UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

____________________________ 
FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

___________________________ 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 29, 2017

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from:to

Commission File Number001-31560

 _______________________________________
SEAGATE TECHNOLOGY HOLDINGS PUBLIC LIMITED COMPANY

(Exact name of registrant as specified in its charter)

 _______________________________________
Ireland98-064857798-1597419

(State or other jurisdiction of

(I.R.S. Employer
incorporation or organization)

(I.R.S. Employer

Identification Number)

38/39 Fitzwilliam Square

Dublin 2, Ireland

(Address of principal executive offices)

D02 NX53
(Zip Code)
Telephone: (353)(1) 234-3136

(Registrant’s telephone number, including area code)

_______________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Ordinary Shares, par value $0.00001 per shareSTXThe NASDAQ Global Select Market
_______________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large accelerated filer:filer☒☒Accelerated filer Accelerated filer:☐
Non-accelerated filer☐Smaller reporting company ☐
Emerging growth company☐
Non-accelerated filer:If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  (Do not check if a smaller reporting company)Smaller reporting company:☐
Emerging growth company:☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes ☐No ☒

As of January 23, 2018, 284,827,401 October 24, 2022,206,454,363of the registrant’s ordinary shares, par value $0.00001 per share, were issued and outstanding.




INDEX

SEAGATE TECHNOLOGY HOLDINGS PLC

PAGE NO.

3

4

5

6

7

8

9

28

36

37
PART II

Item 1.

38
37

38

38
58

58
38
58
58
59
60

2
Table of Contents
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

Item 4.

Mine Safety Disclosures

38

Item 5.

Other Information

38

Item 6.

Exhibits

39

SIGNATURES

40

PART I

FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

Table of Contents

Page

4

5

6

7

8

9

9

11

13
14

14
16

15

Note 6. Goodwill and Other Intangible Assets

16

Note 7. Restructuring and Exit Costs

17
16

18
16

19
20

23

23
24

24

25

25
26

27

Note 16.13. Subsequent Events

27


See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents
SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

(Unaudited)

                                                
     December 29,
2017		   June 30,
2017		 
ASSETS      

Current assets:

      

Cash and cash equivalents

    $2,556   $2,539 

Accounts receivable, net

     1,055    1,199 

Inventories

     1,014    982 

Other current assets

     285    321 
    

 

 

   

 

 

 

Total current assets

     4,910    5,041 

Property, equipment and leasehold improvements, net

     1,762    1,875 

Goodwill

     1,238    1,238 

Other intangible assets, net

     222    281 

Deferred income taxes

     402    609 

Other assets, net

     216    224 
    

 

 

   

 

 

 

Total Assets

    $8,750   $9,268 
    

 

 

   

 

 

 
LIABILITIES AND EQUITY      

Current liabilities:

      

Accounts payable

    $1,620   $1,626 

Accrued employee compensation

     183    237 

Accrued warranty

     111    113 

Current portion of long-term debt

     560    —   

Accrued expenses

     639    650 
    

 

 

   

 

 

 

Total current liabilities

     3,113    2,626 

Long-term accrued warranty

     125    120 

Long-term accrued income taxes

     12    15 

Othernon-current liabilities

     123    122 

Long-term debt

     4,316    5,021 
    

 

 

   

 

 

 

Total Liabilities

     7,689    7,904 

Commitments and contingencies (See Notes 12, 14 and 15)

      

Shareholders’ Equity:

      

Ordinary shares and additionalpaid-in capital

     6,246    6,152 

Accumulated other comprehensive loss

     (11)    (17) 

Accumulated deficit

     (5,174)    (4,771) 
    

 

 

   

 

 

 

Total Equity

     1,061    1,364 
    

 

 

   

 

 

 

Total Liabilities and Equity

    $8,750   $9,268 
    

 

 

   

 

 

 

The information as of June 30, 2017 was derived from the Company’s audited Consolidated Balance Sheet as of June 30, 2017.

 September 30,
2022		July 1,
2022
(unaudited)
ASSETS  
Current assets:  
Cash and cash equivalents$761 $615 
Accounts receivable, net1,098 1,532 
Inventories1,606 1,565 
Other current assets275 321 
Total current assets3,740 4,033 
Property, equipment and leasehold improvements, net2,196 2,239 
Goodwill1,237 1,237 
Other intangible assets, net5 9 
Deferred income taxes1,137 1,132 
Other assets, net296 294 
Total Assets$8,611 $8,944 
LIABILITIES AND (DEFICIT) EQUITY  
Current liabilities:  
Accounts payable$1,712 $2,058 
Accrued employee compensation106 252 
Accrued warranty66 65 
Current portion of long-term debt636 584 
Accrued expenses618 596 
Total current liabilities3,138 3,555 
Long-term accrued warranty83 83 
Other non-current liabilities128 135 
Long-term debt, less current portion5,613 5,062 
Total Liabilities8,962 8,835 
Commitments and contingencies (See Notes 10 and 12)
Shareholders’ (Deficit) Equity:
Ordinary shares and additional paid-in capital7,248 7,190 
Accumulated other comprehensive income73 36 
Accumulated deficit(7,672)(7,117)
Total Shareholders’ (Deficit) Equity(351)109 
Total Liabilities and Shareholders’ (Deficit) Equity$8,611 $8,944 




See Notes to Condensed Consolidated Financial Statements.

4

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SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

                                                                                                
     For the Three Months Ended   For the Six Months Ended 
     December 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Revenue

    $2,914   $2,894   $5,546   $5,691 
          

Cost of revenue

     2,037    2,003    3,933    3,999 

Product development

     250    305    513    620 

Marketing and administrative

     142    155    287    308 

Amortization of intangibles

     19    28    41    57 

Restructuring and other, net

     33    33    84    115 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,481    2,524    4,858    5,099 
    

 

 

   

 

 

   

 

 

   

 

 

 
          

Income from operations

     433    370    688    592 
          

Interest income

     6    1    13    2 

Interest expense

     (61)    (50)    (122)    (100) 

Other, net

     (7)    (11)    (20)    (11) 
    

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net

     (62)    (60)    (129)    (109) 
    

 

 

   

 

 

   

 

 

   

 

 

 
          

Income before income taxes

     371    310    559    483 

Provision for income taxes

     212    13    219    19 
    

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    $159   $297   $340   $464 
    

 

 

   

 

 

   

 

 

   

 

 

 
          

Net income per share:

          

Basic

    $0.55   $1.00   $1.18   $1.56 

Diluted

     0.55    1.00    1.17    1.55 

Number of shares used in per share calculations:

          

Basic

     288    296    289    297 

Diluted

     291    298    291    299 

Cash dividends declared per ordinary share

    $0.63   $0.63   $1.26   $1.26 

 For the Three Months Ended
 September 30,
2022		October 1,
2021
Revenue$2,035 $3,115 
 
Cost of revenue1,553 2,159 
Product development234 233 
Marketing and administrative129 133 
Amortization of intangibles3 3 
Restructuring and other, net9 1 
Total operating expenses1,928 2,529 
 
Income from operations107 586 
 
Interest income1 — 
Interest expense(71)(59)
Other, net(10)6 
Other expense, net(80)(53)
 
Income before income taxes27 533 
(Benefit from) provision for income taxes(2)7 
Net income$29 $526 
 
Net income per share:
Basic$0.14 $2.33 
Diluted$0.14 $2.28 
Number of shares used in per share calculations:  
Basic208 226 
Diluted210 231 



See Notes to Condensed Consolidated Financial Statements.

