foreign Markets. Disruptions in financial markets and the deterioration of the underlying economic conditions in the past in some countries, including those in Asia, have had an impact on our sales to customers located in, or whose end-user customers are located in, these countries.

Fluctuations in Currency Exchange Rates. Prices for our products are denominated predominately in U.S. dollars, even when sold to customers that are located outside the United States. Currency instability in Asian and other geographic markets may make our products more expensive than products sold by other manufacturers that are priced in the local currency. Moreover, many of the costs associated with our operations located outside the United States are denominated in local currencies. As a consequence, the increased strength of local currencies against the U.S. dollar in countries where we have foreign operations would result in higher effective operating costs and, potentially, reduced earnings. Currently, we do not hedge our foreign exchange risk. We cannot assure you that fluctuations in foreign exchange rates will not have a negative effect on our operations and profitability.

Longer Payment Cycles. Our customers outside of the United States are often allowed longer time periods for payment than our U.S. customers. This increases the risk of nonpayment due to the possibility that the financial condition of particular customers may worsen during the course of the payment period.

Seasonality. Seasonal reductions in the business activities of our customers during the summer months, particularly in Europe, typically result in lower earnings during those periods.

Tariffs, Duties, Limitations on Trade and Price Controls. Our international operations are affected by limitations on imports, currency exchange control regulations, transfer pricing regulations, price controls and other restraints on trade. In addition, the governments of many countries, including China, Malaysia, Singapore and Thailand, in which we have significant operating assets, have exercised and continue to exercise significant influence over many aspects of their domestic economies and international trade.

Potential Adverse Tax Consequences. Our international operations create a risk of potential adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries.

Increased Costs. The shipping and transportation costs associated with our international operations are typically higher than those associated with our U.S. operations, resulting in decreased operating margins in some foreign countries.

Credit and Access to Capital Risks. Our international customers could have reduced access to working capital due to higher interest rates, reduced bank lending resulting from 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.

Political Risks Associated with International Operations—Our international operations subject us to risks related to political unrest and terrorism.

We have manufacturing facilities in parts of the world that periodically experience political unrest. This could disrupt our ability to manufacture important components as well as cause interruptions and/or delays in our

ability to ship components to other locations for continued manufacture and assembly. Any such delays or interruptions could result in delays in our ability to fill orders and have an adverse effect on our results of operation and financial condition. U.S. and international responses to the terrorist attacks on September 11, 2001 could exacerbate these risks.

Legal and Operational Risks Associated with International Operations—Our international operations subject us to risks related to staffing and management, legal and regulatory requirements and the protection of intellectual property.

Operating outside of the United States creates difficulties associated with staffing and managing our international manufacturing facilities, complying with local legal and regulatory requirements and protecting our intellectual property. We cannot assure you that we will continue to be found to be operating in compliance with applicable customs, currency exchange control regulations, transfer pricing regulations or any other laws or regulations to which we may be subject. We also cannot assure you that these laws will not be modified.

Control by our Sponsor Group—We are indirectly controlled by our sponsor group and their interests may conflict with yours.

Affiliates of Silver Lake Partners, Texas Pacific Group, August Capital, J.P. Morgan Partners, LLC and investment partnerships affiliated with Goldman, Sachs & Co., indirectly own approximately 33%, 22%, 11%, 7% and 2%, respectively, of Seagate Technology Holdings’ outstanding shares, through their ownership interests in New SAC. The sponsors’ ownership of New SAC is the subject of a shareholders agreement and other arrangements that result in the sponsors acting as a group with respect to all matters submitted to our shareholders. As a result, the members of our sponsor group indirectly have the power to:

control all matters submitted to our shareholders;

elect our directors; and

exercise control over our business, policies and affairs.

The shareholders agreement between our sponsor group and New SAC requires the approval of the members of New SAC’s board of directors designated by our sponsor group before New SAC takes specific actions that could affect us, such as entering into a material business combination, selling a material amount of assets or issuing equity securities. Accordingly, our ability to engage in significant transactions, such as a merger, acquisition or liquidation, will be limited without the consent of members of our sponsor group. Members of our sponsor group also provide us with services in exchange for a management fee.

Because Seagate Technology Holdings is currently a direct subsidiary of New SAC, New SAC has the power to control all matters affecting Seagate Technology Holdings, including:

the composition of the board of directors of Seagate Technology Holdings and, through the directors, any determination with respect to our business direction and policies, including the appointment and removal of our officers;

the allocation of business opportunities that may be suitable for Seagate Technology Holdings, New SAC or other subsidiaries of New SAC;

the allocation and sharing of resources, including management personnel, among Seagate Technology Holdings, New SAC and other subsidiaries of New SAC;

any determination with respect to mergers or other business combinations;

acquisition or disposition of assets;

financing;

changes to agreements providing for the provision of services by New SAC to us;

the payment of dividends on Seagate Technology Holdings’ common shares; and

determinations with respect to Seagate Technology Holdings’ tax returns.

Also, New SAC is not prohibited from selling a controlling interest in Seagate Technology Holdings to a third party.

Conflicts of Interest of our Directors and Officers—Our directors and executive officers may have conflicts of interest because of their ownership of capital stock of, and their employment with, our parent company and our affiliates.

Many of our directors and executive officers hold ordinary and preferred shares of our parent company, New SAC, and some of them hold shares of capital stock and options to purchase the capital stock of our affiliate, Crystal Decisions, Inc., a business intelligence software solutions company. Ownership of the capital stock of our parent company and our affiliates by our directors and officers could create, or appear to create, potential conflicts of interest when our directors and officers are faced with decisions that could have different implications for us and for New SAC or our affiliates. Some of our directors also serve on the boards of New SAC, Seagate Removable Storage Solutions Holdings, a tape drive company, and Seagate Software (Cayman) Holdings, the parent company of Crystal Decisions. Several of our executive officers also serve as officers and/or directors of those entities as well as other affiliates of ours. We expect that our directors and executive officers will continue to spend a portion of their time on the affairs of our parent company and our affiliates, for which they may receive directorship fees or compensation from those entities. In view of these overlapping relationships, conflicts of interest may exist or arise with respect to existing and future business dealings, including the relative commitment of time and energy by our directors and officers to us and to our parent company and affiliates, potential acquisitions of businesses or properties and other business opportunities, the issuance of additional securities, the election of new or additional directors and the payment of dividends by us. We cannot assure you that any conflicts of interest will be resolved in our favor.

Risks Associated with Future Acquisitions—We may not be able to identify suitable strategic alliance, acquisition or investment opportunities, or successfully acquire and integrate companies that provide complementary products or technologies.

Our growth strategy involves pursuing strategic alliances with, and making acquisitions of or investments in, other companies that are complementary to our business. There is substantial competition for attractive strategic alliance, acquisition and investment candidates. We may not be able to identify suitable acquisition, investment or strategic partnership candidates. Even if we were able to identify them, we cannot assure you that we will be able to partner with, acquire or invest in suitable candidates, or integrate acquired technologies or operations successfully into our existing technologies and operations. Our ability to finance potential acquisitions will be limited by our high degree of leverage, the covenants contained in the indenture that governs our 8% senior notes, the credit agreement that governs our new senior secured credit facilities and any agreements governing any other debt we may incur.

If we are successful in acquiring other companies, these acquisitions may have an adverse effect on our operating results, particularly while the operations of the acquired business are being integrated. It is also likely that integration of acquired companies would lead to the loss of key employees from those companies or the loss of customers of those companies. In addition, the integration of any acquired companies would require substantial attention from our senior management, which may limit the amount of time available to be devoted to our day-to-day operations or to the execution of our strategy. In addition, the expansion of our business involves the risk that we might not manage our growth effectively, that we would incur additional debt to finance these acquisitions or investments and that we would incur substantial charges relating to the write-off of in-process research and development, similar to that which we incurred in connection with several of our prior acquisitions. Each of these items could have a material adverse effect on our financial position and results of operations.

Potential Loss of Licensed Technology—The closing of the November 2000 transactions may have triggered change of control or anti-assignment provisions in some of our license agreements, which could result in a loss of our right to use licensed technology.

We have a number of cross-licenses with third parties that enable us to manufacture our products free from any infringement claims that might otherwise be made by these third parties against us. A number of these licenses contain change of control or anti-assignment provisions. We have taken steps to transfer these licenses in connection with the closing of the November 2000 transactions; however, we cannot assure you that these transfers will not be challenged. For example, Papst Licensing GmbH, IBM and Hitachi initially took the position that their license agreements did not transfer to our new business entities. Subsequently, we entered into new license agreements with IBM and Hitachi in December 2001. In September 2002, we settled a broader dispute with Papst that resolved the claim by Papst that its license agreement was not properly transferred.

To the extent that third party cross-licenses are deemed not to have been properly assigned to us in the November 2000 transactions, our inability to either obtain new licenses or transfer existing licenses could result in delays in product development or prevent us from selling our products until equivalent substitute technology can be identified, licensed and/or integrated or until we are able to substantially engineer our products to avoid infringing the rights of third parties. We might not be able to renegotiate agreements, be able to obtain necessary licenses in a timely manner, on acceptable terms, or at all, or be able to re-engineer our products successfully. Moreover, the loss of any of these licenses would increase the risk of infringement claims being made against us, which claims could have a material adverse effect on our business.

Risk of Intellectual Property Litigation—Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

We cannot be certain that our products do not and will not infringe issued patents or other intellectual property rights of others. Historically, patent applications in the United States and some foreign countries have not been publicly disclosed until the patent is issued, and we may not be aware of currently filed patent applications that relate to our products or technology. If patents are later issued on these applications, we may be liable for infringement. We may be subject to legal proceedings and claims, including claims of alleged infringement of the patents, trademarks and other intellectual property rights of third parties by us or our licensees in connection with their use of our products. We are currently subject to a suit by Convolve, Inc. and the Massachusetts Institute of Technology. For a more detailed description of this suit, see Item 8 of this registration statement.

Intellectual property litigation is expensive and time-consuming, regardless of the merits of any claim, and could divert our management’s attention from operating our business. In addition, intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot assure you that we will be successful in defending ourselves against intellectual property claims. Moreover, software patent litigation has increased due to the current uncertainty of the law and the increasing competition and overlap of product functionality in the field. If we were to discover that our products infringe the intellectual property rights of others, we would need to obtain licenses from these parties or substantially reengineer our products in order to avoid infringement. We might not be able to obtain the necessary licenses on acceptable terms, or at all, or be able to reengineer our products successfully. Moreover, if we are sued for infringement and lose the suit, we could be required to pay substantial damages and/or be enjoined from using or selling the infringing products or technology. Any of the foregoing could cause us to incur significant costs and prevent us from selling our products.

Dependence on Intellectual Property—If our intellectual property and other proprietary information were copied or independently developed by competitors, our operating results would be negatively affected.

Our success depends to a significant degree upon our ability to protect and preserve the proprietary aspects of our technology. However, we may be unable to prevent third parties from using our technology without our

authorization or independently developing technology that is similar to ours, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. The use of our technology or similar technology by others could reduce or eliminate any competitive advantage we have developed, cause us to lose sales or otherwise harm our business. If it became necessary for us to resort to litigation to protect these rights, any proceedings could be burdensome and costly, and we may not prevail.

Limitations on Patent Protection—Our issued and pending patents may not adequately protect our intellectual property or provide us with any competitive advantage.

Although we have numerous U.S. and foreign patents and numerous pending patents that relate to our technology, we cannot assure you that any patents, issued or pending, will provide us with any competitive advantage or will not be challenged by third parties. Moreover, our competitors may already have applied for patents that, once issued, will prevail over our patent rights or otherwise limit our ability to sell our products in the United States or abroad. Our competitors also may attempt to design around our patents or copy or otherwise obtain and use our proprietary technology. With respect to our pending patent applications, we may not be successful in securing patents for these claims. Our failure to secure these patents may limit our ability to protect the intellectual property rights that these applications were intended to cover.

Disclosure of our Proprietary Technology—Confidentiality and non-disclosure agreements may not adequately protect our proprietary technology or trade secrets.

We have entered into confidentiality agreements with our employees and non-disclosure agreements with customers, suppliers and potential strategic partners, among others. If any party to these agreements were to violate their agreement with us and disclose our proprietary technology to a third party, we may be unable to prevent the third party from using this information. Because a significant portion of our proprietary technology consists of specialized knowledge and technical expertise developed by our employees, we have a program in place designed to ensure that our employees communicate any developments or discoveries they make to other employees. However, employees may choose to leave our company before transferring their knowledge and expertise to our other employees. Violations by others of our confidentiality or non-disclosure agreements and the loss of employees who have specialized knowledge and expertise could harm our competitive position and cause our sales and operating results to decline. Our trade secrets may otherwise become known or independently developed by others, and trade secret laws provide no remedy against independent development or discovery.

Service Marks and Trademarks—Our failure to obtain trademark registrations or service marks, or challenges to those marks, could impede our marketing efforts.

We have registered and applied for some service marks and trademarks, and will continue to evaluate the registration of additional service marks and trademarks, as appropriate. We cannot guarantee the approval of any of our pending applications by the applicable governmental authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge these registrations. A failure to obtain trademark registrations in the United States and in other countries could limit our ability to use our trademarks and impede our marketing efforts in those jurisdictions.

Environmental Matters—We could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, as a result of violations of or liabilities under environmental laws.

Our operations inside and outside the United States are subject to laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. In addition to the U.S. federal, state and local laws to which our domestic operations are subject, our extensive international manufacturing operations subject us to environmental regulations imposed by foreign governments. Although our policy is to apply strict standards for environmental protection at our sites inside and outside the United

States, we could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, third-party property damage or personal injury claims if we were to violate or become liable under environmental laws or become non-compliant with environmental permits required at our facilities. Contaminants have been detected at some of our present and former sites, principally in connection with historical operations. In addition, we have been named as a potentially responsible party at several superfund sites. While we are not currently aware of any contaminated or superfund sites as to which material outstanding claims or obligations exist, the discovery of additional contaminants or the imposition of additional cleanup obligations at these or other sites could result in significant liability. In addition, the ultimate costs under environmental laws and the timing of these costs are difficult to predict. Liability under some environmental laws relating to contaminated sites can be imposed retroactively and on a joint and several basis. In other words, one liable party could be held liable for all costs at a site. Potentially significant expenditures could be required in order to comply with environmental laws that may be adopted or imposed in the future.

Dependence on Key Personnel—The loss of some key executive officers and employees could negatively impact our business prospects.

Our future performance depends to a significant degree upon the continued service of 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 will also depend in large part upon our ability to attract, retain and further incentivize highly skilled management, marketing, sales and product development personnel. A significant portion of the incentive compensation for our senior management vests in calendar year 2003 and substantially all of this compensation will have vested by November 2004. We may not be able to provide our senior management with adequate additional incentives to remain employed by us after this time. We have experienced intense competition for personnel, and we cannot assure you that we will be able to retain our key employees or that we will be successful in attracting, assimilating and retaining personnel in the future.

System Failures—System failures caused by events beyond our control could adversely affect computer equipment and electronic data on which our operations depend.

Our operations are dependent on our ability to protect our computer equipment and the information stored in our databases from damage by, among other things, earthquake, fire, natural disaster, power loss, telecommunications failures, unauthorized intrusion and other catastrophic events. As our operations become more automated and increasingly interdependent, our exposure to the risks posed by these types of events will increase. A significant part of our operations is based in an area of California that has experienced power outages and earthquakes and is considered seismically active. We do not have a contingency plan for addressing the kinds of events referred to in this paragraph that would be sufficient to prevent system failures and other interruptions in our operations that could have a material adverse effect on our business, results of operations and financial condition.

Potential Tax Legislation—Negative publicity about companies located in certain offshore jurisdictions may lead to new legislation that could increase our tax burden.

Several members of the United States Congress have introduced legislation relating to the tax treatment of U.S. companies that have undertaken certain types of expatriation transactions. While we do not believe that this legislation, as currently proposed, would adversely affect us, the exact scope of the legislation and whether it will ultimately be enacted is unclear at this time. Therefore, it is possible that legislation in this area, if enacted, could materially increase our future tax burden or otherwise affect our business.

Substantial Leverage—Our substantial leverage may place us at a competitive disadvantage in our industry.

We are leveraged and have significant debt service obligations. Our significant debt and debt service requirements could adversely affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities. For example, our high level of debt presents the following risks to you:

we are required to use a substantial portion of our cash flow from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances and other general corporate requirements;

our interest expense could increase if prevailing interest rates increase, because a substantial portion of our debt bears interest at floating rates;

our substantial leverage increases our vulnerability to economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;

our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and our industry and could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategies;

our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements; and

covenants in our debt instruments limit our ability and the ability of our subsidiaries to pay dividends or make other restricted payments and investments.

Significant Debt Service Requirements—Servicing our debt requires a significant amount of cash, and our ability to generate cash may be affected by factors beyond our control.

Our business may not generate cash flow in an amount sufficient to enable us to pay the principal of, or interest on, our indebtedness or to fund our other liquidity needs, including working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that:

our business will generate sufficient cash flow from operations;

we will continue to realize the cost savings, revenue growth and operating improvements that resulted from the execution of our long-term strategic plan; or

future borrowings will be available to us under our new senior secured credit facilities or that other sources of funding will be available to us, in each case, in amounts sufficient to enable us to fund our liquidity needs.

If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, product development efforts, strategic acquisitions, investments and alliances, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. In addition, our existing debt instruments permit us to incur a significant amount of additional debt. If we incur additional debt above the levels now in effect, the risks associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough cash flow to fund our liquidity needs, could intensify.

Restrictions Imposed by Debt Covenants—Restrictions imposed by our existing debt instruments will limit our ability to finance future operations or capital needs or engage in other business activities that may be in our interest.

Our existing debt instruments, including the indenture governing our 8% senior notes and the credit agreement governing our new senior secured credit facilities, impose, and the terms of any future debt may impose, operating and other restrictions on us. The indenture governing our 8% senior notes limits our ability to incur additional indebtedness if our consolidated coverage ratio, which is the ratio of the aggregate consolidated EBITDA of our subsidiary, Seagate Technology HDD Holdings, the issuer of our 8% senior notes and a co-borrower under our new senior secured credit facilities, and its restricted subsidiaries, to the total interest expense of those entities, is less than or equal to 3.0 to 1.0 during any consecutive four-quarter period. The limitations on our ability to incur additional indebtedness under the credit agreement governing our new senior secured credit facilities are even more restrictive. Our existing debt instruments also limit, among other things, our ability to:

pay dividends or make distributions in respect of our shares;

redeem or repurchase shares;

make investments or other restricted payments;

sell assets;

issue or sell shares of restricted subsidiaries;

enter into transactions with affiliates;

create liens;

enter into sale/leaseback transactions;

effect a consolidation or merger; and

make certain amendments to our deferred compensation plans.

These covenants are subject to a number of important qualifications and exceptions, including exceptions that permit us to make significant distributions of cash. In addition, the obligation to comply with many of the covenants under the indenture governing our 8% senior notes will cease to apply if the notes achieve investment grade status.

Our existing debt instruments also require us to achieve specified financial and operating results and maintain compliance with specified financial ratios. Our ability to comply with these ratios may be affected by events beyond our control.

A breach of any of the restrictive covenants described above or our inability to comply with the required financial ratios could result in a default under our existing debt instruments. If a default occurs, the lenders under our new senior secured credit facilities or the holders of our 8% senior notes may elect to declare all of our outstanding obligations, together with accrued interest and other fees, to be immediately due and payable. If we are unable to repay outstanding borrowings under our new senior secured credit facilities or to pay interest on our 8% senior notes when due, the lenders under our new senior secured credit facilities will have the right to call on the guarantees and, ultimately, to proceed against the collateral granted to them to secure the debt. If our outstanding indebtedness were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full that debt and any future indebtedness, which would cause the market price of our common shares to decline significantly.

Available Information

Seagate Technology Holdings and Seagate Technology HDD Holdings have filed with the SEC a registration statement on Form S-4 (Registration No. 333-88388) under the Securities Act of 1933 with respect to

the exchange of all outstanding privately placed 8% senior notes due 2009 for an equal amount of registered 8% senior notes due 2009, and Seagate Technology Holdings has filed a registration statement on Form S-1 (Registration No. 333-100513) with respect to its proposed initial public offering of common shares. Upon the earliest to occur of the effectiveness of either of the aforementioned registration statements or this registration statement, we will become subject to the informational requirements of the Securities Exchange Act. Accordingly, we will file periodic and current reports and other information with the SEC. The aforementioned registration statements and this registration statement and other reports or information can be inspected, and copies may be obtained, at the Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, and at the regional public reference facilities maintained by the SEC located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Information on the operation of the Public Reference Room of the SEC may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site (http://www.sec.gov) that contains reports and information statements and other information that we have filed electronically with the SEC.

Enforceability of Civil Liabilities

Seagate Technology Holdings is incorporated under the laws of the Cayman Islands. Some of the directors and officers and a substantial portion of the assets of Seagate Technology Holdings are located outside the United States. Consequently, it may be difficult for you to effect service of process on us and to enforce civil liabilities against our directors and officers in courts outside the United States judgments of courts of the United States predicated upon civil liability provisions under the U.S. federal securities or other laws.

We have been advised by our Cayman Islands legal counsel, Walkers, that there is doubt with respect to Cayman Islands law as to (1) whether a judgment of a U.S. court predicated solely upon the civil liability provisions of the U.S. federal securities or other laws would be enforceable in the Cayman Islands against us and (2) whether an action could be brought in the Cayman Islands against us in the first instance on the basis of liability predicated solely upon the provisions of the U.S. federal securities or other laws.

ITEM 2. FINANCIAL INFORMATION

Selected Financial Data

We list in the table below selected historical consolidated and combined financial information relating to us and our predecessor for the periods indicated. Through November 22, 2000, the rigid disc drive business that we now operate and the storage area networks business that we operated through November 4, 2002 were the rigid disc drive and storage area networks divisions of Seagate Delaware. Those divisions are our predecessor, and our operations prior to our sale of XIOtech were substantially identical to the operations of our predecessor before the November 2000 transactions.

We have derived our predecessor’s historical financial information below as of the end of and for fiscal years 1998 and 1999 from the audited combined financial statements and related notes of our predecessor, which are not included in this registration statement.

We have derived our predecessor’s historical financial information below as of the end of and for fiscal year 2000 and for the period from July 1, 2000 through November 22, 2000 from the audited combined financial statements and related notes of our predecessor included elsewhere in this registration statement.

We have derived our historical financial information as of and for the period from November 23, 2000 through June 29, 2001 and for fiscal year 2002 from our audited consolidated financial statements and related notes included elsewhere in this registration statement.

You should read the selected historical consolidated financial information below in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section under Item 2 of this registration statement and the consolidated financial statements and related notes included elsewhere in this registration statement.

	Predecessor												Seagate Technology Holdings
	Fiscal Year Ended (a)									July 1, 2000 to Nov. 22, 2000			Nov. 23, 2000 to June 29, 2001			Fiscal Year Ended June 28, 2002 (b)
	July 3, 1998			July 2, 1999			June 30, 2000			July 1, 2000 to Nov. 22, 2000			Nov. 23, 2000 to June 29, 2001			Fiscal Year Ended June 28, 2002 (b)
	(in millions, except for per share data)
Statement of Operations Data:
Revenue	$	6,267		$	6,180		$	6,073		$	2,310		$	3,656		$	6,087
Cost of revenue		5,523			4,902			4,822			2,035			2,924			4,494
Product development		555			566			664			409			388			698
Marketing and administrative		330			345			464			450			288			498
Amortization of goodwill and other intangibles		21			20			33			20			12			19
In-process research and development (b)		216			2			105			—			52			—
Restructuring (c)		347			59			206			19			66			4
Unusual items (d)		(22	)		75			64			—			—			—

Income (loss) from operations (e)		(703	)		211			(285	)		(623	)		(74	)		374
Other income (expense):
Interest income		98			102			101			57			31			25
Interest expense		(51	)		(48	)		(52	)		(24	)		(54	)		(77	)
Other non-operating income (expense) (f)		(66	)		10			877			(28	)		(4	)		(83	)

Income (loss) before income taxes		(722	)		275			641			(618	)		(101	)		239
Provision for (benefit from) income taxes		(191	)		61			275			(206	)		9			86

Net income (loss)	$	(531	)	$	214		$	366		$	(412	)	$	(110	)	$	153


Net income per share (g):
Basic																$	0.38

Diluted																	0.36

Number of shares used in per share calculations:
Basic																	401
Diluted																	428

Balance Sheet Data (at end of Period):
Cash and cash equivalents	$	656		$	368		$	868					$	726		$	612
Short-term investments		1,161			1,227			1,140						183			231
Total assets		5,442			5,122			5,818						2,966			3,095
Accrued deferred compensation																	147
Total debt (including current portion of long-term debt)		705			704			703						900			751
Total shareholders’ equity (h)		2,839			2,362			2,942						653			641

(a)

We report, and our predecessor reported, financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30 of that year. Accordingly, each fiscal year ended on the date indicated above. Fiscal year 1998 was 53 weeks. All other fiscal years presented were 52 weeks. All references to years represent fiscal years unless otherwise noted.

(b)

On November 4, 2002, we sold XIOtech to New SAC in return for a $32 million promissory note from New SAC. Immediately after the sale, we made an in-kind distribution of the promissory note to our existing shareholders, including New SAC. XIOtech’s revenue and net loss were $74 million and $51 million, respectively, for the fiscal year ended June 28, 2002. In addition, we refinanced all of our then outstanding indebtedness in May 2002. See “Unaudited Pro Forma Condensed Consolidated Financial Information” for a description of the pro forma effects of these transactions.

(c)

These amounts represent portions of the purchase price of prior acquisitions that were attributed to in-process research and development projects of acquired companies. Our predecessor recorded the following charges related to the write-off of in-process research and development: (1) in fiscal year 1998, principally consisting of $216 million in connection with the acquisition of Quinta; (2) in fiscal year 1999, of $2 million in connection with the acquisition of a minority interest in Seagate Software Holdings; (3) in fiscal year 2000, of $105 million in connection with the acquisition of XIOtech; and (4) in the period from November 23, 2000 to June 29, 2001, we recorded an in-process research and development charge of $52 million in connection with the November 2000 transactions.

(d)

Restructuring charges are the result of board approved restructuring plans we have implemented to align our global workforce and manufacturing capacity with existing and anticipated future market requirements. These charges are described in more detail in the

notes to the audited consolidated and combined financial statements of Seagate Technology Holdings and its predecessor included elsewhere in this registration statement and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” section under Item 2 of this registration statement.

(e)

Unusual items include: (1) in fiscal year 1998, a $22 million reversal of expense recognized in fiscal year 1997, but paid in a lesser amount in fiscal year 1998 relating to the settlement of litigation; (2) in fiscal year 1999, a gross charge of $78 million of cash compensation expense related to the acquisition of Quinta by our predecessor, which was offset by $3 million of other one-time items; and (3) in fiscal year 2000, $64 million of expense related to the settlement of litigation.

(f)

Income (loss) from operations includes: (1) in fiscal year 2000, $43 million of non-cash compensation expense and payroll taxes related to the reorganization of Seagate Software Holdings, Inc., of which $2 million was allocated to cost of revenue, $1 million was allocated to product development expense and $40 million was allocated to marketing and administrative expense; (2) in the period from July 1, 2000 to November 22, 2000, non-cash compensation expense totaling $567 million related to the November 2000 transactions, of which $265 million was allocated to cost of revenue, $116 million was allocated to product development expense and $185 million was allocated to marketing and administrative expense; and (3) in fiscal year 2002, a $179 million charge to record $32 million paid to participants in our deferred compensation plan and $147 million to accrue the remaining obligations under the plan. Of the $179 million charge, $38 million was allocated to cost of revenue, $29 million was allocated to product development expense and $112 million was allocated to marketing and administrative expense.

(g)

Other non-operating income (expense) includes: (1) in fiscal year 1998, mark-to-market losses of $76 million on foreign exchange hedging contracts partially offset by gains on the sale of certain investments in equity securities of $8 million; (2) in fiscal year 2000, $679 million of gains on the sale of SanDisk Corporation stock and $199 million of gains on the exchange of certain investments in equity securities; (3) for the period from July 1, 2000 through November 22, 2000, losses recognized on investments in Lernout & Hauspie Speech Products N.V. and Gadzoox Networks, Inc., and losses on the sale of marketable securities of $138 million, $8 million and $8 million, respectively, partially offset by gains on sales of SanDisk Corporation and Veeco Instruments, Inc. stock of $102 million and $20 million, respectively; and (4) in fiscal year 2002, $93 million in debt refinancing charges.

(h)

Net income (loss) per share data is not presented prior to November 23, 2000 because our predecessor had no formal capital structure. Basic and diluted net loss per share information is not presented for the period from November 23, 2000 to June 29, 2001 because Seagate Technology Holdings had a net loss, had no outstanding common shares, and the assumed conversion of the preferred Series A shares would be antidilutive. Basic and diluted net income per share for fiscal year 2002 includes weighted average common shares outstanding and the dilutive effect as if all 400 million Series A preferred shares had converted into common shares on a one-to-one basis. Diluted net income per share for fiscal year 2002 also includes the dilutive effect (calculated using the treasury stock method) of the assumed exercise of outstanding options to purchase common shares.

(i)

We declared and paid return of capital distributions of approximately $33 million and $167 million to our common and preferred shareholders of record as of March 19, 2002 and May 17, 2002, respectively. These distributions represent a total payment of approximately $0.50 for each common and preferred share.

Unaudited Pro Forma Condensed Consolidated Financial Information

We have prepared the following unaudited pro forma condensed consolidated financial information for the fiscal year ended June 28, 2002. This unaudited pro forma condensed consolidated financial information has been prepared based on our historical consolidated financial statements and gives pro forma effect to the refinancing and the sale of XIOtech. For a description of the refinancing which took place in May 2002, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—The Refinancing.”