5

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SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

                                                                                                
     For the Three Months Ended   For the Six Months Ended 
     December 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Net income

    $159   $297   $340   $464 

Other comprehensive income (loss), net of tax:

          

Cash flow hedges

          

Change in net unrealized gain (loss) on cash flow hedges

     —      (2)    —      (3) 

Less: reclassification for amounts included in net income

     —      —      —      1 
    

 

 

   

 

 

   

 

 

   

 

 

 

Net change

     —      (2)    —      (2) 
    

 

 

   

 

 

   

 

 

   

 

 

 

Marketable securities

          

Change in net unrealized gain (loss) on marketable securities

     —      —      —      —   

Less: reclassification for amounts included in net income

     —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Net change

     —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Post-retirement plans

          

Change in unrealized gain (loss) on post-retirement plans

     —      —      —      —   

Less: reclassification for amounts included in net income

     —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Net change

     —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Foreign currency translation adjustments

     2    (7)    6    (6) 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     2    (9)    6    (8) 
    

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

    $161   $288   $346   $456 
    

 

 

   

 

 

   

 

 

   

 

 

 

 For the Three Months Ended
 September 30,
2022		October 1,
2021
Net income$29 $526 
Other comprehensive income (loss), net of tax:
Change in net unrealized gains (losses) on cash flow hedges:
Net unrealized gains (losses) arising during the period32 (9)
Losses reclassified into earnings5 3 
Net change37 (6)
Change in unrealized components of post-retirement plans:
Net unrealized gains arising during the period1 1 
Losses reclassified into earnings— 1 
Net change1 2 
Foreign currency translation adjustments(1)— 
Total other comprehensive income (loss), net of tax37 (4)
Comprehensive income$66 $522 


See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents
SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

                                                
     For the Six Months Ended 
     December 29,
2017		   December 30,
2016		 

OPERATING ACTIVITIES

      

Net income

    $340   $464 

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization

     318    391 

Share-based compensation

     59    73 

Impairment of long-lived assets

     —      9 

Deferred income taxes

     204    3 

Othernon-cash operating activities, net

     3    18 

Changes in operating assets and liabilities:

      

Accounts receivable, net

     145    110 

Inventories

     (32)    (140) 

Accounts payable

     59    170 

Accrued employee compensation

     (54)    70 

Accrued expenses, income taxes and warranty

     3    69 

Vendor receivables

     42    19 

Other assets and liabilities

     —      (9) 
    

 

 

   

 

 

 

Net cash provided by operating activities

     1,087    1,247 
    

 

 

   

 

 

 

INVESTING ACTIVITIES

      

Acquisition of property, equipment and leasehold improvements

     (201)    (235) 

Proceeds from the sale of property and equipment

     2    (1) 

Maturities of short-term investments

     —      6 

Other investing activities, net

     (11)    (4) 
    

 

 

   

 

 

 

Net cash used in investing activities

     (210)    (234) 
    

 

 

   

 

 

 

FINANCING ACTIVITIES

      

Redemption and repurchase of debt

     (152)    —   

Taxes paid related to net share settlement of equity awards

     (21)    (24) 

Repurchases of ordinary shares

     (361)    (248) 

Dividends to shareholders

     (366)    (188) 

Proceeds from issuance of ordinary shares under employee stock plans

     35    47 
    

 

 

   

 

 

 

Net cash used in financing activities

     (865)    (413) 
    

 

 

   

 

 

 

Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash

     5    (12) 
    

 

 

   

 

 

 

Increase in cash, cash equivalents, and restricted cash

     17    588 

Cash, cash equivalents, and restricted cash at the beginning of the period

     2,543    1,132 
    

 

 

   

 

 

 

Cash, cash equivalents, and restricted cash at the end of the period

    $2,560   $1,720 
    

 

 

   

 

 

 

 For the Three Months Ended
 September 30,
2022		October 1,
2021
OPERATING ACTIVITIES  
Net income$29 $526 
Adjustments to reconcile net income to net cash provided by operating activities: 
Depreciation and amortization135 104 
Share-based compensation29 34 
Deferred income taxes(5)(4)
Other non-cash operating activities, net13 2 
Changes in operating assets and liabilities: 
Accounts receivable, net434 (143)
Inventories(41)16 
Accounts payable(300)28 
Accrued employee compensation(146)(92)
Accrued expenses, income taxes and warranty4 11 
Other assets and liabilities93 14 
Net cash provided by operating activities245 496 
INVESTING ACTIVITIES  
Acquisition of property, equipment and leasehold improvements(133)(117)
Proceeds from the sale of assets1 — 
Purchases of investments(1)(18)
Proceeds from sale of investments— 15 
Net cash used in investing activities(133)(120)
FINANCING ACTIVITIES 
Redemption and repurchase of debt— (6)
Dividends to shareholders(147)(153)
Repurchases of ordinary shares(408)(425)
Taxes paid related to net share settlement of equity awards(39)(43)
Proceeds from issuance of long-term debt600 — 
Proceeds from issuance of ordinary shares under employee stock plans29 33 
Other financing activities, net(1)— 
Net cash provided by (used in) financing activities34 (594)
Increase (decrease) in cash, cash equivalents and restricted cash146 (218)
Cash, cash equivalents and restricted cash at the beginning of the period617 1,211 
Cash, cash equivalents and restricted cash at the end of the period$763 $993 


See Notes to Condensed Consolidated Financial Statements.

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SEAGATE TECHNOLOGY HOLDINGS PLC

CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

For the SixThree Months Ended December 29, 2017

September 30, 2022 and October 1, 2021

(In millions)

(Unaudited)

   Number
of
Ordinary
Shares		   Par Value
of Shares		   Additional
Paid-in
Capital		   Accumulated
Other
Comprehensive
Loss		   Accumulated
Deficit		   Total 

Balance at June 30, 2017

   292   $—     $6,152   $(17)   $(4,771)   $1,364 

Net income

           340    340 

Other comprehensive income

         6      6 

Issuance of ordinary shares under employee stock plans

   4      35        35 

Repurchases of ordinary shares

   (10)          (361)    (361) 

Tax withholding related to vesting of restricted stock units

   (1)          (21)    (21) 

Dividends to shareholders

           (361)    (361) 

Share-based compensation

       59        59 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 29, 2017

   285   $—     $6,246   $(11)   $(5,174)   $1,061 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
Balance at July 1, 2022210 $— $7,190 $36 $(7,117)$109 
Net income29 29 
Other comprehensive income37 37 
Issuance of ordinary shares under employee share plans2 29 29 
Repurchases of ordinary shares(5)(400)(400)
Tax withholding related to vesting of restricted share units(1)(39)(39)
Dividends to shareholders ($0.70 per ordinary share)(145)(145)
Share-based compensation29 29 
Balance at September 30, 2022206 $— $7,248 $73 $(7,672)$(351)

 Number of Ordinary SharesPar Value of SharesAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
Balance at July 2, 2021227 $— $6,977 $(41)$(6,305)$631 
Net income526 526 
Other comprehensive loss(4)(4)
Issuance of ordinary shares under employee share plans3 33 33 
Repurchases of ordinary shares(5)(425)(425)
Tax withholding related to vesting of restricted share units— (43)(43)
Dividends to shareholders ($0.67 per ordinary share)(151)(151)
Share-based compensation34 34 
Balance at October 1, 2021225 $— $7,044 $(45)$(6,398)$601 

See Notes to Condensed Consolidated Financial Statements.

8

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SEAGATE TECHNOLOGY HOLDINGS PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Basis of Presentation and Summary of Significant Accounting Policies

1.Basis of Presentation and Summary of Significant Accounting Policies
Organization

Seagate Technology Holdings plc (the(“STX”) and its subsidiaries (collectively, unless the context otherwise indicates, the “Company”) is a leading provider of data storage technology and infrastructure solutions. Its principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. In addition to HDDs, the Company produces a broad range of data storage products including solid state drives (“SSD”SSDs”) and their related controllers,, solid state hybrid drives (“SSHD”SSHDs”), storage subsystems, as well as a scalable edge-to-cloud mass data platform that includes data transfer shuttles and storage subsystems.

Hard disk drivesa storage-as-a-service cloud.