On November 4, 2002, we sold XIOtech, our wholly owned subsidiary that operated our storage area networks business, to New SAC. New SAC in turn sold 51% of the shares that it had acquired in XIOtech to a third party in a transaction in which XIOtech also sold newly issued shares to this third party. As a result, New SAC has retained an interest of less than 20% of XIOtech.

In consideration of our sale of XIOtech to New SAC, we received a $32 million promissory note from New SAC. The amount of this promissory note was equal to the estimated fair value of XIOtech as of the date of the sale, net of intercompany indebtedness. This estimate as to fair value was based in part on the per share price paid by the third party investor to New SAC for XIOtech. Immediately after the sale of XIOtech to New SAC, we made an in-kind pro rata distribution of the entire promissory note to our existing shareholders, including New SAC, which currently owns approximately 99.4% of our outstanding shares. That portion of the promissory note distributed back to New SAC was cancelled, and New SAC immediately paid off the remaining 0.6% of the promissory note held by our minority shareholders. As a result of our sale of XIOtech, we will no longer consolidate XIOtech’s operations with our operations.

Because New SAC owns approximately 99.4% of our outstanding shares, our sale of XIOtech to New SAC will be recorded as a dividend of an amount equal to the net book value of XIOtech rather than as a sale for the fair value of the promissory note. As of June 28, 2002, the net book value of XIOtech was approximately $10 million.

The unaudited pro forma condensed consolidated statements of operations for the fiscal year ended June 28, 2002 have been adjusted to give pro forma effect to the refinancing and the sale of XIOtech, as if they had occurred on the first day of our fiscal year 2002. The unaudited pro forma condensed consolidated balance sheet as of June 28, 2002 has been adjusted to give pro forma effect to the sale of XIOtech as if it had occurred on June 28, 2002. The unaudited pro forma condensed consolidated balance sheet as of June 28, 2002 does not include pro forma adjustments relating to the refinancing because the refinancing is already included in our historical financial information for June 28, 2002.

The pro forma adjustments to our unaudited pro forma consolidated statement of operations for the fiscal year ended June 28, 2002 relating to the refinancing eliminate the loss that was recorded on the extinguishment of the debt, reduce interest income as a result of cash used in the refinancing and lower interest expense as a result of the reduction in outstanding principal and the lower average interest rate of our new indebtedness. The pro forma adjustments to our unaudited pro forma consolidated statement of operations for the fiscal year ended June 28, 2002 relating to the sale of XIOtech deduct the historical operating results of XIOtech and increase revenue and cost of revenue to recognize our intercompany sales of rigid disc drives to XIOtech and intercompany sales of storage area networks products by XIOtech to us. These intercompany sales transactions were previously eliminated by us in consolidation. The pro forma adjustments to our unaudited pro forma condensed balance sheet as of June 28, 2002 deduct the historical balance sheet of XIOtech as of June 28, 2002, record the cash received from XIOtech upon the closing of the transaction for payment of an intercompany receivable that was previously eliminated in consolidation, and eliminate XIOtech common stock and paid-in capital amounts as if the sale to New SAC had been completed as of June 28, 2002.

The unaudited pro forma adjustments are based on available information and upon assumptions that management believes are reasonable as described above and in the accompanying notes. The unaudited pro forma condensed consolidated financial information does not purport to represent what our results of operations or financial position would actually have been had the refinancing or the sale of XIOtech actually occurred as of the beginning of our fiscal year 2002 or as of June 28, 2002. This unaudited pro forma condensed consolidated financial information should be read in conjunction with our audited consolidated financial statements and the related notes included in this prospectus.

SEAGATE TECHNOLOGY HOLDINGS

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Fiscal Year Ended June 28, 2002

(in millions, except per share data)

				Pro Forma Adjustments
	Seagate Technology Holdings			Less: XIOtech (a)			Plus: Other Pro Forma Adjustments			Pro Forma Seagate Technology Holdings
Revenue	$	6,087		$	74		$	10	(b)	$	6,023
Cost of revenue		4,494			38			3	(b)		4,465
								6	(c)
Product development		698			17			—			681
Marketing and administrative		498			66			—			432
Amortization of intangibles		19			1			—			18
Restructuring		4			—			—			4

Income (loss) from operations		374			(48	)		1			423
Other income (expense):
Interest income		25			—			(9	)(d)		16
Interest expense		(77	)		—			19	(d)		(58	)
Debt refinance charge		(93	)		—			93	(d)		—
Other, net		10			(3	)		—			13

Other income (expense), net		(135	)		(3	)		103			(29	)

Income (loss) before income taxes		239			(51	)		104			395
Provision for income taxes		86			—			—			86

Net income	$	153		$	(51	)	$	104		$	308

Net income per share:
Basic	$	0.38								$	0.77

Diluted	$	0.36								$	0.72

Number of shares used in per share calculations:
Basic		401									401
Diluted		428									428

(Footnotes on Page 38)

SEAGATE TECHNOLOGY HOLDINGS

Unaudited Pro Forma Condensed Consolidated Balance Sheet

June 28, 2002

(in millions)

			Pro Forma Adjustments
	Seagate Technology Holdings		Less: XIOtech (a)			Plus: Other Pro Forma Adjustments			Pro Forma Seagate Technology Holdings
ASSETS
Cash and cash equivalents	$	612	$	9		$	9	(e)	$	612
Short-term investments		231		—			—			231
Accounts receivable, net		614		17			—			597
Inventories		347		8			1	(c)		340
Other current assets		158		—			—			158

Total Current Assets		1,962		34			10			1,938
Property, equipment and leasehold improvements, net		1,022		7			—			1,015
Intangible assets, net		6		—			—			6
Other assets, net		105		—			—			105

Total Assets	$	3,095	$	41		$	10		$	3,064

LIABILITIES
Accounts payable	$	743	$	5		$	—		$	738
Affiliate accounts payable		12		9			9	(e)		12
Accrued employee compensation		190		5			—			185
Accrued deferred compensation		147		—			—			147
Accrued expenses		339		10			—			329
Accrued income taxes		170		—			—			170
Current portion of long-term debt		2		—			—			2

Total Current Liabilities		1,603		29			9			1,583
Other liabilities		102		2			—			100
Long-term debt, less current portion		749		—			—			749

SHAREHOLDERS’ EQUITY
Common shares, preferred shares and additional paid-in capital		598		111			111	(f)		598
Retained earnings		43		(101	)		(110	)(f)		34

Total Shareholders’ Equity		641		10			1			632

Total Liabilities and Shareholders’ Equity	$	3,095	$	41		$	10		$	3,064

(Footnotes on page 38)

SEAGATE TECHNOLOGY HOLDINGS

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL INFORMATION

(a)	To deduct the historical results of operations and financial position of XIOtech.

(b)	To record revenue and cost of revenue from our intercompany sales of disc drives to XIOtech and intercompany sales of storage area networks products by XIOtech to us. These intercompany sales transactions were previously eliminated by us in consolidation.

(c)	To adjust cost of revenue and inventory for intercompany profit previously eliminated by us in consolidation.

(d)

To record adjustments relating to the refinancing as follows: (1) to reduce interest income by $9 million to reflect lower average invested cash balances as a result of $419 million of cash used in the refinancing primarily to reduce outstanding debt, pay distributions to shareholders, and pay deferred compensation plan participants; (2) to reduce interest expense by $19 million to reflect lower interest expense as a result of the reduction in principal and a lower interest rate on our new indebtedness; and (3) to eliminate the $93 million non-recurring loss on extinguishment of the debt that was recorded in May 2002.

(e)	To record the cash to be received from XIOtech upon closing of the transaction for payment of an intercompany receivable. Previously, we eliminated this intercompany receivable in consolidation.

(f)	To add back XIOtech paid-in capital and common stock amounts included in XIOtech’s stand alone financial statements but not included on Seagate Technology’s consolidated financial statements.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the financial condition and results of operations for the fiscal year ended June 30, 2000, the period from July 1, 2000 through November 22, 2000, the period from November 23, 2000 through June 29, 2001 and the fiscal year ended June 28, 2002 for Seagate Technology Holdings and its predecessor. Financial information for the fiscal year ended June 30, 2000 and the period from July 1, 2000 through November 22, 2000 is the historical financial information of the predecessor. Through November 22, 2000, the rigid disc drive business that Seagate Technology Holdings now operates and the storage area networks business that Seagate Technology Holdings operated through November 4, 2002 were the rigid disc drive and storage area networks divisions of Seagate Delaware. Those divisions are Seagate Technology Holdings’ predecessor, and Seagate Technology Holdings’ operations prior to the sale of XIOtech were substantially identical to the operations of its predecessor before the November 2000 transactions. Although Seagate Technology Holdings was incorporated on August 10, 2000, prior to November 23, 2000, its operations were not material.

Pro forma financial information related to revenue and cost of revenue for the fiscal year ended June 29, 2001 is based on Seagate Technology Holdings’ historical consolidated financial statements for the period from November 23, 2000 through June 29, 2001 and the historical combined financial statements of its predecessor for the period from July 1, 2000 through November 22, 2000, adjusted to give pro forma effect to the November 2000 transactions and to eliminate the related compensation charges, as if the November 2000 transactions had occurred on July 1, 2000.

You should read this discussion in conjunction with the selected historical consolidated financial information and the consolidated financial statements and related notes of Seagate Technology Holdings and its predecessor included elsewhere in this registration statement. Except as noted, references to any fiscal year mean the twelve month period ending on the Friday closest to June 30 of that year.

Our Company

We are the worldwide leader in the design, manufacturing and marketing of rigid disc drives. Rigid disc drives are used as the primary medium for storing electronic information in systems ranging from desktop computers and consumer electronics to data centers delivering information over corporate networks and the Internet. As of June 28, 2002, we are the largest manufacturer of rigid disc drives in terms of unit shipments. We produce a broad range of rigid disc drive products that make us a leader in both the enterprise sector of our industry, where our products are primarily used in enterprise servers, mainframes and workstations, and the personal storage sector of our industry, where our products are used in PCs and consumer electronics.

We sell our rigid disc drives primarily to major original equipment manufacturers, or OEMs, and also market to distributors under our globally recognized brand name. For pro forma fiscal year 2001 and fiscal year 2002, approximately 70% and 66%, respectively, of our combined rigid disc drive revenue was from sales to OEMs, including customers such as Compaq (which recently merged with Hewlett-Packard), Dell, EMC, IBM and Sun Microsystems. We have longstanding relationships with many of these OEM customers. We also have key relationships with major distributors, who sell our rigid disc drive products to small OEMs, dealers, system integrators and retailers throughout most of the world. For pro forma fiscal year 2001 and fiscal year 2002, approximately 40% and 39%, respectively, of Seagate Technology Holdings’ revenue came from customers located in North America, approximately 34% and 31%, respectively, came from customers located in Europe and approximately 26% and 30%, respectively, came from customers located in the Far East. Substantially all of our revenue is denominated in U.S. dollars.

November 2000 Transactions

Overview

Prior to November 22, 2000, Suez Acquisition Company, the predecessor to New SAC, entered into a stock purchase agreement with Seagate Delaware and Seagate Software Holdings, Inc., a subsidiary of Seagate Delaware. Concurrently, Seagate Delaware and VERITAS Software Corporation entered into an agreement and plan of merger and reorganization. Suez Acquisition Company was an exempted company incorporated with limited liability under the laws of the Cayman Islands and formed solely for the purpose of entering into the stock purchase agreement and undertaking the related acquisitions. As discussed below, Suez Acquisition Company later assigned all of its rights and obligations under the stock purchase agreement to New SAC, an exempted company incorporated with limited liability under the laws of the Cayman Islands and formed for the same purpose.

In connection with the stock purchase agreement, Suez Acquisition Company agreed to purchase for $1.840 billion in cash substantially all of the operating assets of Seagate Delaware and its consolidated subsidiaries, including Seagate Delaware’s disc drive, tape drive, storage area networks and software businesses and operations and selected cash balances, but excluding the approximately 128 million shares of VERITAS common stock held by Seagate Software Holdings, Inc. and Seagate Delaware’s equity investments in Gadzoox Networks, Inc. and Lernout & Hauspie Speech Products N.V., or LHSP. The $1.840 billion included transaction costs of $25 million. In addition, under the stock purchase agreement, Suez Acquisition Company agreed to assume substantially all of the operating liabilities of Seagate Delaware and its consolidated subsidiaries. Suez Acquisition Company also agreed to acquire Seagate Technology Investments Holdings, Inc., or STIH, a former subsidiary of Seagate Delaware, which at the time of the November 2000 transactions held strategic investments in various companies, such as e2open.com and Iolon, Inc. Prior to the closing of the November 2000 transactions, Suez Acquisition Company assigned all its rights and obligations under the stock purchase agreement to New SAC. After the closing of those transactions, New SAC became our direct parent company and the indirect parent company of various other former subsidiaries of Seagate Delaware.

Immediately following the consummation of the November 2000 transactions, VERITAS acquired the remainder of Seagate Delaware by way of a merger of a wholly-owned subsidiary of VERITAS with and into Seagate Delaware, with Seagate Delaware surviving and becoming a wholly-owned subsidiary of VERITAS. We refer to this transaction as the VERITAS merger. VERITAS did not acquire Seagate Delaware’s disc drive business or any other Seagate Delaware operating business, but it did acquire:

approximately 128 million shares of VERITAS common stock held by Seagate Software Holdings, Inc.;

capital stock of Seagate Software Holdings, Inc.;

cash on the balance sheet of Seagate Delaware in excess of the required cash balance of $765 million, as adjusted, that was purchased by Suez Acquisition Company; and

Seagate Delaware’s equity investments in Gadzoox Networks and LHSP.

In the VERITAS merger, Seagate Delaware’s stockholders received merger consideration consisting of VERITAS stock, cash and an interest in specified tax refunds that are attributable to Seagate Delaware.

An indemnification agreement provides that New SAC and its subsidiaries are required to indemnify VERITAS and its affiliates for specified liabilities of Seagate Delaware and Seagate Software Holdings, Inc., including selected taxes. In return, VERITAS, Seagate Delaware and their affiliates agreed to indemnify New SAC and its subsidiaries for specified liabilities, including all taxes of Seagate Delaware for which New SAC is not obligated to indemnify VERITAS and its affiliates. VERITAS deposited $150 million in an escrow account, which may be applied by New SAC to satisfy certain tax liabilities, and which remains in the escrow account in full. To the extent that any part of the $150 million is not utilized to satisfy these tax liabilities, it will be paid out to the former Seagate Delaware stockholders. In July 2002, Seagate Technology Holdings and those of its

affiliates that are parties to the indemnification agreement entered into a reimbursement agreement which allocates the respective liabilities and obligations under the indemnification agreement. Under the reimbursement agreement, if we and our affiliates become obligated to indemnify Seagate Delaware, VERITAS or any of their affiliates for tax liabilities under the indemnification agreement, Seagate Technology HDD Holdings will be responsible for the first $125 million of the tax liabilities, and any amount exceeding $125 million will then be allocated among Seagate Technology HDD Holdings, Seagate Technology SAN Holdings, Seagate Removable Storage Solutions Holdings and Seagate Software (Cayman) Holdings on a pro rata basis in accordance with the portion of the purchase price allocated to each entity in connection with the November 2000 transactions. For indemnification obligations other than tax liabilities under the indemnification agreement, the responsible entity will reimburse any entity that satisfies the obligation on its behalf.