HDDs are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drivesHDDs continue to be the primary medium of mass data storage due to their performance attributes, reliability, high capacities, superior quality and cost effectiveness. Complementing existing data center storage architecture, solid-state storage devicesarchitectures, SSDs use integrated circuit assemblies as memory to store data, withand most SSDs using NAND-baseduse NAND flash memory. In additioncontrast to HDDs and SSDs, SSHDs combine the features of SSDs and HDDs in the same unit, containing a large hard disk drivehigh-capacity HDD and ana smaller SSD acting as a cache to improve performance of frequently accessed data.

performance.

The Company’s HDD products are designed for mission criticalmass capacity storage and nearline applicationslegacy markets. Mass capacity storage involves well-established use cases—such as hyperscale data centers and public clouds as well as emerging use cases. Legacy markets include markets the Company continues to sell to but that it does not plan to invest in enterprise serverssignificantly. The Company’s HDD and storage systems; edge compute / client compute applications, where its products are designed primarily for desktopSSD product portfolio includes Serial Advanced Technology Attachment, Serial Attached SCSI and mobile computing; and edgenon-compute /client non-compute applications, where its products are designed forNon-Volatile Memory Express based designs to support a wide variety of end user devices such as portable external storage systems, surveillance systems, network-attached storage (“NAS”), digital video recorders (“DVRs”)mass capacity and gaming consoles.

legacy applications.

The Company’s cloud systems and solutions extend innovation from the device into the information infrastructure, onsite and in the cloud. Its portfolio includes modularstorage subsystems for enterprises, cloud service providers, scale-out storage servers and original equipment manufacturers (“OEM”OEMs”). Engineered for modularity, mobility, capacity and performance, these solutions include the Company’s enterprise HDDs and SSDs, enabling customers to integrate powerful, scalable storage systemswithin existing environments or create new ecosystems from the ground up in a secure, cost-effective manner.
The Company’s Lyve portfolio provides a simple, cost-efficient and scale-outsecure way to manage massive volumes of data across the distributed enterprise. The Lyve platform includes a shuttle solution that enables enterprises to transfer massive amounts of data from endpoints to the core cloud, a storage-as-a-service cloud offering that provides frictionless mass capacity storage servers.

at the metro edge.

Basis of Presentation and Consolidation

The unaudited Condensed Consolidated Financial Statements of the Company and the accompanying notes were prepared in accordance with United States (“U.S.”) Generally Accepted Accounting Principles (“GAAP”). The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and all its wholly-owned and majority-owned subsidiaries, after elimination of intercompany transactions and balances.

The preparation of financial statements in accordance with U.S. generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. These estimates and assumptions include the impact of the COVID-19 pandemic. Actual results could differ materially from those estimates. The methods, estimates and judgments the Company uses in applying its most critical accounting policies have a significant impact on the results the Company reports in its condensed consolidated financial statements.
The condensedCompany’s consolidated financial statements reflect, in the opinion of management, all material adjustments necessary to present fairly the condensed consolidated financial position, results of operations, comprehensive income, cash flows and shareholders’ equity for the periods presented. Such adjustments are of a normal and recurring nature. Certain prior period amounts in the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.

The Company’s Consolidated Financial Statements for the fiscal year ended June 30, 2017,July 1, 2022 are included in its Annual Report onForm 10-K, as filed with the United StatesU.S. Securities and Exchange Commission (“SEC”) on August 4, 2017.5, 2022. The Company believes that the disclosures included in thethese unaudited condensed consolidated financial statements, when read in conjunction with its Consolidated Financial Statementsconsolidated financial statements as of June 30, 2017,July 1, 2022, and the notes thereto, are adequate to make the information presented not misleading.

The results of operations and the cash flows for the three and six months ended December 29, 2017,September 30, 2022 are not necessarily indicative of the results of operations to be expected for any subsequent interim period inor for the Company’s fiscal year ending June 29, 2018. 30, 2023.

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Fiscal Year
The Company operates and reports financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. BothIn fiscal years with 53 weeks, the threefirst quarter consists of 14 weeks and sixthe remaining quarters consist of 13 weeks each. The three months ended December 29, 2017September 30, 2022 and the three and six months ended December 30, 2016October 1, 2021 consisted of 13 weeksweeks. Fiscal years 2023 and 26 weeks, respectively. Fiscal year 2018 will be comprised2022 both comprise of 52 weeks and will end on June 29, 2018.30, 2023 and July 1, 2022, respectively. The fiscal quarters ended December 29, 2017, September 29, 2017,30, 2022, July 1, 2022 and December 30, 2016,October 1, 2021, are also referred to herein as the “December 2017“September 2022 quarter”, the “June 2022 quarter” and the “September 20172021 quarter”, and the “December 2016 quarter”, respectively.

Summary of Significant Accounting Policies

There have been no significantmaterial changes into the Company’s significant accounting policies. Please refer topolicies disclosed in Note 11. Basis of Presentation and Summary of Significant Accounting Policies of “Financial Statements and Supplementary Data” contained in Part II, Item 88. of the Company’s Annual Report onForm 10-K for the fiscal year ended June 30, 2017,July 1, 2022, as filed with the SEC on August 4, 2017 for a discussion of the Company’s other significant accounting policies.

5, 2022.

Recently IssuedAdopted Accounting Pronouncements

In May 2014, August 2015, April 2016, May 2016 and December 2016,March 2020, the Financial Accounting Standards Board (“FASB”) issuedASU 2014-092020-04 (ASC Topic 606)848), Revenue from Contracts with Customers,Reference Rate Reform. This ASU 2015-14 (ASC Topic 606) Revenue from Contracts with Customers, Deferral of the Effective Date, ASU 2016-10 (ASC Topic 606) Revenue from Contracts with Customers, Identifying Performance Obligationsprovides optional expedients and Licensing,ASU 2016-12 (ASC Topic 606) Revenue from Contracts with Customers, Narrow-Scope Improvementsexceptions for applying U.S. GAAP to contracts, hedging relationships and Practical Expedients, andASU 2016-20 (ASC Topic 606) Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, respectively. ASC Topic 606 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. It also requires entities to disclose both quantitative and qualitative information that enable financial statements users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.other transactions affected by reference rate reform if certain criteria are met. The Company is required to adoptadopted the guidance in the first quarter of fiscal 2019. This standard may be applied retrospectivelyended September 30, 2022 on a prospective basis and is transitioning from an interest rate based on London Interbank Offered Rate (“LIBOR”) to all prior periods presented, or retrospectively with a cumulative adjustment to retained earnings in the year of adoptionSecured Overnight Financing Rate (“modified retrospective transition approach”SOFR”). Based on its assessment, the Company plans to adopt the new revenue standard in the first quarter of fiscal 2019, utilizing the modified retrospective method of transition. While management has not yet completed its assessment of the impact of adopting this new standard on the Company’s consolidated financial statements, the Company expects theThe adoption of the new standard will result in the recognition of revenues generally uponshipment (sell-in basis) for sales of products to certain direct retail customers and customers in certain indirect retail channels which are currently being recognized on a sell-through basis. Accordingly, the Company will need to estimate variable consideration (e.g. rebates) related to customer incentives on these arrangements. These changes arethis ASU did not expected to have a material impact on the Company’s condensed consolidated financial statements.

In January 2016,November 2021, the FASB issuedASU 2016-01 (ASCSubtopic 825-10)2021-10 (ASC Topic 832), Financial Instruments—Overall RecognitionDisclosures by Business Entities about Government Assistance. This ASU requires annual disclosures that increase the transparency of transactions involving government grants, including (1) the type of transactions, (2) the accounting for those transactions and Measurement(3) the effect of Financial Assets and Financial Liabilities.those transactions on an entity’s financial statements. The amendmentsCompany adopted the guidance in thisthe quarter ended September 30, 2022.
Recently Issued Accounting Pronouncements
In September 2022, the FASB issued ASU require entities to measure all investments in equity securities at fair value with changes recognized through net income.2022-04 (ASC Subtopic 405-50), Disclosure of Supplier Finance Program Obligations. This requirement does not apply to investments that qualify for the equity methodASU requires disclosure of accounting, to those that result in consolidationkey terms of the investee, or for whichoutstanding supplier finance programs and a rollforward of the entity meets a practicability exception to fair value measurement. Additionally, the amendments eliminate certain disclosure requirements related to financial instruments measured at amortized cost and add disclosures related to the measurement categories of financial assets and financial liabilities.obligations. The Company is required to adopt thethis guidance in the first quarter of fiscal 2019. Early adoption is permitted for only certain portions of the ASU. The Company expects to elect the measurement alternative for measurement of equity investments, defined as cost, less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Price Changes”) until the equity investments’ fair value becomes readily determinable. The amount of the impact to equity investments will depend on any Price Changes observed after adoption in the first quarter of fiscal 2019.

In February 2016, the FASB issuedASU 2016-02 (ASC Topic 842), Leases. The ASU amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet asa right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The Company is required to adopt the guidance in the first quarter of fiscal 2020.2024. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its condensed consolidated financial statements.

In January 2017,June 2022, the FASB issuedASU 2017-012022-03 (ASC Topic 805)820), Business Combination: ClarifyingFair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This ASU clarifies that a contractual restriction on the Definitionsale of a Business. The amendments in this ASU change the definition of a businessequity security is not considered when measuring its fair value and requires new disclosures for equity securities subject to assist with evaluating when a set of transferred assets and activities is a business.contractual sale restriction. The Company plansis required to adopt thethis guidance in the first quarter of fiscal 2019. Early adoption is permitted.year 2025. The Company is indoes not expect the process of assessing the impactadoption of this ASU to have a material impact on its condensed consolidated financial statements.

In May 2017, the FASB issuedASU 2017-09 (ASC Topic 718), Stock Compensation: Scope

10
Table of Modification Accounting. The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The Company plans to adopt the guidance in the first quarter of fiscal 2019. Early adoption is permitted. The Company is in the process of assessing the impact of this ASU on its condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

In July 2015, the FASB issuedASU 2015-11 (ASC Topic 330), Inventory: Simplifying the Measurement of Inventory. The amendments in this ASU require inventory measurement at the lower of cost and net realizable value. This ASU became effective and was adopted by the Company in the September 2017 quarter on a prospective basis. The adoption of this guidance had no material impact on the Company’s condensed consolidated financial statements and disclosures.

In March 2016, the FASB issuedASU 2016-09 (ASC Topic 718), Stock Compensation—Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU are intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax consequences, classification on the consolidated statement of cash flows and treatment of forfeitures. This ASU became effective and was adopted by the Company in the September 2017 quarter. Upon adoption, excess tax benefits or deficiencies from share-based award activity are reflected in the condensed consolidated statements of operations as a component of the provision for income taxes, whereas they previously were recognized in the Shareholder’s equity in the condensed consolidated balance sheets. The Company also elected to continue to account for share-based compensation expense net of estimated forfeitures. The adoption of this ASU resulted in an increase in deferred tax assets relating to net operating losses of approximately $0.6 billion, offset by an equivalent increase in the valuation allowance with no impact to retained earnings. The adoption of this guidance had no material impact on the Company’s condensed consolidated financial statements and disclosures.

In October 2016, the FASB issuedASU 2016-16 (ASC Topic 740), Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. The amendments in this ASU require the recognition of the income tax consequences for intra-entity transfers of assets other than inventory when the transfer occurs. The Company elected to adopt this ASU in the September 2017 quarter on a modified retrospective basis with no material impact on the Company’s condensed consolidated financial statements and disclosures.

2.Balance Sheet Information

Investments

Contents

2.Balance Sheet Information
Available-for-sale Debt Securities
The following table summarizes, by major type, the fair value and amortized cost of the Company’s available-for-sale debt investments as of December 29, 2017:

                                                                        

(Dollars in millions)

    Amortized
Cost		   Unrealized
Gain/(Loss)		   Fair
Value		 

Available-for-sale securities:

        

Money market funds

    $674   $—     $674 

Time deposits and certificates of deposit

     390    —      390 
    

 

 

   

 

 

   

 

 

 

Total

    $1,064   $—     $1,064 
    

 

 

   

 

 

   

 

 

 
        

Included in Cash and cash equivalents

        $1,060 

Included in Other current assets

         4 
        

 

 

 

Total

        $1,064 
        

 

 

 

September 30, 2022 and July 1, 2022:

September 30,
2022		July 1,
2022
(Dollars in millions)Amortized CostUnrealized Gain/(Loss)Fair ValueAmortized CostUnrealized Gain/(Loss)Fair Value
Available-for-sale debt securities:      
Money market funds$159 $— $159 $60 $— $60 
Time deposits and certificates of deposit1 — 1 1 — 1 
Other debt securities16 — 16 23 — 23 
Total$176 $— $176 $84 $— $84 
Included in Cash and cash equivalents  $158   $59 
Included in Other current assets  2   2 
Included in Other assets, net16 23 
Total  $176   $84 
As of December 29, 2017,September 30, 2022 and July 1, 2022, the Company’s Other current assets included $4$2 million in restricted cash and investmentsequivalents held as collateral at banks for various performance obligations.

As of December 29, 2017,September 30, 2022 and July 1, 2022, the Company had no materialavailable-for-sale debt securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined that no impairment related to credit losses for available-for-sale debt securities were other-than-temporarily impaired as of December 29, 2017.

September 30, 2022.

The fair value and amortized cost of the Company’s investments classified asavailable-for-sale debt securities as of December 29, 2017,September 30, 2022, by remaining contractual maturity were as follows:

                                                

(Dollars in millions)

    Amortized
Cost		   Fair
Value		 

Due in less than 1 year

    $1,064   $1,064 

Due in 1 to 5 years

     —      —   

Due in 6 to 10 years

     —      —   

Thereafter

     —      —   
    

 

 

   

 

 

 

Total

    $1,064   $1,064 
    

 

 

   

 

 

 

The following table summarizes, by major type, the fair value and amortized cost of the Company’s investments as of June 30, 2017:

                                                                        

(Dollars in millions)

    Amortized
Cost		   Unrealized
Gain/(Loss)		   Fair
Value		 

Available-for-sale securities:

        

Money market funds

    $594   $—     $594 

Time deposits and certificates of deposit

     584    —      584 
    

 

 

   

 

 

   

 

 

 

Total

    $1,178   $—     $1,178 
    

 

 

   

 

 

   

 

 

 
        

Included in Cash and cash equivalents

        $1,174 

Included in Other current assets

         4 
        

 

 

 

Total

        $1,178 
        

 

 

 

As of June 30, 2017, the Company’s Other current assets included $4 million in restricted cash and investments held as collateral at banks for various performance obligations.

As of June 30, 2017, the Company had no materialavailable-for-sale securities that had been in a continuous unrealized loss position for a period greater than 12 months. The Company determined noavailable-for-sale securities were other-than-temporarily impaired as of June 30, 2017.