Management Rollover

In connection with the November 2000 transactions, approximately 100 members of Seagate Delaware’s management group entered into rollover agreements under which they agreed not to receive merger consideration consisting of VERITAS stock and cash in respect of a portion of their restricted shares of Seagate Delaware’s common stock and unvested options to purchase those shares. The aggregate value of this foregone consideration was approximately $184 million. Instead of receiving this merger consideration, members of the management group received restricted ordinary and preferred shares of New SAC granted under the New SAC 2000 Restricted Share Plan and participation interests in our deferred compensation plan.

New SAC Restricted Shares. At the closing of the November 2000 transactions, the board of directors of New SAC adopted the New SAC 2000 Restricted Share Plan. The 2000 Restricted Share Plan allows for the awarding of grants of ordinary and preferred shares of New SAC to management, employees, directors and consultants of New SAC and its affiliates. New SAC issued 1,843,000 restricted ordinary shares and 48,500 restricted preferred shares under this plan to those members of management participating in the rollover agreements described below. The restricted ordinary and preferred shares granted under the 2000 Restricted Share Plan vest as follows:

one-third of the shares vested on November 22, 2001;

one-third have been vesting and will continue to vest proportionately each month over the 18 months following November 22, 2001; and

the final one-third vests on May 22, 2003.

In addition, at the closing of the November 2000 transactions certain individuals purchased additional ordinary and preferred shares of New SAC for approximately $41 million in cash. Of this $41 million, approximately $21 million was purchased by members of the management group.

Following the closing of the November 2000 transactions, the board of directors of New SAC approved the 2001 Restricted Share Plan. Unlike the 2000 Restricted Share Plan, the 2001 Restricted Share Plan only provides for the grant of restricted ordinary shares of New SAC and does not provide for the grant of restricted preferred shares of New SAC. Like the 2000 Restricted Share Plan, the 2001 Restricted Share Plan allows for the award of grants to management, employees, directors and consultants of New SAC and its affiliates. New SAC has issued 483,523 restricted ordinary shares under this plan. Restricted shares granted under the 2001 Restricted Share Plan will vest as follows:

25% of the shares will vest on the first anniversary of the vesting commencement date; and

75% of the shares will vest proportionately each month over the 36 months following the first anniversary of the vesting commencement date.

As of June 28, 2002 there were 47,930 restricted preferred shares outstanding under the 2000 Restricted Share Plan and there were 2,291,112 restricted ordinary shares outstanding under both the 2000 and 2001

Restricted Share Plans. Accordingly, we have been recognizing, and will continue to recognize, compensation expense of approximately $28 million proportionately over the respective vesting periods based on the estimated fair value of these shares on the date of issuance. Through June 28, 2002, we had recognized $17 million of this compensation expense.

Deferred Compensation Plan. In connection with the management rollover, and in addition to the grant of restricted ordinary and preferred shares of New SAC, members of the management group received approximately $179 million of interests in deferred compensation plans adopted by our wholly-owned subsidiaries. Each member of the management group received an interest in one of the plans, with the substantial majority of the members receiving interests in the Seagate Technology HDD Holdings plan. At inception, the interests in the deferred compensation plan were subject to multi-year vesting. On June 19, 2002, the board of directors accelerated vesting of all deferred compensation interests under the terms of the plan.

Under the credit agreement governing our new senior secured credit facilities and the indenture governing our 8% senior notes, the restrictions on Seagate Technology HDD Holdings’ ability to make payments under its deferred compensation plan were substantially reduced. As a result of these changes and the acceleration of vesting described above, it became probable that all of Seagate Technology HDD Holdings’ obligations under the deferred compensation plan will be paid. Accordingly, all of the remaining obligations under the deferred compensation plan, totaling $147 million, were accrued during the quarter ended June 28, 2002. Together with the $32 million payment that Seagate Technology HDD Holdings made to participants in the deferred compensation plan in May 2002, Seagate Technology Holdings’ total deferred compensation expense in the quarter ended June 28, 2002 was $179 million before related tax benefits.

Seagate Technology Holdings Share Option Plan

In December 2000, the board of directors of Seagate Technology Holdings adopted the Seagate Technology Holdings 2001 Share Option Plan. Under the terms of this share option plan, eligible employees, directors and consultants can be awarded options to purchase common shares of Seagate Technology Holdings under vesting terms to be determined at the date of grant. In January 2002, this share option plan was amended to increase the maximum number of common shares issuable under the share option plan from 72 million to 100 million shares. No options to purchase Seagate Technology Holdings common shares had been issued through June 29, 2001. During the fiscal year ended June 28, 2002, however, options to purchase approximately 74 million Seagate Technology Holdings common shares, net of cancellations, representing approximately 16% of the total voting power of Seagate Technology Holdings, assuming the exercise of all options, were granted to employees under this share option plan. As of June 28, 2002, options to purchase 2,320,127 common shares had been exercised.

Allocation of Net Purchase Price

New SAC accounted for the November 2000 transactions as a purchase in accordance with Accounting Principles Board, or APB, Opinion No. 16, “Business Combinations.” All acquired tangible assets, identifiable intangible assets and assumed liabilities were valued based on their relative fair values and reorganized into the following businesses:

the rigid disc drive and storage area networks business, which is now Seagate Technology Holdings;

the tape drive business, which is now Seagate Removable Storage Solutions Holdings, or SRSS;

the software business, or Crystal Decisions; and

an investment holding company, Seagate Technology Investments Holdings, or STIH.

SRSS, Crystal Decisions and STIH are direct or indirect subsidiaries of New SAC and are not owned by Seagate Technology Holdings. The fair value of the net assets acquired by New SAC exceeded the net purchase price of $1.840 billion by approximately $909 million. Accordingly, the resultant negative goodwill was

allocated on a pro rata basis to the acquired long-lived assets and reduced the recorded amounts by approximately 46%.

The table below summarizes the allocation of net purchase price by New SAC (dollars in millions).

Description	Useful Life in Years	Total New SAC			STH			SRSS			Crystal Decisions			STIH
Net current assets(1)		$	939		$	869		$	36		$	9		$	25
Long-term investments(2)			42			—			—			—			42
Other long-lived assets			42			42			—			—			—
Property, plant and equipment(3)	Up to 30		778			763			10			5			—
Identified intangibles:
Trade names(4)	10		47			47			—			—			—
Developed technologies(4)	3-7		76			49			12			15			—
Assembled workforces(4)	1-3		53			43			3			7			—
Other	5		1			1			—			—			—

Total identified intangibles			177			140			15			22			—
Long-term deferred taxes(5)			(75	)		(63	)		(10	)		(2	)		—
Long-term liabilities			(122	)		(119	)		(3	)		—			—

Net assets			1,781			1,632			48			34			67
In-process research and development(4)			59			52			—			7			—

Net Purchase Price		$	1,840		$	1,684		$	48		$	41		$	67

(1)

Acquired current assets included cash and cash equivalents, accounts receivable, inventories and other current assets. The fair values of current assets generally approximated the recorded historic book values. Short-term investments were valued based on quoted market prices. Inventory values were estimated based on the current market value of the inventories less completion costs and less a profit margin for activities remaining to be completed until the inventory is sold. Valuation allowances were established for current deferred tax assets in excess of long-term deferred tax liabilities. Assumed current liabilities included accounts payable, accrued compensation and expenses and accrued income taxes. The fair values of current liabilities generally approximated the historic recorded book values because of the monetary nature of most of the liabilities.

(2)

The value of individual long-term equity investments was based upon quoted market prices, where available, and where market prices were not available, was based on New SAC’s estimates of the fair values of the individual investments.

(3)

New SAC estimated the fair value of the acquired property, plant and equipment. In arriving at the determination of market value for these assets, New SAC considered the estimated cost to construct or acquire comparable property. Machinery and equipment were assessed using replacement cost estimates reduced by depreciation factors representing the condition, functionality and operability of the assets. The sales comparison approach was used for office and data communication equipment. Land, land improvements, buildings and building and leasehold improvements were valued based upon discussions with knowledgeable independent personnel.

(4)

New SAC estimated the value of acquired identified intangibles. The significant assumptions relating to each category are discussed in the following paragraphs. Also, these assets are being amortized on the straight-line basis over their estimated useful life and resultant amortization is included in amortization of goodwill and other intangibles.

Trade names. The value of the trade names was based upon discounting to their net present value the licensing income that would arise by charging the operating businesses that use the trade names.

Developed technologies. The value of this asset for each operating business was determined by discounting to their net present value the expected future cash flows attributable to all existing technologies that had reached technological feasibility, after considering risks relating to: (a) the characteristics and applications of the technology, (b) existing and future markets and (c) life cycles of the technologies. Estimates of future revenues and expenses used to determine the value of developed technology were consistent with the historical trends in the industry and expected performance.

Assembled workforces. The value of the assembled work force was determined by estimating the recruiting, hiring and training costs to replace each group of existing employees.

In-process research and development. The value of in-process research and development was based on an evaluation of all developmental projects using the guidance set forth in Interpretation No. 4 of Financial Accounting Standards Board, or FASB, Statement No. 2, “Accounting for Research and Development Costs” and FASB Statement No. 86, “Accounting for the Cost of Computer Software to Be Sold, Leased, or Otherwise Marketed.”

The amount was determined by: (a) obtaining management estimates of future revenues and operating profits associated with existing developmental projects, (b) projecting the cash flows and costs to completion of the underlying technologies and resultant products and (c) discounting these cash flows to their net present value.

Estimates of future revenues and expenses used to determine the value of in-process research and development were consistent with the historical trends in the industry and expected performance. The entire amount was charged to operations because related technologies had not reached technological feasibility and they had no alternative future use.

(5)

Long-term deferred tax liabilities arose as a result of the excess of the fair values of inventory and acquired intangible assets over their related tax basis. Seagate Technology Holdings had $434 million of U.S. federal and state deferred tax assets for which a full valuation allowance was established.

Allocation of Purchase Price to Seagate Technology Holdings Pursuant to the Application of Push Down Accounting

The November 2000 transactions constituted a purchase transaction by New SAC of substantially all the operating assets and liabilities of Seagate Delaware. Under purchase accounting rules, the net purchase price has been allocated to the acquired assets and liabilities of Seagate Delaware and its subsidiaries based on their estimated fair values at the date of the November 2000 transactions. New SAC estimated the fair values, including in-process research and development. However, the estimated fair values of identifiable tangible and intangible assets and liabilities acquired from Seagate Delaware and its subsidiaries were greater than the amount paid, resulting in negative goodwill. The negative goodwill was allocated to the long-lived tangible and intangible assets as well as in-process research and development. This includes amounts relating to Seagate Technology Holdings, on the basis of relative fair values. Subsequently, in the fourth quarter of fiscal year 2002, in accordance with SFAS 109, we reduced the net carrying value of the long-lived intangibles from $104 million to zero to reflect the recognition of tax benefits. See Note 5 of the audited consolidated and combined financial statements of Seagate Technology Holdings and its Predecessor.

In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 54, “Push Down Basis of Accounting Required in Certain Limited Circumstances,” the accounting for the purchase transaction has been “pushed down” from New SAC to Seagate Technology Holdings’ financial statements. Seagate Technology Holdings’ condensed consolidated financial statements as of and for all periods subsequent to November 23, 2000 reflect the new basis in its assets and liabilities at that date, including the pushed down purchase accounting adjustments.

As a result of the November 2000 transactions and the push down accounting, Seagate Technology Holdings’ results of operations following the November 2000 transactions, particularly the depreciation and

amortization charges, are not necessarily comparable to its predecessors’ results of operations prior to the November 2000 transactions. Depreciation charges following the November 2000 transactions are lower as a result of write-downs of Seagate Technology Holdings’ depreciable assets pursuant to purchase accounting rules. The favorable effect on results of operations from these lower charges will gradually decrease in future periods as Seagate Technology Holdings’ older assets become fully depreciated and new, higher-priced assets are acquired.

Current Trends Affecting Our Results of Operations

Industry Dynamics. Our industry is characterized by several trends that have a material impact on our strategic planning, financial condition and results of operations. One key trend has been the decline in spending on information technology by enterprises and consumers as a result of the weakened global economy. The slowdown in enterprise expenditures is also a result of the extensive investments that many enterprises had already made in recent years before the global economic slowdown. Currently, demand for rigid disc drives in the enterprise sector is being adversely impacted as a result of the weakened economy and because enterprises have shifted their focus from making new equipment purchases to more efficiently using their existing information technology infrastructure through, among other things, adopting new storage architectures.

Simultaneously with this economic weakness, there has been continued consolidation and attrition among our competitors. For instance, in 2001 Maxtor merged with Quantum's rigid disc drive operations and IBM recently announced it has agreed to merge its rigid disc drive business with that of Hitachi. Also in 2001, Fujitsu ceased manufacturing rigid disc drives for the personal storage market. This consolidation among our competitors has contributed to shifts in market share as newly combined companies focus on integrating their operations and OEMs maintain diversity by shifting their purchasing allocations to new suppliers. Also, as manufacturers merge or exit the rigid disc drive industry, they frequently liquidate their excess inventory leading to competitive pressure which has resulted in even lower selling prices.

Consolidation is also occurring among our customers. For example, Compaq, our largest customer in 2001, recently merged with Hewlett-Packard. As a result of this trend, our customer base is increasingly concentrated among fewer OEMs, providing them with increased pricing leverage. In the event that our sales to a combined entity are less than, or are on terms that are less favorable than, our sales to these customers when they were separate entities, our results of operations would suffer.

Our industry is also characterized by continuous and significant advances in technology. This contributes to:

rapid product life cycles that can be as short as six months;

increased importance of being first to market with new products in volume production;

difficulty in recovering research and development expenses; and

price erosion, particularly as new products that use fewer components become available.

Seagate Dynamics. During the past several years we have restructured our operations to reduce our costs and improve our manufacturing efficiency and flexibility. Since 1998, we and our predecessor have implemented restructuring plans that have resulted in total net charges of approximately $354 million, the closing of 14 facilities and a reduction in headcount of approximately 38,000 employees. Through our Factory of the Future initiative, we have increased the use of automation in our manufacturing operations. We believe that these changes in our operations have added to our manufacturing flexibility allowing us to improve our responsiveness to customers and take advantage of unforecasted sales opportunities to deliver products on short notice. Additionally, we have substantially improved our gross margin due to these ongoing cost savings from our restructuring activities and our programs to implement operating efficiencies. We have further benefited from reductions in depreciation expense resulting from write-downs to the fair market value of our depreciable assets in connection with the November 2000 transactions. The favorable effects on results of operations from these

lower depreciation charges in connection with the write-down will gradually decrease in future periods as our older assets become fully depreciated and new, higher-priced assets are acquired. We believe our reduced cost structure and improved manufacturing efficiency provides us with greater flexibility to address changing market conditions.