(Dollars in millions)Amortized CostFair Value
Due in less than 1 year$160 $160 
Due in 1 to 5 years15 15 
Due in 6 to 10 years— — 
Thereafter1 1 
Total$176 $176 
Cash, Cash Equivalents and Restricted Cash

The following table provides a summary of cash, cash equivalents and restricted cash reported within the Company’s Condensed Consolidated Balance Sheets that reconciles to the corresponding amount in the Company’s Condensed Consolidated Statements of Cash Flows:

                                                                                                

(Dollars in millions)

    December 29,
2017		   June 30,
2017		   December 30,
2016		   July 1,
2016		 

Cash and cash equivalents

    $2,556   $2,539   $1,716   $1,125 

Restricted cash included in Other current assets

     4    4    4    7 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash, cash equivalents, and restricted cash shown in the Statements of Cash Flows

    $2,560   $2,543   $1,720   $1,132 
    

 

 

   

 

 

   

 

 

   

 

 

 

(Dollars in millions)September 30,
2022		July 1,
2022		October 1,
2021		July 2,
2021
Cash and cash equivalents$761 $615 $991 $1,209 
Restricted cash included in Other current assets2 2 2 2 
Total cash, cash equivalents and restricted cash shown in the Statements of Cash Flows$763 $617 $993 $1,211 


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Accounts receivable, net
In connection with an existing factoring agreement, from time to time the Company sells trade receivables to a third party for cash proceeds less a discount. During the three months ended September 30, 2022, the Company sold trade receivables without recourse for cash proceeds of $200 million. As of September 30, 2022, the total amount that remained subject to servicing by the Company was $237 million. The discounts on receivables sold were not material for the three months ended September 30, 2022. During the three months ended October 1, 2021, the Company did not sell any trade receivables to a third party.
Inventories

The following table provides details of the inventory balance sheet item:

                                                

(Dollars in millions)

    December 29,
2017		   June 30,
2017		 

Raw materials and components

    $303   $350 

Work-in-process

     296    257 

Finished goods

     415    375 
    

 

 

   

 

 

 
    $1,014   $982 
    

 

 

   

 

 

 

(Dollars in millions)September 30,
2022		July 1,
2022
Raw materials and components$648 $601 
Work-in-process402 414 
Finished goods556 550 
Total inventories$1,606 $1,565 
Property, Equipment and Leasehold Improvements, net

The components of property, equipment and leasehold improvements, net, were as follows:

                                                

(Dollars in millions)

    December 29,
2017		   June 30,
2017		 

Property, equipment and leasehold improvements

    $9,422   $9,633 

Accumulated depreciation and amortization

     (7,660)    (7,758) 
    

 

 

   

 

 

 
    $1,762   $1,875 
    

 

 

   

 

 

 

(Dollars in millions)September 30,
2022		July 1,
2022
Property, equipment and leasehold improvements$10,699 $10,659 
Accumulated depreciation and amortization(8,503)(8,420)
Property, equipment and leasehold improvements, net$2,196 $2,239 
Accrued Expenses

The following table provides details of the accrued expenses balance sheet item:

                                                

(Dollars in millions)

    December 29,
2017		   June 30,
2017		 

Dividends payable

    $179   $184 

Other accrued expenses

     460    466 
    

 

 

   

 

 

 

Total

    $639   $650 
    

 

 

   

 

 

 

(Dollars in millions)September 30,
2022		July 1,
2022
Dividends payable$145 $147 
Other accrued expenses473 449 
Total$618 $596 











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Accumulated Other Comprehensive Income (Loss) (“AOCI”)

The components of AOCI, net of tax, were as follows:

                                                                                                                        

(Dollars in millions)

    Unrealized
Gains (Losses)
on Cash Flow
Hedges		   Unrealized
Gains (Losses)
on Marketable
Securities		   Unrealized
Gains (Losses)
on Post-
Retirement
Plans		   Foreign
Currency
Translation
Adjustments		   Total 

Balance at June 30, 2017

    $—     $—     $(5)   $(12)   $(17) 

Other comprehensive income (loss) before reclassifications

     —      —      —      6    6 

Amounts reclassified from AOCI

     —      —      —      —      —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     —      —      —      6    6 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 29, 2017

    $—     $—     $(5)   $(6)   $(11) 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
            

Balance at July 1, 2016

    $(1)   $—     $(7)   $(17)   $(25) 

Other comprehensive income (loss) before reclassifications

     (3)    —      —      (6)    (9) 

Amounts reclassified from AOCI

     1    —      —      —      1 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     (2)    —      —      (6)    (8) 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 30, 2016

    $(3)   $—     $(7)   $(23)   $(33) 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

3.Debt

Short-Term Borrowings

(Dollars in millions)Unrealized Gains/(Losses) on Cash Flow HedgesUnrealized Gains/(Losses) on Post-Retirement PlansForeign Currency Translation AdjustmentsTotal
Balance at July 1, 2022$51 $(14)$(1)$36 
Other comprehensive income before reclassifications32 1 — 33 
Amounts reclassified from AOCI5 — (1)4 
Other comprehensive income37 1 (1)37 
Balance at September 30, 2022$88 $(13)$(2)$73 
Balance at July 2, 2021$(18)$(22)$(1)$(41)
Other comprehensive (loss) income before reclassifications(9)1 — (8)
Amounts reclassified from AOCI3 1 — 4 
Other comprehensive loss(6)2 — (4)
Balance at October 1, 2021$(24)$(20)$(1)$(45)
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3.Debt
The credit agreement entered intofollowing table provides details of the Company’s debt as of September 30, 2022 and July 1, 2022:
(Dollars in millions)September 30,
2022		July 1,
2022
Unsecured Senior Notes(1)
$1,000 issued on May 22, 2013 at 4.75% due June 1, 2023 (the “2023 Notes”), interest payable semi-annually on June 1 and December 1 of each year.
$540 $540 
$500 issued on February 3, 2017 at 4.875% due March 1, 2024 (the “2024 Notes”), interest payable semi-annually on March 1 and September 1 of each year.
499 499 
$1,000 issued on May 28, 2014 at 4.75% due January 1, 2025 (the “2025 Notes”), interest payable semi-annually on January 1 and July 1 of each year.
479 479 
$700 issued on May 14, 2015 at 4.875% due June 1, 2027 (the “2027 Notes”), interest payable semi-annually on June 1 and December 1 of each year.
504 504 
$500 issued on June 18, 2020 at 4.091% due June 1, 2029 (the “June 2029 Notes”), interest payable semi-annually on June 1 and December 1 of each year.
468 466 
$500 issued on December 8, 2020 at 3.125% due July 15, 2029 (the “July 2029 Notes”), interest payable semi-annually on January 15 and July 15 of each year.
500 500 
$500 issued on June 10, 2020 at 4.125% due January 15, 2031 (the “January 2031 Notes”), interest payable semi-annually on January 15 and July 15 of each year.
500 500 
$500 issued on December 8, 2020 at 3.375% due July 15, 2031 (the “July 2031 Notes”), interest payable semi-annually on January 15 and July 15 of each year.
500 500 
$500 issued on December 2, 2014 at 5.75% due December 1, 2034 (the “2034 Notes”), interest payable semi-annually on June 1 and December 1 of each year.
489 489 
Term Loans
$600 borrowed on October 14, 2021 at SOFR plus a variable margin ranging from 1.125% to 2.375%, (the “Term Loan A1”), repayable in quarterly installments beginning on December 31, 2022, with a final maturity date of September 16, 2025.
600 600 
$600 borrowed on October 14, 2021 at SOFR plus a variable margin ranging from 1.25% to 2.5%, (the “Term Loan A2”), repayable in quarterly installments beginning on December 31, 2022, with a final maturity date of July 30, 2027.
600 600 
$600 borrowed on August 18, 2022 at SOFR plus a variable margin ranging from 1.25% to 2.5%, (the “Term Loan A3”), repayable in quarterly installments beginning on December 31, 2022, with a final maturity date of July 30, 2027.
600 — 
6,279 5,677 
Less: unamortized debt issuance costs(30)(31)
Debt, net of debt issuance costs6,249 5,646 
Less: current portion of long-term debt(636)(584)
Long-term debt, less current portion$5,613 $5,062 
__________________________________
(1) All unsecured senior notes are issued by Seagate HDD Cayman, and the obligations under these notes are fully and unconditionally guaranteed, on a senior unsecured basis, by Seagate Technology Unlimited Company (“STUC”)and, itspursuant to a supplemental indenture dated as of May 18, 2021, STX.
Credit Agreement
The Company’s subsidiary, Seagate HDD Cayman, has a credit agreement, which was most recently amended on JanuaryAugust 18, 20112022 (the “Credit Agreement”).
Prior to the August 18, 2022 amendment, the Credit Agreement provided a term loan facility in an aggregate principal amount of $1.2 billion that was extended in two tranches of $600 million each for Term Loans A1 and subsequently amended (the “RevolvingA2 and a $1.75 billion senior unsecured revolving credit facility (“Revolving Credit Facility”). Term Loans A1 and A2 were drawn in full on October 14, 2021.
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On August 18, 2022, Seagate Technology Holdings plc and Seagate HDD Cayman (the “Borrower”) entered into an amendment to the Credit Agreement (the “Sixth Amendment”), which provides for a new term loan facility in the Company with a $700aggregate principal amount of $600 million senior secured revolving credit facility. The term(“Term Loan A3”). Term Loan A3 was borrowed in full at the closing of the Revolving Credit Facility is through January 15, 2020, provided that if the Company does not have Investment Grade Ratings (as defined in the Revolving Credit Facility) on August 15, 2018, then the maturity date will be August 16, 2018 unless certain extension conditions have been satisfied. The loans made under the Revolving Credit Facility will bearSixth Amendment. Term Loan A3 bears interest at a rate of SOFR plus a variable margin of 1.25% to 2.5%, in each case with such margin being determined based on the corporate credit rating of the Borrower or one of its parent entities. Term Loan A3 is repayable in quarterly installments beginning on December 31, 2022 and is scheduled to mature on July 30, 2027.
The Sixth Amendment to the Credit Agreement also replaced the LIBOR interest rates plus variable margin for the Term Loans A1 and A2 with the SOFR interest rates plus a variable margin that will be determined based on the corporate credit rating of the Company.Borrower or one of its parent entities. The CompanySixth Amendment also permits the Borrower to increase the revolving loan commitments or obtain new term loans of up to $100 million in aggregate, subject to the satisfaction of certain terms and conditions.
STX and certain of its material subsidiaries, including STUC, fully and unconditionally guarantee both the Revolving Credit Facility. Facility and the Term Loans A1, A2 and A3 (the “Term Loans”).
The Revolving Credit Facility is available for cash borrowings, subject to compliance with certain covenants and other customary conditions to borrowing, and for the issuance of letters of credit up to asub-limit of $75 million.

The Revolving Credit Facility, as amended,Agreement includes three financial covenants: (1) minimum cash, cash equivalents and marketable securities;interest coverage ratio, (2) a fixed charge coverage ratio;total leverage ratio and (3) a net leverage ratio. On April 27, 2016, the Revolving Credit Agreement was amended in order to increase the allowable net leverage ratio to allow for higher net leverage levels.minimum liquidity amount. The Company was in compliance with the modified covenants as of December 29, 2017 and expects to be in compliance for the next 12 months.

September 30, 2022. As of December 29, 2017,September 30, 2022, no borrowings had been drawn or(including swingline loans) were outstanding and no commitments were utilized for letters of credit utilizedissued under the Revolving Credit Facility.

Long-Term

Future Principal Payments on Long-term Debt

$800 million Aggregate Principal Amount of 3.75% Senior Notes due November 2018 (the “2018 Notes”). The interest on the 2018 Notes is payable semi-annually on May 15 and November 15 of each year. The issuer under the 2018 Notes is Seagate HDD Cayman, and the obligations under the 2018 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company. During the three and six months ended December 29, 2017, the Company repurchased $128 million and $150 million aggregate principal amount of the 2018 Notes, respectively, for cash at a premium to their principal amount, plus accrued and unpaid interest. The Company recorded a loss of approximately $2 million on repurchases during the three and six months ended December 29, 2017 which is included in Other, net on the Condensed Consolidated Statements of Operations. The remainder of the 2018 Notes are classified as Current portion of long-term debt on the Company’s Condensed Consolidated Balance Sheet at December 29, 2017.

$750 million Aggregate Principal Amount of 4.25% Senior Notes due March

At September 30, 2022, (the “2022 Notes”). The interest on the 2022 Notes is payable semi-annually on March 1 and September 1 of each year. The issuer under the 2022 Notes is Seagate HDD Cayman, and the obligations under the 2022 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

$1 billion Aggregate Principal Amount of 4.75% Senior Notes due June 2023 (the “2023 Notes”). The interest on the 2023 Notes is payable semi-annually on June 1 and December 1 of each year. The issuer under the 2023 Notes is Seagate HDD Cayman, and the obligations under the 2023 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

$500 million Aggregate Principal Amount of 4.875% Senior Notes due March 2024 (the “2024 Notes”). The interest on the 2024 Notes is payable semi-annually on March 1 and September 1 of each year. The issuer under the 2024 Notes is Seagate HDD Cayman, and the obligations under the 2024 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

$1 billion Aggregate Principal Amount of 4.75% Senior Notes due January 2025 (the “2025 Notes”). The interest on the 2025 Notes is payable semi-annually on January 1 and July 1 of each year. The issuer under the 2025 Notes is Seagate HDD Cayman, and the obligations under the 2025 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

$700 million Aggregate Principal Amount of 4.875% Senior Notes due June 2027 (the “2027 Notes”). The interest on the Notes is payable semi-annually on June 1 and December 1 of each year. The issuer under the 2027 Notes is Seagate HDD Cayman, and the obligations under the 2027 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

$500 million Aggregate Principal Amount of 5.75% Senior Notes due December 2034 (the “2034 Notes”). The interest on the 2034 Notes is payable semi-annually on June 1 and December 1 of each year. The issuer under the 2034 Notes is Seagate HDD Cayman, and the obligations under the 2034 Notes are fully and unconditionally guaranteed, on a senior unsecured basis, by the Company.

At December 29, 2017, future principal payments on long-term debt were as follows (in millions):

                        

Fiscal Year

    Amount 

Remainder of 2018

    $—   

2019

     560 

2020

     —   

2021

     —   

2022

     750 

Thereafter

     3,613 
    

 

 

 

Total

    $4,923 
    

 

 

 

4.Income Taxes

Fiscal YearAmount
Remainder of 2023$608 
2024614 
2025627 
2026629 
2027649 
Thereafter3,188 
Total$6,315 
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Table of Contents
4.Income Taxes
The Company recorded an income tax provisions of $212benefit of $2 million and $219 million in the three and six months ended December 29, 2017, respectively. The income tax provision for the three and six months ended December 29, 2017 September 30, 2022. The income tax benefit included approximately $197$7 million ofnet discrete tax benefit, primarily associated with the excess tax benefits related to share-based compensation expense.
During the three months ended September 30, 2022, the Company’s unrecognized tax benefits excluding interest and penalties increased by approximately $1 million to $115 million, substantially all of which would impact the effective tax rate, if recognized, subject to certain future valuation allowance reversals. The Company is not expecting material changes to its unrecognized tax benefits in the next twelve months beginning October 1, 2022.
The Company’s income tax provision of $7 million for the three months ended October 1, 2021 included approximately $10 million of net discrete tax expense,benefit, primarily associated with the revaluation of U.S. deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017, partially offset by the recognition of previously unrecognizednet excess tax benefits associated with the expiration of certain statutes of limitation.

related to share-based compensation expense.

The Company’s income tax provision recorded for the three and six months ended December 29, 2017September 30, 2022 and October 1, 2021 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a reduction in the net U.S. deferred tax assets associated with revaluation to a lower U.S. tax rate.

During the six months ended December 29, 2017, the Company’s unrecognized tax benefits excluding interestcurrent year generation of research credits.

5.Restructuring and penalties increased by approximately $1 million to $75 million. The unrecognized tax benefits that, if recognized, would impact the effective tax rate were $75 million at December 29, 2017, subject to certain future changes in valuation allowance. During the 12 months beginning December 30, 2017, the Company expects that its unrecognized tax benefits could be reduced by approximately $2 million, primarily as a result of the expiration of certain statutes of limitation.

Exit Costs

The Company recorded an income tax provisionrestructuring charges of $13$9 million and $19 million in the three and six months ended December 30, 2016, respectively. The income tax provision for the six months ended December 30, 2016 included approximately $4 million of net discrete tax benefits, primarily associated with the release of tax reserves associated with the expiration of certain statutes of limitation and prior year tax adjustments.