We maintain a highly integrated approach to our business by designing and manufacturing components we view as critical to our products, such as read/write heads and recording media. We believe that our control of these key technologies, combined with our innovations in manufacturing, enable us to achieve product performance and time-to-market advantages. However, this approach requires us to make significant capital expenditures and investments in research and development. Although we believe that we derive an important competitive advantage as a result of this strategy, it results in higher fixed costs, which may adversely affect our financial performance in periods of declining demand. This approach also increases the importance of realizing and maintaining substantial market share in the markets in which we compete, allowing us to spread our technology investments across a high unit volume of products.

Our recent financial results reflect significant growth in our market share with a number of our customers. We believe these market share gains are largely driven by our technology leadership, as evidenced by our product innovation and time-to-market leadership. This leadership position has enabled us to leverage our investments in research and development across a broad range of technologically advanced high performance enterprise and personal storage products, which generally have higher margins than our older generation products. If our competitors introduce technologically advanced products to our customers, we could lose market share and suffer declines in revenues, margins and overall financial performance. A portion of our recent growth in market share is also the result of both consolidation in our industry, as well as certain rigid disc drive manufacturers exiting the market. Our ability to grow our market share or maintain our current share may be negatively affected by our customers’ preference to diversify their sources of supply or if they decide to meet their requirements by manufacturing rigid disc drives themselves, particularly with respect to enterprise products.

Operating Results During Fiscal Year 2003. Our recent operating results have been favorably impacted by market share gains within the rigid disc drive industry. Our ability to sustain or grow operating results during fiscal year 2003 may be unfavorably impacted by softer demand following the winter holiday season due to reduced consumer spending and during the summer months due to normal seasonal patterns as well as the potential for our customers to diversify their sources of supply, particularly with respect to enterprise storage products as observed in the quarter ended September 27, 2002.

Compensation Expense. Through September 27, 2002, all options granted to employees for the purchase of common shares have been granted with exercise prices equal to the fair value of our common shares on the date of the grant. As a result, we have not recorded compensation to date in connection with option grants to employees. However, if market conditions permit us to proceed with our proposed initial public offering, we may record and begin to amortize deferred compensation for options granted after September 27, 2002 and before the consummation of the proposed offering. Any compensation expense will be determined based on the difference between the estimated mid-point in the range of the proposed offering price for the common shares and the exercise price of the option on the date of the grant. The deferred compensation charge will be amortized over a 48-month vesting period.

Disposition of Assets

Sale of XIOtech Corporation. On November 4, 2002, we sold XIOtech to New SAC. New SAC in turn sold 51% of XIOtech to a third party in a transaction in which XIOtech also sold newly issued shares to this third party. As a result, New SAC has retained an interest of less than 20% of XIOtech.

sale, net of intercompany indebtedness. Immediately after the sale of XIOtech to New SAC, we made an in-kind pro rata distribution of the entire promissory note to our existing shareholders, including New SAC, which currently owns approximately 99.4% of our outstanding shares. That portion of the promissory note distributed back to New SAC was cancelled, and New SAC immediately paid off the remaining 0.6% of the promissory note held by our minority shareholders. As a result of our sale of XIOtech, we will no longer consolidate XIOtech’s operations with our operations. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”

Repair and Warranty Services Agreement. On October 28, 2002, we closed the sale of our product repair and servicing facility in Reynosa, Mexico and certain related equipment and inventory to a wholly owned subsidiary of Jabil Circuit, Inc. Jabil has agreed to offer continued employment to 1,800 workers and members of management in Reynosa. Jabil will also be the primary source provider of warranty repair services for a multi-year period at costs defined in a long-term services agreement. During the term of this services agreement, we will be dependent upon Jabil to effectively manage warranty repair related costs and activities. The arrangement with Jabil is comprised of various elements, including the sale of the facility, equipment and inventory, our obligations under the services agreement, and potential reimbursements by us to Jabil. Because the fair values of each of these elements have not been separately established, and because we will repurchase the inventory sold to Jabil, the excess of the sale prices assigned to the various elements of the arrangements with Jabil over their respective carrying values will be offset against cost of revenue as a reduction to warranty expense over the period of the long-term services agreement.

Results of Operations

We list in the tables below the historical consolidated and combined statements of operations in dollars and as a percentage of revenue for the periods indicated.

	Predecessor						Seagate Technology Holdings
	Fiscal Year Ended June 30, 2000			July 1, 2000 to Nov. 22, 2000			Nov. 23, 2000 to June 29, 2001			Fiscal Year Ended June 28, 2002
				(in millions)
Revenue	$	6,073		$	2,310		$	3,656		$	6,087
Cost of revenue		4,822			2,035			2,924			4,494

Gross margin		1,251			275			732			1,593

Product development		664			409			388			698
Marketing and administrative		464			450			288			498
Amortization of intangibles		33			20			12			19
In-process research and development		105			—			52			—
Restructuring		206			19			66			4
Unusual items		64			—			—			—

Income (loss) from operations		(285	)		(623	)		(74	)		374
Other income (expense), net		926			5			(27	)		(135	)

Income (loss) before income taxes		641			(618	)		(101	)		239
Provision for (benefit from) income taxes		275			(206	)		9			86

Net income (loss)	$	366		$	(412	)	$	(110	)	$	153


	Predecessor						Seagate Technology Holdings
	Fiscal Year Ended June 30, 2000			July 1, 2000 to Nov. 22, 2000			Nov. 23, 2000 to June 29, 2001			Fiscal Year Ended June 28, 2002
Revenue		100	%		100	%		100	%		100	%
Cost of revenue		79			88			80			74

Gross margin		21			12			20			26

Product development		11			18			11			12
Marketing and administrative		8			19			8			8
Amortization of intangibles		1			1			—			—
In-process research and development		2			—			1			—
Restructuring		3			1			2			—
Unusual items		1			—			—			—

Income (loss) from operations		(5	)		(27	)		(2	)		6
Other income (expense), net		15			—			(1	)		(2	)

Income (loss) before income taxes		10			(27	)		(3	)		4
Provision for (benefit from) income taxes		4			(9	)		—			1

Net income (loss)		6	%		(18	)%		(3	)%		3	%

Charges recorded in the historical financial statements of us and our predecessor, including charges related to the November 2000 transactions, have been significant and impact the comparability of the results of operations of us and our predecessor for the periods presented and will impact the comparability of results for future periods. For a description of these charges, see “Selected Historical Consolidated Financial Information” and the notes thereto.

In the discussions of “Fiscal Year 2002 Results of Operations,” “Fiscal Year 2001 Results of Operations” and “Fiscal Year 2000 Results of Operations” set forth below, we refer to the revenue and cost of revenue data for fiscal year 2001 as “pro forma” for comparative purposes. The pro forma revenue and cost of revenue data give effect to the November 2000 transactions as if they had occurred on July 1, 2000. Pro forma revenue for fiscal year 2001 is the sum of the historical revenue of our predecessor for the period from July 1, 2000 through November 22, 2000 and our historical revenue for the period from November 23, 2000 through June 29, 2001. Pro forma cost of revenue for fiscal year 2001 is the sum of the historical cost of revenue of our predecessor for the period from July 1, 2000 through November 22, 2000 and our historical cost of revenue for the period from November 23, 2000 through June 29, 2001, as adjusted for:

the elimination of the $265 million compensation charge recorded as a result of the acceleration and net exercise of Seagate Delaware stock options held by employees of Seagate Technology Holdings at November 22, 2000;

the reduction of depreciation expense by $107 million due to new, lower accounting basis in property, equipment and leasehold improvements; and

the elimination of the adverse impact of $131 million related to the sale of higher cost inventories that were written up to fair value at the close of the November 2000 transactions.

Fiscal Year 2002 Results of Operations

Revenue. Revenue in fiscal year 2002 was $6.087 billion, up 2% from $5.966 billion in pro forma fiscal year 2001. The increase in revenue was primarily due to improved unit sales volume and product mix that was substantially offset by price erosion. Our unit shipments increased from 43 million units in pro forma fiscal year 2001 to 55 million units in fiscal year 2002. This increase was primarily caused by market share gains driven by increased unit shipments of personal storage and enterprise storage rigid disc drive products to OEMs and continued growth in the rigid disc drive market for consumer electronics such as Microsoft’s Xbox. We attribute these gains in market share primarily to the market acceptance of our 40 gigabyte personal storage disc drives and our 73 gigabyte enterprise storage disc drive, each of which achieved volume production in the beginning of fiscal year 2002. In addition, we gained a higher share of some of our OEM customers’ rigid disc drive purchases due to favorable execution versus our competitors and due to industry consolidation. Our strategy to implement operational efficiencies has increased our manufacturing flexibility and in fiscal year 2002 this enabled us to take advantage of unforecasted customer demand and deliver products on short notice.

Our overall average unit sales price for our rigid disc drive products was $118, $109, $111 and $100 for the first, second, third and fourth quarters of fiscal year 2002, respectively. Average price erosion from pro forma fiscal year 2001 to fiscal year 2002 was approximately 20%. Price erosion during the period was driven primarily by the introduction of new, higher storage capacity products. Due to the achievement of higher areal densities, these new products require fewer discs and read/write heads and therefore cost less to produce. Since they cost less to produce, these products can be priced lower than would otherwise be possible and, as a result, drive down prices of older generation products. Competition also contributed to price erosion during this period. The pricing environment during the fourth quarter of fiscal year 2002 was extremely aggressive; a condition that was exacerbated by competitors exiting the industry and liquidating their excess inventory. Price competition in our industry has historically been intense even during periods when demand for rigid disc drives is stable, and we expect intense price competition to continue for the foreseeable future. To remain competitive, it will be necessary for us to continue to reduce our prices. We expect a continuation of the aggressive pricing environment as industry participants respond to current economic conditions, a decline in global information technology spending and more efficient utilization of enterprise-wide storage capacity by end-users of storage products.

During fiscal year 2002, we continued to maintain various sales programs aimed at increasing customer demand. We exercise a considerable degree of judgment in formulating the underlying estimates related to distributor inventory levels, sales program participation and customer claims submittals in determining the

provision for such programs. During fiscal year 2002, the total provision for sales programs recorded as contra- revenue was approximately 4% of total revenue, compared to 3% of total revenue over each of the two previous fiscal years. The increase in sales program expenses during fiscal year 2002 was due primarily to the higher cost of price protection programs, which are based on estimates of distributor inventory levels and current and future price erosion rates. As price erosion rates in the rigid disc drive industry escalated during the fourth quarter of fiscal year 2002, the cost of price protection programs increased accordingly. Furthermore, in the third quarter of fiscal year 2002, our North American distribution customers transitioned from a consignment model, where the inventory is owned by us until it is sold by the distributor, to a sell-in model, where the inventory is owned by the distributor. During fiscal year 2002, this transition resulted in a one-time increase in total revenue, operating income and net income of approximately 1%, 3% and 7%, respectively. In the third quarter of fiscal year 2002, this transition resulted in a one-time increase in total revenue, operating income and net income of approximately 4%, 9% and 9%, respectively. Because our North American distributors have transitioned to the sell-in model, the cost of our price protection programs may trend higher in future periods. Historically, actual sales program costs have approximated the estimated cost of such programs recognized in our financial statements. Variances between actual and estimated costs of sales programs during each of the last three fiscal years have not been material due to our ongoing reviews of actual program expenses to ensure that accruals are continuously adjusted to approximate the actual costs of sales programs. Should actual sales program costs in any period differ significantly from estimated sales program costs either as a result of higher than expected rates of price erosion or otherwise, our future results of operations could be materially affected.

Cost of Revenue. Cost of revenue for fiscal year 2002 was $4.494 billion, up 1% from $4.457 billion for pro forma fiscal year 2001. Gross margin as a percentage of revenue for fiscal year 2002 was 26% as compared with 25% for pro forma fiscal year 2001. As discussed in the paragraph above, we experienced significant price erosion during the period. This price erosion exerted substantial downward pressure on our gross margins. However, this downward pressure was more than offset by improved absorption of fixed costs from increased unit sales volume and a shift in mix to higher storage capacity products. It was also offset by ongoing cost savings as a result of our restructuring activities and our program to implement operational efficiencies. Our restructuring activities during these periods were comprised of workforce reductions, capacity reductions, including closure of facilities or portions of facilities, and the write-off of excess equipment, primarily in our Far East operations in Malaysia and Thailand. Our cost structure decreased as a result of reductions in our total number of manufacturing facilities and headcount. Pursuant to our strategy to implement operational efficiencies, we have increased the degree of automation in our manufacturing operations, closed facilities, reduced headcount and reconfigured our production lines to handle multiple products.

We exercise a considerable degree of judgment in formulating the underlying estimates used for product failure rates and trends, estimated repair costs and return rates. Actual warranty costs during fiscal year 2002 represented approximately 1% of total revenue. Warranty costs have trended down over the last few years even though shipment volumes have increased. These reductions are due to reduced warranty periods, better product quality and more efficient repair operations. Historically, actual warranty costs have approximated the estimated warranty costs recognized in our financial statements. Variances between actual and estimated warranty costs have not been material due to our ongoing reviews of return rates and repair costs to ensure that accruals are continuously adjusted to approximate actual warranty costs. Should actual warranty costs in any period differ significantly from estimated warranty costs, our future results of operations could be materially affected.

Operating Expenses. Under the credit agreement governing our new senior secured credit facilities and the indenture governing our 8% senior notes, the restrictions on our ability to make payments under our deferred compensation plan were substantially reduced. In addition, on June 19, 2002, our board of directors accelerated vesting of all deferred compensation plan interests under the terms of the plan. As a result, it became probable that all of our obligations under the deferred compensation plan will be paid. Accordingly, all of the remaining obligations under the deferred compensation plan, totaling $147 million, were accrued during the fourth quarter of fiscal year 2002. Together with the $32 million payment we made to participants in the deferred compensation plan in May 2002, our total deferred compensation expense recorded in the fourth quarter of fiscal year 2002 was

$179 million before related tax benefits. The income statement classification of the $179 million charge was as follows: Cost of revenue—$38 million; Product development expenses—$29 million; Marketing and administrative expenses—$112 million.

In fiscal year 2002, product development expenses were reduced by our restructuring activities, which resulted in a savings of $24 million in pre-production expenses, and by the consolidation of our rigid disc drive design centers, which resulted in a savings of $17 million. As discussed above, product development expenses and marketing and administrative expenses included deferred compensation expenses of $29 million and $112 million, respectively.

Non-Operating Expenses. Net other expense includes $93 million of charges incurred as a result of our debt refinancing in the fourth quarter of fiscal year 2002. Interest income was lower in fiscal year 2002 as a result of lower average invested cash following the November 2000 transactions.

Income Taxes. We recorded a provision for income taxes of $86 million for the fiscal year ended June 28, 2002. Our provision for income taxes differs from the provision for income taxes that would be derived by applying a notional 35% tax rate to income before income taxes primarily due to (i) the net effect of the tax benefit related to income generated from our manufacturing plants located in China, Malaysia, Singapore and Thailand that operate under tax holidays (scheduled to expire in whole or in part at various dates through 2010) and (ii) an increase in our valuation allowance for U.S. deferred tax assets.

As of June 28, 2002, we have recorded net deferred tax assets of $58 million, the realization of which is dependent on our ability to generate sufficient U.S. taxable income in fiscal year 2003. Although realization is not assured, management believes that it is more likely than not that these deferred tax assets will be realized. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future U.S. domestic taxable income are reduced. We will review our forecasts of U.S. taxable income in each quarter of fiscal year 2003 to evaluate and record adjustments to our valuation allowance if required.

During the fiscal year ended June 28, 2002, we reduced our valuation allowance for deferred tax assets arising as a result of the November 2000 transactions to reflect the realization of acquired tax benefits in our U.S. income tax returns. The acquired tax benefits realized in our U.S. income tax returns exceeded the $104 million net carrying value of our long-lived intangible assets recorded in connection with the purchase of the operating assets of Seagate Delaware. In accordance with SFAS 109, we reduced our long-lived intangible assets acquired in the November 2000 transactions to zero. As a result of the adjustment to the long-lived intangible assets, we will have no future depreciation and amortization expense related to intangible assets acquired in the November 2000 transactions.

On July 31, 2001, Seagate Delaware and the Internal Revenue Service filed a settlement stipulation with the United States Tax Court in complete settlement of the remaining disputed tax matters reflected in the statutory notice of deficiency dated June 12, 1998. The settlement stipulation is expressly contingent upon Seagate Delaware and the Internal Revenue Service entering into a closing agreement in connection with certain tax matters arising in all or some part of the open tax years of Seagate Delaware and New SAC. The settlement is now before the Joint Committee on Taxation for review. The filing of the settlement stipulation and the anticipated execution of the closing agreement will not result in an additional provision for income taxes.

Certain of our U.S. federal and state tax returns and foreign tax returns for various fiscal years are under examination by taxing authorities. We believe that adequate amounts of tax have been provided for any final assessments that may result from these examinations.

As a result of the November 2000 transactions and the ensuing corporate structure, we now consist of a foreign parent holding company with various U.S. domestic and foreign affiliates. Seagate Technology Holdings

does not expect to be subject to U.S. federal income taxes on dividends or other earnings distributions that it may receive from foreign subsidiaries. Dividend distributions by U.S. subsidiaries to Seagate Technology HDD Holdings may be subject to U.S. withholding taxes, if and when distributed. A substantial portion of our manufacturing operations located in the Far East currently operate free from tax under various tax holidays, which are scheduled to expire in whole or in part at various dates through 2010. Because of our foreign ownership structure and subject to potential future increases in our valuation allowance for U.S. deferred tax assets, we anticipate that our effective tax rate in future periods will generally be less than the U.S. federal statutory rate.

Fiscal Year 2001 Results of Operations

As a result of the closing of the November 2000 transactions, we initiated our operations on November 23, 2000. All results of operations prior to this date included in this registration statement are the results of operations of our predecessor, the rigid disc drive and storage area networks business of Seagate Delaware. The following discussion describes the results of operations of our predecessor for the period from July 1, 2000 through November 22, 2000 and our results of operations for the period from November 23, 2000 through June 29, 2001.

Period from July 1, 2000 to November 22, 2000 . During this period our predecessor’s ability to satisfy customer demand was constrained by a limited supply of certain electrical components from some of its external suppliers. This resulted in lower than expected revenues during this period and the shifting of unit shipments that were expected during this period into the subsequent period. As a result of the acceleration of stock options in connection with the November 2000 transactions, compensation charges were allocated to cost of revenue, product development expenses, and marketing and administrative expenses in the amounts of $265 million, $116 million and $185 million, respectively. Additionally, our predecessor incurred $77 million of marketing and administrative expenses related to administrative costs in connection with the November 2000 transactions. During this period, our predecessor recorded restructuring charges of $19 million to continue the alignment of its global workforce and manufacturing capacity with existing and anticipated future market requirements and net losses of $32 million relative to certain of its investments in equity securities.

Seagate Delaware recorded a benefit from income taxes of $206 million in this period. The recorded benefit from income taxes differs from the benefit from income taxes that would be derived by applying the U.S. federal statutory rate to the loss before income taxes primarily due to losses recorded in connection with the sale by Seagate Delaware of its operating assets located in the Far East that were not deductible for U.S. tax purposes and the write-off of deferred tax assets that could not be recognized in the U.S. federal and state tax returns of our predecessor for the taxable period ended November 22, 2000.

As of November 22, 2000, our predecessor’s foreign manufacturing subsidiaries had approximately $3.050 billion of undistributed foreign earnings of which approximately $1.722 billion were considered permanently reinvested offshore. In connection with the sale of the operating assets of Seagate Delaware, approximately $1.650 billion of the unremitted foreign earnings were deemed to be distributed for U.S. tax purposes to the U.S. parent. Seagate Delaware had previously recorded deferred income tax liabilities of approximately $542 million for its foreign earnings not considered permanently reinvested offshore. The deferred tax liabilities were eliminated because the remaining unremitted earnings of our predecessor’s foreign subsidiaries will not be subject to U.S. corporate level tax if remitted to us.

Period from November 23, 2000 to June 29, 2001 . During this period, and particularly in the quarter ended June 29, 2001, our revenue was negatively affected by an overall decline in demand for storage products due to reductions in global information technology spending partially offset by the abatement of supply constraints with respect to certain electrical components. Our gross margins were positively impacted by lower charges to cost of revenue for depreciation of approximately $140 million resulting from write-downs to fair value of our depreciable assets in connection with the November 2000 transactions. Our gross margins were negatively

impacted as a result of a $131 million write-up of inventories to fair value pursuant to purchase accounting rules and the subsequent sale of that inventory during the period. At the time of the closing of the November 2000 transactions, we incurred marketing and administrative expenses of $40 million as a result of management and advisory fees paid to selected members of our sponsor group and we recorded a $52 million charge to operations for in-process research and development. We recorded additional restructuring charges of $66 million to continue the alignment of our global workforce and manufacturing capacity with existing and anticipated future market requirements. In connection with the November 2000 transactions, our cash balances declined resulting in a lower level of interest income in this period and our predecessor repaid its long-term debt and we incurred new debt at higher interest rates resulting in a subsequently higher level of interest expense.

We recorded a $9 million provision for income taxes for the period from November 23, 2000 to June 29, 2001. The $9 million provision for income taxes differs from the benefit from income taxes that would be derived by applying a notional 35% tax rate to the loss before income taxes primarily due to the net effect of non-deductible charges related to the acquisition of the operating assets of Seagate Delaware, an increase in our allowance for U.S. deferred tax assets of certain subsidiaries, and income generated from our manufacturing plants located in China, Malaysia, Singapore and Thailand that operate under tax holidays (scheduled to expire in whole or in part at various dates through 2010).

Fiscal Year 2000 Results of Operations

Revenue . Revenue in fiscal year 2000 was $6.073 billion, 2% higher than $5.966 billion in pro forma fiscal year 2001. The decline in revenue from fiscal year 2000 to pro forma fiscal year 2001 was primarily due to price erosion, which was partially offset by higher unit sales volumes particularly in the first and second quarters of pro forma fiscal year 2001. Unit shipments increased from 41 million units in fiscal year 2000 to 43 million units in pro forma fiscal year 2001. This was lower than historical unit growth rates and was due to the declining demand for information technology products in both the personal storage and enterprise sectors of the market. Revenue and the number of units sold declined 15% and 16%, respectively, in the fourth quarter of pro forma fiscal year 2001 as compared with the third quarter of pro forma fiscal year 2001. Overall average unit sales price on rigid disc drive products was $140, $149, $127, and $125 for the four quarters of pro forma fiscal year 2001, respectively. Average price erosion from fiscal year 2000 to pro forma fiscal year 2001 was approximately 8%, which is less than previously experienced in our business, due to industry-wide component supply constraints during the first half of the fiscal year and the successful transitioning of customers to higher priced 15,000 revolutions per minute enterprise disc drives.

Cost of Revenue. Cost of revenue for fiscal year 2000 was $4.822 billion, 8% higher than $4.457 billion for pro forma fiscal year 2001. Gross margin as a percentage of revenue for fiscal year 2000 was 21%, compared with 25% for pro forma fiscal year 2001. The increase in gross margin as a percentage of revenue from fiscal year 2000 to pro forma fiscal year 2001 was primarily due to lower depreciation charges in cost of revenue in pro forma fiscal year 2001 as a result of write-downs to fair value of our depreciable assets in connection with the November 2000 transactions, as well as our ongoing cost savings as a result of our restructuring activities and our program to implement operational efficiencies. Our and our predecessor’s restructuring activities during these periods were comprised of workforce reductions, capacity reductions, including closures of facilities or portions of facilities, and the write-off of excess equipment, primarily in our Far East operations in Malaysia and Thailand.

Operating Expenses. During fiscal year 2000, our predecessor relocated certain of our manufacturing operations, which had historically shared costs with design centers in the same location, to offshore locations. As part of this relocation, employees and assets that previously had been associated with manufacturing engineering were redeployed to design engineering to help drive faster product launches. This contributed to product development expense increases with respect to salaries and related costs and depreciation expense during fiscal year 2000. Marketing and administrative expenses for fiscal year 2000 included a $40 million compensation charge related to the Seagate Software Holdings, Inc. reorganization. Amortization of goodwill and other intangibles increased in fiscal year 2000 due to additional amortization related to goodwill and intangibles arising from the acquisition of XIOtech Corporation in January 2000.

In fiscal year 2000, our predecessor recorded total restructuring charges of $216 million, offset by $2 million of reversals of amounts recorded in the same period, $5 million of restructuring accruals recorded in fiscal year 1999 and $3 million of restructuring accruals recorded in fiscal year 1998, resulting in a net restructuring charge of $206 million. The $206 million restructuring charge was a result of a restructuring plan established to align the global workforce and manufacturing capacity with existing and anticipated future market requirements and was necessitated by improved productivity and operating efficiencies. We refer to this plan as the fiscal year 2000 restructuring plan. These actions included:

workforce reductions;

capacity reductions, including closure of facilities or portions of facilities;

write-off of excess equipment; and

consolidation of operations in recording media operations, disc drive assembly and test facilities, printed circuit board assembly manufacturing facilities, recording head operations, customer service operations, sales and marketing activities and research and development activities.

In connection with the fiscal year 2000 restructuring plan, our predecessor planned to reduce our workforce by approximately 23,000 employees primarily in manufacturing. All of these employees had been terminated as of March 29, 2002. As a result of employee terminations and the write-off of equipment and facilities in connection with the restructuring charges recorded during fiscal year 2000 related to the fiscal year 2000 restructuring plan, we estimate that after the completion of these restructuring activities, annual salary and depreciation expense have been reduced by approximately $151 million and $48 million, respectively. The implementation of the fiscal year 2000 restructuring plan was substantially complete as of December 29, 2000. Unusual items in fiscal year 2000 consisted of a $64 million charge related to various legal settlements.

Non-Operating Expenses. Net other income in fiscal year 2000 included a gain on the sale of portions of our predecessor’s investment in SanDisk of $679 million as well as gains totaling $199 million on the exchange of their investments in the equity securities of Dragon Systems, Inc. for those of LHSP, on the exchange of their investments in the equity securities of CVC for those of Veeco Instruments and on the exchange of their investments in the equity securities of iCompression for those of Globespan.

Income Taxes . Our predecessor recorded a provision for income taxes of $275 million for fiscal year 2000 and its effective tax rate was 43%. The effective tax rate used to record the provision for income taxes for fiscal year 2000 differed from the U.S. federal statutory rate primarily due to in-process research and development expenses that were not deductible for tax purposes, partially offset by the benefit related to research and development tax credits.

Our predecessor provided for income taxes at the U.S. federal statutory rate of 35% on substantially all of our current year foreign earnings for fiscal year 2000. A substantial portion of our Far East manufacturing operations at plant locations in China, Malaysia, Singapore and Thailand operate under various tax holidays, which expire in whole or in part at various dates through 2010. The tax holidays had no impact on net income in fiscal year 2000. Cumulative undistributed earnings of our Far East subsidiaries for which no income taxes were provided aggregated approximately $1.631 billion at June 30, 2000. These earnings were considered to be permanently invested in non-U.S. operations. Additional U.S. federal and state taxes of approximately $584 million would have had to have been provided if these earnings had been repatriated to the United States in fiscal year 2000.

Quarterly Financial Results

The following tables present the unaudited quarterly results of operations for us and for our predecessor in dollars and as a percentage of revenue for the periods indicated through the quarter ended June 28, 2002. The information for each of these periods is unaudited and has been prepared on the same basis as the audited consolidated and combined financial statements of us and our predecessor included elsewhere in this registration statement. In the opinion of management, all necessary adjustments, which consist only of normal and recurring adjustments, have been included to present fairly the unaudited quarterly results. This data should be read in conjunction with the consolidated and combined financial statements and the notes thereto included elsewhere in this registration statement. These operating results are not indicative of the expected results of any future period.