The Company’s income tax provision recorded for the three and six months ended December 30, 2016 differed from the provision from income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a decrease in valuation allowance for certain deferred tax assets.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law in the United States. The Act significantly revises U.S. corporate income tax law by, among other things, lowering U.S. corporate income tax rates from 35% to 21%, implementing a territorial tax system and imposing a tax on deemed repatriated earnings ofnon-U.S. subsidiaries. The Act’s new international rules, including the Global IntangibleLow-Taxed Income, the Foreign Derived Intangible Income and the Base Erosion Anti-Avoidance Tax, are not expected to have a material impact on the Company’s financial statements. However, these assessments are based on preliminary review and analysis of the Act and are subject to change as the Company continues to evaluate these highly complex rules as additional interpretive guidance is issued.

Pursuant to SEC Staff Accounting Bulletin (SAB) 118 (regarding the application of ASC 740 associated with the enactment of the Act), the Company recorded a provisional tax expense of approximately $208$1 million, for the three months ended December 29, 2017 tore-measure its U.S. deferred tax assets at the newly enacted 21% tax rate.September 30, 2022 and October 1, 2021 respectively. The tax expense is provisional because the Company continues to evaluate the impact of various domestic and international provisions of the Act as well as the impact of additional guidance that may be provided. This provisional tax expense increased the Company’s effective tax rate for the three months ended December 29, 2017 to approximately 56%. Many of the other U.S. tax changesrestructuring plans are not expected to impact the Company’s tax expense in the short-term due the Company’s large net operating loss and tax credit carryovers.

5.Acquisitions

Dot Hill Systems Corp.

On October 6, 2015, the Company acquired all of the outstanding shares of Dot Hill Systems Corp. (“Dot Hill”), a supplier of software and hardware storage systems. The Company paid $9.75 per share, or $674 million, in cash for the acquisition. The acquisition of Dot Hill further expands the Company’sOEM-focused cloud storage systems business and advances the Company’s strategic efforts.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

                        

(Dollars in millions)

    Amount 

Cash and cash equivalents

    $40 

Accounts receivable, net

     48 

Inventories

     21 

Other current andnon-current assets

     7 

Property, plant and equipment

     10 

Intangible assets

     252 

Goodwill

     364 
    

 

 

 

Total assets

     742 
    

 

 

 

Accounts payable, accrued expenses and other

     (68) 
    

 

 

 

Total liabilities

     (68) 
    

 

 

 

Total

    $674 
    

 

 

 

The following table shows the fair value of the separately identifiable intangible assets at the time of acquisition and the period over which each intangible asset will be amortized:

                                                

(Dollars in millions)

    Fair Value   Weighted-
Average
Amortization
Period		 

Existing technology

    $164    5.0 years 

Customer relationships

     71    7.0 years 

Trade names

     3    5.0 years 
    

 

 

   

Total amortizable intangible assets acquired

     238    5.5 years 

In-process research and development

     14   
    

 

 

   

Total acquired identifiable intangible assets

    $252   
    

 

 

   

The recognized goodwill, which is not deductible for income tax purposes, is primarily attributable to cost synergies expected to arise after the acquisition and the benefits the Company expects to derive from enhanced market opportunities.

6.Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill for the six months ended December 29, 2017, are as follows:

                        

(Dollars in millions)

    Amount 

Balance at June 30, 2017

    $1,238 

Goodwill acquired

     —   

Goodwill disposed

     (1) 

Foreign currency translation effect

     1 
    

 

 

 

Balance at December 29, 2017

    $1,238 
    

 

 

 

Other Intangible Assets

Other intangible assets consist primarily of existing technology, customer relationships and trade names acquired in business combinations. Intangibles are amortized on a straight-line basis over the respective estimated useful lives of the assets. Amortization is charged to Operating expenses in the Condensed Consolidated Statements of Operations.

The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as of December 29, 2017, is set forth in the following table:

                                                                                                

(Dollars in millions)

    Gross Carrying
Amount		   Accumulated
Amortization		   Net Carrying
Amount		   Weighted-Average
Remaining Useful  Life		 

Existing technology

    $279   $(138)   $141    3.2 years 

Customer relationships

     105    (50)    55    4.3 years 

Trade name

     17    (11)    6    1.7 years 

Other intangible assets

     36    (16)    20    2.2 years 
    

 

 

   

 

 

   

 

 

   

Total amortizable other intangible assets

    $437   $(215)   $222    3.2 years 
    

 

 

   

 

 

   

 

 

   

The carrying value of other intangible assets subject to amortization, excluding fully amortized intangible assets, as of June 30, 2017 is set forth in the following table:

                                                                                                

(Dollars in millions)

    Gross Carrying
Amount		   Accumulated
Amortization		   Net Carrying
Amount		   Weighted-Average
Remaining Useful  Life		 

Existing technology

    $280   $(112)   $168    3.6 years 

Customer relationships

     487    (395)    92    3.4 years 

Trade name

     27    (19)    8    2.1 years 

Other intangible assets

     29    (16)    13    2.6 years 
    

 

 

   

 

 

   

 

 

   

Total amortizable other intangible assets

    $823   $(542)   $281    3.4 years 
    

 

 

   

 

 

   

 

 

   

For the three and six months ended December 29, 2017, the amortization expense of other intangible assets were $33 million and $69 million, respectively. For the three and six months ended December 30, 2016, the amortization expense of other intangible assets was $42 million and $84 million, respectively. As of December 29, 2017, expected amortization expense for other intangible assets for each of the next five fiscal years and thereafter is as follows:

                        

(Dollars in millions)

    Amount 

Remainder of 2018

    $40 

2019

     71 

2020

     53 

2021

     25 

2022

     17 

Thereafter

     16 
    

 

 

 

Total

    $222 
    

 

 

 

7.Restructuring and Exit Costs

For the three and six months ended December 29, 2017, the Company recorded restructuring charges of approximately $33 million and $84 million, respectively, comprised primarily of charges related to workforce reduction costs and facilityfacilities and other exit costs associated with the restructuring of its workforce during the fiscal year. The Company’s significant restructuring plans are described below.costs. All restructuring charges are reported in Restructuring and other, net on the Company’s Condensed Consolidated Statements of Operations.

December 2017 Plan -

The following tables summarize the Company’s restructuring activities under the Company’s active restructuring plans:
(Dollars in millions)Workforce Reduction CostsFacilities and Other Exit CostsTotal
Accrual balances at July 1, 2022$— $5 $5 
Restructuring charges9 — 9 
Cash payments(3)(1)(4)
Accrual balances at September 30, 2022$6 $4 $10 
Total costs incurred inception to date as of September 30, 2022$72 $24 $96 
Total expected charges to be incurred as of September 30, 2022$— $1 $1 
On December 8, 2017,October 24, 2022, the CompanyCompany’s Board of Directors approved and committed to aan October 2022 restructuring plan (the “December 2017“October 2022 Plan”) to reduce its cost structure. The December 2017 Plan included reducingstructure to better align the Company’s globaloperational needs to current economic conditions while continuing to support the long-term business strategy. The October 2022 Plan includes reducing its worldwide headcount by approximately 500 employees. 3,000 employees, or 8% of the global workforce, along with other cost saving measures.
The December 2017October 2022 Plan, is expectedwhich the Company expects to be substantially completed by the end of the fiscal year 2018.

July 2017 Plan -On July 25, 2017, the Company committedsecond quarter 2023, is expected to a restructuring plan (the “July 2017 Plan”) to reduce its cost structure. The July 2017 Plan included reducing the Company’s global headcount by approximately 600 employees. The July 2017 Plan was largely completed by the end of the September 2017 quarter.

March 2017 Plan -On March 9, 2017, the Company committed to a restructuring plan (the “March 2017 Plan”)result in connection with the continued consolidation of its global footprint. The Company closed its design center in Korea, resulting in the reduction of the Company’s headcount by approximately 300 employees. The March 2017 Plan was largely completed by the end of fiscal year 2017.