	Predecessor					Seagate Technology Holdings
	Quarter Ended Sep. 29, 2000		Sep. 30, 2000 to Nov. 22, 2000			Nov. 23, 2000 to Dec. 29, 2000			Quarter Ended
	Quarter Ended Sep. 29, 2000		Sep. 30, 2000 to Nov. 22, 2000			Nov. 23, 2000 to Dec. 29, 2000			Mar. 30, 2001			June 29, 2001			Sep. 28, 2001			Dec. 28, 2001			Mar. 29, 2002			June 28, 2002
									(in millions)
Revenue	$	1,677	$	633		$	974		$	1,468		$	1,214		$	1,294		$	1,629		$	1,691		$	1,473
Cost of revenue		1,298		737			862			1,102			961			996			1,192			1,180			1,125

Gross margin		379		(104	)		112			366			253			298			437			511			348

Product development		183		226			69			162			157			151			164			177			206
Marketing and administrative		121		329			94			122			72			96			109			97			196
Amortization of intangibles		12		8			4			3			5			5			5			5			5
In-process research and development (a)		—		—			52			—			—			—			—			—			—
Restructuring costs (b)		19		—			—			54			12			—			—			4			—

Income (loss) from operations (c)		44		(667	)		(107	)		25			7			46			159			228			(59	)
Other income (expense), net (d)		144		(139	)		(16	)		(8	)		(3	)		(6	)		(10	)		(14	)		(105	)

Income (loss) before income taxes		188		(806	)		(123	)		17			4			40			149			214			(164	)
Provision for (benefit from) income taxes		65		(271	)		20			(9	)		(3	)		6			25			21			34

Net income (loss)	$	123	$	(535	)	$	(143	)	$	26		$	7		$	34		$	124		$	193		$	(198	)

	Predecessor				Seagate Technology Holdings
	Quarter Ended Sep. 29, 2000		Sep. 30, 2000 to Nov. 22, 2000		Nov. 23, 2000 to Dec. 29, 2000		Quarter Ended
	Quarter Ended Sep. 29, 2000		Sep. 30, 2000 to Nov. 22, 2000		Nov. 23, 2000 to Dec. 29, 2000		Mar. 30, 2001		June 29, 2001		Sep. 28, 2001		Dec. 28, 2001		Mar. 29, 2002			June 28, 2002
Revenue	100	%	100	%	100	%	100	%	100	%	100	%	100	%		100	%	100	%
Cost of revenue	77		116		89		75		79		77		73			70		76

Gross margin	23		(16	)	11		25		21		23		27			30		24

Product development	11		36		7		11		13		12		10			10		14
Marketing and administrative	7		52		10		8		6		7		7			6		14
Amortization of intangibles	1		1		—		—		—		—		—			—		—
In-process research and development (a)	—		—		5		—		—		—		—			—		—
Restructuring costs (b)	1		—		—		4		1		—		—			—		—

Income (loss) from operations (c)	3		(105	)	(11	)	2		1		4		10			14		(4	)
Other income (expense), net (d)	8		(22	)	(2	)	(1	)	—		(1	)	(1	)		(1	)	(7	)

Income (loss) before income taxes	11		(127	)	(13	)	1		1		3		9			13		(11	)
Provision for (benefit from) income taxes	4		(43	)	2		(1	)	—		—		1			1		2

Net income (loss)	7	%	(84	)%	(15	)%	2	%	1	%	3	%	8	%	$	12	%	(13	)%

(a)

Seagate Technology Holdings recorded an in-process research and development charge of $52 million in the period from November 23, 2000 to December 29, 2000 in connection with the November 2000 transactions.

(b)

Restructuring charges are described in more detail in the notes to the audited consolidated and combined financial statements relating to Seagate Technology Holdings and its predecessor included elsewhere in this registration statement and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” section under Item 2 of this registration statement.

(c)

Income (loss) from operations includes: (1) in the quarter ended September 29, 2000, administrative costs of $3 million related to the transactions; (2) in the period from September 30, 2000 to November 22, 2000, a $567 million non-cash compensation charge related to the acceleration of stock options in connection with the November 2000 transactions, of which $265 million was allocated to cost of revenue, $116 million was allocated to product development expense and $185 million was allocated to marketing and administrative expense, and $74 million in administrative costs were incurred related to the transactions; (3) in the period from November 23, 2000 to December 29, 2000, the recognition of higher costs of revenue resulting from the $131 million write-up to fair value of inventories acquired at the close of the November 2000 transactions, $40 million in fees paid to sponsors for consulting and advisory services in connection with the November 2000 transactions and $6 million in administrative costs related to the transactions; and (4) in the quarter ended June 28, 2002, a $179 million charge to record $32 million paid to participants in the deferred compensation plan and $147 million to accrue the remaining obligations under the plan. Of the $179 million charge, $38 million was allocated to cost of revenue, $29 million was allocated to product development expense and $112 million was allocated to marketing and administrative expense.

(d)

Other income (expense) includes: (1) in the quarter ended September 29, 2000, net gains of $122 million on the sale of investments; (2) in the period from September 30, 2000 to November 22, 2000, a $154 million loss on investments; and (3) in the quarter ended June 28, 2002, debt refinancing charges of $93 million.

During the period from September 30, 2000 to November 22, 2000 our predecessor’s revenues were adversely affected by a limited supply of certain electrical components from our external suppliers. This shifted some shipments into the subsequent November 23, 2000 to December 29, 2000 period when these supplier constraints began to alleviate. In addition, the November 23, 2000 to December 29, 2000 period benefited from the seasonality of our business whereby the December holidays drive sales of consumer electronics and PCs. By the end of the quarter ended March 30, 2001, we began to experience an overall decline in demand due to reductions in global information technology spending. This decline in spending persisted and was the primary cause of lower revenue in the next two quarters as compared to the quarter ended March 30, 2001. Although the global information technology spending decline continues to the present, revenue increased significantly in the quarters ended December 28, 2001 and March 29, 2002 due to our gains in market share. These gains were the result of our improved execution and our time-to-market leadership within the rigid disc drive industry. In addition, in the quarter ended March 29, 2002, we experienced a one-time benefit to revenue, operating income and net income as a result of the change in the timing of our revenue recognition on sales to our North American distributors when we changed from the consignment model to the sell-in model. In the quarter ended June 28, 2002, the pricing environment became extremely aggressive, a condition that was exacerbated by competitors exiting the industry and liquidating their excess inventory. In addition, our revenue was adversely impacted by lower demand typically associated with the seasonality of our business, particularly in the PC and consumer electronics markets, a decline in global information technology spending due to the weakened global economy, and more efficient utilization of enterprise-wide storage capacity by end users of storage products. As a result of these factors, our revenue declined in the quarter ended June 28, 2002.

During the period from September 30, 2000 to November 22, 2000, our predecessor’s gross margins were negatively impacted as a result of compensation charges to cost of revenue of $265 million related to the acceleration of stock options in connection with the November 2000 transactions. Subsequent to November 22, 2000, gross margins benefited from lower charges to cost of revenue for depreciation resulting from write-downs to fair value of our depreciable assets in connection with the November 2000 transactions. This benefit was offset, however, in the period from November 23, 2000 to December 29, 2000, by $131 million of increased costs due to our higher basis in beginning inventory, also in connection with the November 2000 transactions. In the quarters ended June 29, 2001 and September 28, 2001, gross margins declined moderately due to declines in revenue caused by a slowdown in global information technology spending. However, gross margins increased substantially in the following two quarters due to increases in revenue from gains in market share and from lower costs resulting from our initiatives, such as Six Sigma, Factory of the Future and enhanced supply chain management. In the quarter ended June 28, 2002, gross margins again declined. This was a result of severe price erosion during the period as well as lower absorption of fixed costs from lower unit sales volume.

Liquidity and Capital Resources

The following is a discussion of our principal liquidity requirements and capital resources.

The Refinancing

In May 2002, we refinanced all of our then outstanding indebtedness. This refinancing consisted of:

the repurchase of all of our $210 million principal amount 12½% senior subordinated notes due 2007;

the issuance and private placement of $400 million in principal amount of 8% senior notes due 2009 by Seagate Technology HDD Holdings and the unconditional guarantee of the notes by Seagate Technology Holdings;

the repayment of approximately $673 million under our previously existing senior secured credit facilities;

the entry by Seagate Technology HDD Holdings, a direct subsidiary of Seagate Technology Holdings, and Seagate Technology (US) Holdings, an indirect subsidiary of Seagate Technology Holdings, into new senior secured credit facilities, which consist of a $350 million term loan facility that has been drawn in full and a $150 million revolving credit facility that has not been drawn upon for borrowings, but under which $43 million of outstanding letters of credit and bankers’ guarantees had been issued as of June 28, 2002;

the distribution of $167 million to our shareholders who consist of New SAC and employees who have exercised options granted under Seagate Technology Holdings’ share option plan; and

the payment of approximately $32 million to deferred compensation plan participants, consisting of members of the management group.

The impact of the refinancing on Seagate Technology Holdings’ operations, on a pro forma basis as if the refinancing had been accomplished at the beginning of fiscal year 2002 and after elimination of non-recurring charges for the $93 million loss on repayment of debt described below, is a reduction in interest income of approximately $9 million and a reduction in interest expense of approximately $19 million for fiscal year 2002. The reduction in interest income is a result of lower average invested cash balances after our use in the refinancing of approximately $419 million of cash. The decrease in interest expense is a result of the reduction in the principal balance and interest rates of our new outstanding borrowings. The pro forma impact of the refinancing on fiscal year 2002 net income would be to increase our net income from $153 million to $255 million.

In connection with the refinancing, including the distribution of $32 million to deferred compensation plan participants in May 2002, Seagate Technology Holdings recognized $112 million of non-recurring expenses in the quarter ended June 28, 2002. This included:

a $93 million loss on the extinguishment of debt, which was comprised of:

—

$50 million related to the premium paid in the repurchase of Seagate Technology International’s 12½% senior subordinated notes due 2007;

—

$7 million to write off unamortized discount on those notes;

—

$31 million to write-off capitalized debt issuance costs on both the 12½% senior subordinated notes due 2007 and the former senior secured credit facilities of Seagate Technology International and Seagate Technology (US) Holdings, Inc.;

—

a $4 million loss on an interest rate swap on one of the term loans included in the former senior secured credit facilities of Seagate Technology International and Seagate Technology (US) Holdings, Inc.; and

—

$1 million of other costs and expenses; and

$19 million of compensation expense related to the distribution of $32 million to deferred compensation plan participants, net of a $13 million income tax benefit.

The borrowers under the new senior secured credit facility are Seagate Technology HDD Holdings and Seagate Technology (US) Holdings, Inc. Both of these companies are wholly-owned direct or indirect subsidiaries of Seagate Technology Holdings. The new senior secured credit facilities are secured by a first priority pledge of substantially all the tangible and intangible assets of Seagate Technology HDD Holdings and many of its subsidiaries, as well as a pledge of the shares of Seagate Technology HDD Holdings and many of its subsidiaries, which in the case of non-U.S. subsidiaries of Seagate Technology (US) Holdings, Inc. is limited to a pledge of 65% of the shares of those subsidiaries, in each case subject to a number of exceptions. Seagate Technology Holdings and many of the direct and indirect subsidiaries of Seagate Technology HDD Holdings have guaranteed the obligations under the credit agreement that governs our new senior secured credit facilities.

The credit agreement that governs our new senior secured credit facilities contains covenants that Seagate Technology HDD Holdings must satisfy in order to remain in compliance with the agreement. These covenants require Seagate Technology HDD Holdings, among other things, to maintain the following ratios: (1) an interest expense coverage ratio for any period of four consecutive fiscal quarters of at least 2.50 to 1.00; (2) a fixed charge coverage ratio for any four consecutive fiscal quarters of at least (a) 1.20 to 1.00 for the period from March 30, 2002 to June 29, 2002, (b) 1.25 to 1.00 for the period from June 30, 2002 to June 29, 2003 and (c) 1.50 to 1.00 for any period after June 30, 2003; and (3) a net leverage ratio of not more than (a) 1.75 to 1.00 as of the end of any fiscal quarter during the period from March 30, 2002 to June 29, 2002, and (b) 1.50 to 1.00 as of the end of any fiscal quarter commencing on or after June 30, 2002. We are currently in compliance with all of these covenants, including the financial ratios that we are required to maintain.

The calculated financial ratios for the quarter ended June 28, 2002 is as follows:

	Required	June 28, 2002
Interest Coverage Ratio	Not less than 2.50	20.04
Fixed Charge Coverage Ratio	Not less than 1.20	3.00
Net Leverage Ratio	Not greater than 1.75	(0.08	)

Non-compliance with the terms of the credit agreement, unless cured or waived, could trigger an event of default for both our senior secured credit facilities and our 8% senior notes and require repayment of the debt, the provision of additional guarantees and collateral or other changes in terms. In addition, subject to specified exceptions and qualifications, Seagate Technology Holdings and its subsidiaries that guarantee the new senior secured credit facilities are restricted in their ability to, among other things, incur additional debt, pay dividends, repurchase equity interests, incur any liens on their assets, sell or otherwise dispose of assets, including capital stock of subsidiaries, enter into mergers or consolidations and enter into transactions with affiliates.

In connection with our new senior secured credit facilities, Seagate Technology HDD Holdings and Seagate Technology (US) Holdings, Inc. entered into a new revolving credit facility, under which $150 million is available to these entities. No borrowings were made under this revolving credit facility at the close of the refinancing.

On March 19, 2002, Seagate Technology Holdings paid a distribution of $33 million to its shareholders, including New SAC, to enable New SAC to make a distribution of approximately $33 million to its shareholders, which allowed members of our sponsor group to satisfy tax obligations.

On May 20, 2002, Seagate Technology Holdings made a distribution to its shareholders, including New SAC, to enable New SAC to make a distribution to its preferred shareholders. At approximately the same time, distributions were made to participants in Seagate Technology HDD Holdings’ deferred compensation plan. The aggregate amount of the shareholder distribution was approximately $167 million and the aggregate amount of the deferred compensation plan distribution was approximately $32 million.

The net effect of the refinancing and the distribution to Seagate Technology Holdings’ shareholders and participants in Seagate Technology HDD Holdings’ deferred compensation plan in May 2002 was a decrease in

cash, cash equivalents and short-term investments of $419 million, consisting of an increase of $750 million from our senior secured credit facilities and the issuance of our 8% senior notes, offset by $1.169 billion of cash outlays.

The degree to which we are leveraged could materially and adversely affect our ability to obtain financing for working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances or other purposes and could make us more vulnerable to industry downturns and competitive pressures. Although we are currently not a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of, complementary businesses, products or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all. We will require substantial amounts of cash to fund scheduled payments of principal and interest on our indebtedness, future capital expenditures and any increased working capital requirements. If we are unable to meet our cash requirements out of existing cash or cash flow from operations, we cannot assure you that we will be able to obtain alternative financing on terms acceptable to us, if at all.

Discussion of Cash Flows

At June 28, 2002, our working capital was $359 million, which included cash, cash equivalents and short-term investments of $843 million. The decrease in cash, cash equivalents and short-term investments was $66 million from June 29, 2001 to June 28, 2002. For the fiscal year ending June 28, 2002, the primary contributors to the decrease in cash, cash equivalents and short-term investments were the refinancing of all of our outstanding indebtedness, expenditures for property, equipment and leasehold improvements, and shareholder distributions. These uses of cash were substantially offset by cash provided by operating activities. During the quarter ended June 28, 2002, we repaid $883 million of long-term debt and refinanced it with $750 million of new long-term debt. Cash used to acquire property, equipment and leasehold improvements was $540 million for fiscal year 2002. Shareholder distributions included $33 million paid to Seagate Delaware’s former stockholders in connection with the final accounting for the November 2000 transactions and $167 million paid to shareholders of Seagate Technology Holdings, consisting of New SAC and certain employees. Cash provided by operating activities was $905 million and consisted primarily of net income plus depreciation and amortization and an increase in accounts payable.

Until required for other purposes, our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. Our short-term investments consist primarily of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase.

Net cash provided by (used in) operating activities was $905 million for fiscal year 2002, $269 million for the period from November 23, 2000 to June 29, 2001, $121 million for the period from July 1, 2000 to November 22, 2000, and $443 million for fiscal year 2000. Net cash provided by operating activities for fiscal year 2002 was primarily attributable to net income as adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, deferred compensation and the write-off of debt issuance costs, and as adjusted to reclassify the cash payment for the redemption premium on the 12 ¹ / 2 % senior subordinated notes to net cash used in financing activities. Net cash provided by operating activities during the period from November 23, 2000 to June 29, 2001, was primarily attributable to a net loss, which was more than offset by net non-cash charges such as depreciation, amortization and in-process research and development and a decrease in net operating assets. Net cash provided by operating activities during the period from July 1, 2000 to November 22, 2000 was primarily attributable to a net loss, which was more than offset by net non-cash charges such as depreciation, amortization, deferred income taxes and compensation expense related to the acceleration of vesting of stock options in connection with the November 2000 transactions. Net cash provided by operating activities for fiscal year 2000 was primarily attributable to net income, net of non-cash adjustments such as depreciation and amortization, deferred income taxes, in-process research and development, restructuring charges and gains on investments in equity securities.

Net cash provided by (used in) investing activities was ($610) million for fiscal year 2002, ($1.140) billion for the period from November 23, 2000 to June 29, 2001, $829 million for the period from July 1, 2000 to November 22, 2000, and $173 million for fiscal year 2000. Net cash used in investing activities for fiscal year 2002 was primarily attributable to expenditures for property, equipment and leasehold improvements. Net cash used in investing activities during the period from November 23, 2000 to June 29, 2001, was primarily used to acquire property, equipment and leasehold improvements, the purchase of the rigid disc drive and storage area networks divisions of our predecessor, and purchases of short-term investments in excess of maturities. Net cash provided by investment activities during the period from July 1, 2000 to November 22, 2000, was primarily attributable to net sales and maturities of investments offset by expenditures for property, equipment and leasehold improvements and the establishment of a restricted cash account related to the transaction with VERITAS. Net cash provided by investing activities for fiscal year 2000 was primarily attributable to proceeds from the sale of SanDisk stock partially offset by expenditures for property, equipment and leasehold improvements.

Net cash provided by (used in) financing activities was ($411) million for fiscal year 2002, $1.599 billion for the period from November 23, 2000 to June 29, 2001, ($1.818) billion for the period from July 1, 2000 to November 22, 2000, and ($114) million for fiscal year 2000. Net cash used in financing activities for fiscal year 2002 was primarily attributable to the refinancing and overall reduction of all of our outstanding indebtedness, payment of distributions to our shareholders and payment of the redemption premium on the 12 ¹ / 2 % senior subordinated notes. Net cash provided by financing activities during the period from November 23, 2000 to June 29, 2001 was primarily a result of cash provided from the issuance of our term loans under our former senior secured credit facilities and 12½% senior subordinated notes and cash provided from the issuance of stock to our parent company. Net cash used in financing activities during the period from July 1, 2000 to November 22, 2000, was attributable to excess cash provided to our predecessor’s parent company, Seagate Delaware, for distribution to its shareholders as a result of the November 2000 transactions and repayment of our predecessor’s senior notes and debentures. Net cash used in financing activities for fiscal year 2000 was primarily attributable to excess cash provided to our predecessor’s parent company and the repayment of intercompany loan amounts.

During the fiscal year ended June 28, 2002, we invested approximately $538 million in property, equipment and leasehold improvements. The $538 million investment comprised:

$275 million for manufacturing facilities and equipment related to our subassembly and disc drive final assembly and test facilities in the United States and the Far East;

$149 million for our manufacturing facilities and equipment for the recording head operations in the United States, the Far East and Northern Ireland;

$84 million to upgrade the capabilities of our thin-film media operations in the United States, Singapore and Northern Ireland; and

$30 million for other purposes.

We anticipate investments of approximately $600 million in property and equipment for fiscal year 2003. We plan to finance these investments from existing cash balances and cash flows from operations.

Liquidity Sources, Requirements and Contractual Cash Requirements and Commitments

Our principal sources of liquidity as of June 28, 2002 consisted of: (1) $843 million in cash, cash equivalents, and short-term investments, (2) a $150 million revolving credit facility which has not been drawn upon for borrowings, but under which $43 million of outstanding letters of credit and bankers’ guarantees had been issued as of June 28, 2002, and (3) cash we expect to generate from operations during our next fiscal year.

Since the closing of the November 2000 transactions, our principal liquidity requirements have been to service our debt and meet our working capital, research and development and capital expenditure needs. In addition, in the second half of fiscal year 2002, we made return of capital distributions to our shareholders.

We believe that our sources of cash will be sufficient to fund our operations and meet our cash requirements for at least the next 12 months. Our ability to fund these requirements and comply with the financial covenants under our debt agreements will depend on our future operations, performance and cash flow and is subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control. In addition, as part of our strategy, we intend to selectively pursue strategic alliances, acquisitions and investments that are complementary to our business. Any material future acquisitions, alliances or investments will likely require additional capital. We cannot assure you that additional funds from available sources will be available on terms acceptable to us, or at all.

Our contractual cash obligations and commitments as of June 28, 2002 have been summarized in the table below (in millions):

	Total		Fiscal Year(s)
	Total		2003		2004-2005		2006-2007		After 2007
Contractual Obligations:
Long term debt	$	750	$	2	$	9	$	339	$	400
Capital leases		1		—		1		—		—
Operating leases		235		27		42		39		127

Subtotal		986		29		52		378		527
Commitments:
Capital expenditures		161		161
Letters of credit or bank guarantees		43		43

Subtotal		204		204

Total	$	1,190	$	233	$	52	$	378	$	527

Under operating leases in the table above, we have included total future minimum rent expense under non-cancelable leases for both occupied and abandoned facilities. We have $9 million in restructuring reserves included in the balance sheet related to non-cancelable leases.

Immediately prior to the closing of our initial public offering, we intend to pay a return of capital distribution to our existing shareholders, including New SAC. We have been informed by New SAC that it intends to distribute its proceeds from this return of capital distribution to the holders of its preferred shares. In addition, New SAC is the selling shareholder in our initial public offering and expects to receive a significant portion of the net proceeds from the offering. New SAC has further informed us that it intends to distribute its net proceeds from the offering to the holders of its preferred and ordinary shares. If New SAC makes the distributions described above, we will have an obligation to make payments to the participants in our deferred compensation plan. We expect our sources of cash, including our net proceeds from our initial public offering, to be adequate to fund our return of capital distribution and deferred compensation payments. The extent to which we will need to use sources of cash other than our net proceeds from the proposed offering to make the distributions and payments described above will depend on, among other things, the allocation between us and New SAC of the shares to be offered, which has not yet been determined.

Critical Accounting Policies

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. The SEC has defined the most critical accounting policies as the ones that are most important to the portrayal of our financial condition and operating results, and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are highly uncertain at the time of estimation. Based on this definition, our most critical policies include: establishment of sales program accruals, establishment of warranty accruals, and

valuation of deferred tax assets. Below, we discuss these policies further, as well as the estimates and judgments involved. We also have other key accounting policies and accounting estimates relating to uncollectible customer accounts, valuation of inventory and, when we issue stock awards, the fair value of our shares as determined by the board of directors. We believe that these other policies and other accounting estimates either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period.

Establishment of Sales Program Accruals. We establish certain distributor sales programs aimed at increasing customer demand. These programs are typically related to a distributor’s level of sales, order size and advertising or point of sale activity. We provide for these contra-revenues at the time that revenue is recorded based on estimated requirements. These estimates are based on various factors, including estimated future price erosion, customer sell-through levels, program participation and customer claim submittals. Significant variations in any of these factors could have a material effect on our operating results.

In the third quarter of fiscal year 2002, our North American distribution customers transitioned from a consignment model, under which we recognized revenue when distributors sold our products through to their customers, to a sell-in model, under which we recognize revenue when our products are sold to distributors. This transition resulted from changes in our contractual arrangements with our North American distribution customers. As a result of these changes, title and risk of loss now pass to those distributors at the time we ship our products to them, as compared to our former contractual arrangements under which title and risk of loss remained with us until our products were sold by the distributors. We effected the transition to a sell-in model with respect to our North American distribution customers in an effort to improve our competitive position within the rigid disc drive industry by increasing the incentive of those distributors to sell our products through to their customers. Although a limited right of return exists with respect to sales to our North American distribution customers, requiring us to make estimates of future returns, we believe that these estimates are reasonably accurate due to the short time period during which our North American distribution customers can return our products, the limitations placed on their right to make returns, our long history of conducting business with distributors on a sell-in basis in Asia and Europe, the nature of our historical relationships with our North American distribution customers and the daily reporting procedures through which we monitor inventory levels and sales to end-users. However, the failure of our distribution customers to sell our products to end-users or our failure to accurately predict the level of future returns by our distribution customers could have a material impact on our results of operations in future periods.

Establishment of Warranty Accruals. We estimate probable product warranty costs at the time revenue is recognized. We generally warrant our products for a period of one to five years. Our estimate considers product failure rates and trends, estimated repair costs and probable return rates. We use a statistical model to help us with our estimates. Should actual experience in any period differ significantly from our estimates, our future results of operations could be materially affected.

Valuation of Deferred Tax Assets . The recording of our deferred tax assets each period depends primarily on our ability to generate current and future taxable income in the United States. Each period we evaluate the need for a valuation allowance for our deferred tax assets and we adjust the valuation allowance so that we record net deferred tax assets only to the extent that we conclude it is more likely than not that these assets will be realized.

Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” The provisions of SFAS 141 apply to all business combinations initiated after June 30, 2001. The adoption of SFAS 141 had no effect on our consolidated financial position or results of operations in fiscal year 2002. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized; however, these assets must be reviewed at least annually for impairment. Intangible assets with finite useful lives will continue to be amortized over their respective useful lives. The provisions of SFAS 142 are

effective for our fiscal year 2003. We have determined the adoption of SFAS 142 will have no impact on our consolidated financial position or results of operations in fiscal year 2003.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS 144 amends existing accounting guidance on asset impairment and provides an accounting model for long-lived assets to be disposed of. We adopted SFAS 144 in the first quarter of our fiscal year 2003. We do not expect the adoption of SFAS 144 to have a significant impact on our consolidated results of operations or financial position.

In November 2001, the Emerging Issues Task Force (“EITF”) issued EITF Issue No. 01-09 (“EITF 01-09”), “Accounting for Consideration Given by a Vendor to a Customer/Reseller,” which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF No. 00-25 “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products” (“EITF 00-25”). EITF 01-09 outlines the presumption that consideration given by a vendor to a customer, a reseller or a customer of a reseller is to be treated as a deduction from revenue. Treatment of such payments as an expense is only appropriate if two conditions are met: a) the vendor receives an identifiable benefit in return for the consideration paid that is sufficiently separable from the sale such that the vendor could have entered into an exchange transaction with a party other than the purchaser or its products in order to receive that benefit; and b) the vendor can reasonably estimate the fair value of that benefit. We adopted EITF 01-09 as of January 1, 2002, and it did not have a material impact on our financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than when the exit or disposal plan is approved. The adoption of SFAS 146 is not expected to have a material impact on our financial position or results of operations.

Qualitative and Quantitative Disclosures About Market Risk

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and long-term debt. We do not use derivative financial instruments in our investment portfolio, but use them to hedge floating rate debt.

We invest in high credit quality issuers and, by policy, limit the amount of credit exposure to any one issuer. As stated in our policy, we are averse to principal loss and ensure the safety and preservation of our invested funds by limiting default risk, market risk and reinvestment risk.

We mitigate default risk by maintaining a diversified portfolio and by investing in only high quality securities. We constantly monitor our investment portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any investment issuer, guarantor or depository. We maintain a highly liquid portfolio by investing only in marketable securities with active secondary or resale markets.

We have both fixed and floating rate debt obligations. We enter into debt obligations to support general corporate purposes including capital expenditures and working capital needs. We use derivative financial instruments to hedge a portion of our floating rate debt obligations. In December 2000, we entered into a fixed rate interest rate swap agreement with a notional amount of $245 million and an interest rate of 5.40% for a term of two years. The maturity date of the swap matched the principal serial maturities on the underlying debt. Credit

exposure resulting from the derivative financial instruments was diversified among various commercial banking institutions in the United States and Europe. In May 2002, we refinanced our former senior secured credit facility and redesignated our interest rate swap agreement as a hedge for a portion of the floating rate debt under our new senior secured credit facility.

The table below presents principal (or notional) amounts and related weighted average interest rates by year of maturity for our investment portfolio, debt obligations, and interest rate swap as of June 28, 2002. All investments mature in three years or less.

	2003			2004			2005			2006			2007			Thereafter			Total			Fair Value June 28, 2002
	(in millions)
Assets
Cash equivalents:
Fixed rate	$	554																	$	554		$	554
Average interest rate		1.83	%																	1.83	%
Short-term investments:
Fixed rate	$	12		$	36		$	6											$	54		$	55
Average interest rate		2.68	%		3.17	%		4.35	%											3.21	%
Variable rate	$	176																	$	176		$	176
Average interest rate		2.00	%																	2.00	%
Total investment securities	$	743		$	36		$	6											$	785		$	785
Average interest rate		1.89	%		3.17	%		4.35	%											1.97	%

Long-Term Debt
Fixed rate																$	400		$	400		$	400
Average interest rate																	8.00	%		8.00	%
Floating rate:
Tranche B (LIBOR + 200 bp)	$	2		$	5		$	4		$	3		$	336					$	350		$	350
		3.94	%		3.94	%		3.94	%		3.94	%		3.94	%					3.94	%
Swap (3 month LIBOR)	$	245																	$	245		$	(4	)
		5.40	%																	5.40	%

Foreign Currency Risk. We transact business in various foreign countries. Our primary foreign currency cash flows are in emerging market countries in Asia and in European countries. During fiscal year 2002, we did not hedge any of our local currency cash flows. All foreign currency cash flow requirements were met using spot foreign exchange transactions. We are currently reviewing the potential for hedging local currency cash flows.

ITEM 3. PROPERTIES

Our headquarters is located in the Cayman Islands, while our U.S. executive offices are in Scotts Valley, California. Our principal manufacturing facilities are located in China, Malaysia, Northern Ireland, Singapore and Thailand and, in the United States, in California, Minnesota and Oklahoma. Portions of our facilities are occupied under leases that expire at various times through 2015. The following is a summary of square footage owned or leased by us as of June 28, 2002 for the categories listed in the columns below.

	Administration	Product Development	Manufacturing and Warehouse	Total
North America
California	383,955	224,053	203,361	811,369
Colorado	—	443,100	—	443,100
Minnesota	149,614	414,644	740,177	1,304,435
Oklahoma	59,565	93,364	135,091	288,020
Northeastern states	562	—	—	562
Southeastern states	6,156	—	—	6,156
Other U.S. states	8,160	169,177	—	177,337
Canada and Mexico	40,000	—	335,000	375,000

Total North America	648,012	1,344,338	1,413,629	3,405,979

Europe
England	7,072	—	—	7,072
Ireland	1,600	—	—	1,600
Northern Ireland	68,200	4,900	494,900	568,000
Netherlands	28,355	—	92,234	120,589
Other European countries	32,880	—	—	32,880

Total Europe	138,107	4,900	587,134