July 2016 Plan - On July 11, 2016, the Company committed to a restructuring plan (the “July 2016 Plan”) for continued consolidation of its global footprint across Asia, EMEAtotal pre-tax charges between $60 million and the Americas. The July 2016 Plan included reducing worldwide headcount by approximately 6,500 employees. The July 2016 Plan was largely completed by the end of the December 2017 quarter.

In addition, during fiscal year 2017, the Company committed to sell certain land and buildings primarily in Asia as part of the March 2017 and July 2016 plans, which accordingly met the criteria$70 million. These charges are expected to be classified as assets held for saleprimarily cash-based and were reclassified to Other current assets at that time. These assets remained included in Other current assets on the Condensed Consolidated Balance Sheet asconsist of December 29, 2017.

  December 2017 Plan  July 2017 Plan  March 2017 Plan  July 2016 Plan  Other Plans    

(Dollars in millions)

 Workforce
Reduction
Costs		  Facilities
and
Other
Exit
Costs		  Workforce
Reduction
Costs		  Facilities
and
Other
Exit
Costs		  Workforce
Reduction
Costs		  Facilities
and
Other
Exit
Costs		  Workforce
Reduction
Costs		  Facilities
and
Other
Exit
Costs		  Workforce
Reduction
Costs		  Facilities
and
Other
Exit
Costs		  Total 
Accrual balances at June 30, 2017 $—    $—    $—    $—    $—    $—    $22  $2  $6  $13  $43 

Restructuring charges

  27   —     38   4   —     —     1   9   2   —     81 

Cash payments

  (3)   —     (35)   (3)   —     —     (21)   (11)   (7)   —     (80) 

Adjustments

  —     —     (1)   —     2   —     2   —     —     —     3 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Accrual balances at December 29, 2017 $24  $—    $2  $1  $2  $—    $4  $—    $1  $13  $47 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Total costs incurred to date as of December 29, 2017 $27  $—    $37  $4  $31  $3  $82  $29  $228  $51  $492 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
Total expected charges to be incurred as of December 29, 2017 $3  $7  $—    $—    $—    $1  $1  $4  $—    $3  $19 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
           
Restructuring charges for the three months ended December 29, 2017 $27  $—    $(1)  $—    $1  $—    $2  $3  $1  $—    $33 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

8.Derivative Financial Instruments

employee severance and other one-time termination benefits.

6.Derivative Financial Instruments
The Company is exposed to foreign currency exchange rate, interest rate and to a lesser extent, equity market risks relating to its ongoing business operations. TheFrom time to time, the Company enters into cash flow hedges in the form of foreign currency forward exchange contracts in order to manage the foreign currency exchange rate risk on forecasted expenses and investments denominated in foreign currencies.
16
Table of Contents
The Company enters into certain interest rate swap agreements to convert the variable interest rate on its Term Loans to fixed interest rates. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with the variable interest rate under the Term Loans. The Company designates the interest rate swaps as cash flow hedges. On September 26, 2022, the Company terminated its then existing interest rate swap agreements related to Term Loans A1 and A2 and received cash proceeds of $110 million from the counterparty. The cash proceeds are reported within Net cash provided by operating activities in the Company’s Condensed Consolidated Statement of Cash Flows. The Company discontinued the related hedge accounting prospectively and as a result the realized gain of $110 million continues to be reported in AOCI and is amortized to Interest expense in the Condensed Consolidated Statement of Operations over the remaining period of the Term Loans A1 and A2.
During the quarter ended September 30, 2022, the Company entered into new interest rate swap agreements with a notional amount of $1.6 billion, to convert the variable interest rate on certain principal amounts of the Term Loans drawn under its Credit Agreement, of which $600 million will mature in September 2025 and $1.0 billion will mature in July 2027.
The Company’s accounting policies for these instruments are based on whether the instruments are classified as designated ornon-designated hedging instruments. The Company records all derivatives in theon its Condensed Consolidated Balance Sheets at fair value. The changes in the fair value of thehighly effective portions of designated cash flow hedges are recorded in Accumulated other comprehensive lossAOCI until the hedged item is recognized in earnings. Derivatives that are not designated as hedging instruments and the ineffective portions of cash flow hedgesor are not assessed to be highly effective are adjusted to fair value through earnings. The Company had no outstandingamount of net unrealized loss on cash flow hedges was $23 million and net unrealized gain was $51 million as of December 29, 2017September 30, 2022 and Juneas of July 1, 2022, respectively. As of September 30, 2017.

2022, the amount of existing net gains related to cash flow hedges recorded in AOCI included a net loss of $3 million that is expected to be reclassified to earnings within twelve months.

The Company dedesignatesde-designates its cash flow hedges when the forecasted hedged transactions are realizedaffect earnings or it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in Accumulated other comprehensive lossAOCI on the Company’s Condensed Consolidated Balance Sheets are reclassified immediately into earnings and any subsequent changes in the fair value of such derivative instruments are immediately reflected in earnings. The Company did not recognize anyrecognized a net gains or lossesloss of $7 million and gain of $2 millionin Cost of revenue and Interest expense, respectively, related to the gain and loss of hedge designation on discontinued cash flow hedges during the three months ended September 30, 2022. The Company recognized a net loss of $2 million and $1 million in Cost of revenue and Interest expense, respectively, related to the loss of hedge designation on discontinued cash flow hedges during the three and six months ended December 29, 2017.

AsOctober 1, 2021.

Other derivatives not designated as hedging instruments consist of December 29, 2017 and June 30, 2017,foreign currency forward exchange contracts that the Company does not haveuses to hedge the foreign currency exposure on forecasted expenditures denominated in currencies other than the U.S. dollar. The Company also enters into foreign currency forward contracts with contractual maturities of less than one month, which are designed to mitigate the effect of changes in foreign exchange rates on monetary assets and liabilities. The Company recognizes gains and losses on these contracts, as well as the related costs in Other, net on its Condensed Consolidated Statements of Operations.
17
Table of Contents
The following tables show the total notional value of the Company’s outstanding foreign currency forward exchange contracts.

contracts as of September 30, 2022 and July 1, 2022. All of the foreign currency forward exchange contracts mature within 12 months.

 As of September 30, 2022
(Dollars in millions)Contracts Designated as HedgesContracts Not Designated as Hedges
Singapore Dollar$171 $72 
Thai Baht132 47 
Chinese Renminbi89 30 
British Pound Sterling61 24 
Total$453 $173 
 As of July 1, 2022
(Dollars in millions)Contracts Designated as HedgesContracts Not Designated as Hedges
Singapore Dollar$178 $52 
Thai Baht133 35 
Chinese Renminbi92 24 
British Pound Sterling64 15 
Total$467 $126 
The Company is subject to equity market risks due to changes in the fair value of the notional investments selected by its employees as part ofits Non-qualified Deferred Compensation Plan—non-qualified deferred compensation plan: the Seagate Deferred Compensation Plan (the “SDCP”). In fiscal year 2014, the Company entered into a Total Return Swap (“TRS”) in order to manage the equity market risks associated with the SDCPSDCP’s liabilities. The Company pays a floating rate, based on LIBOR plus an interest rate spread, on the notional amount of the TRS. The TRS is designed to substantially offset changes in the SDCP liabilitySDCP’s liabilities due to changes in the value of the investment options made by employees. As of December 29, 2017,September 30, 2022, the notional investments underlying the TRS amounted to $117 million. The$98 million and the contract term of the TRS is through January 2019 and is2023, settled on a monthly basis, therefore limiting counterparty performance risk. The Company did not designate the TRS as a hedge. Rather, the Company records all changes in the fair value of the TRS to earnings to offset the market value changes of the SDCPSDCP’s liabilities.

As of December 29, 2017 and June 30, 2017,

The following tables show the Company had no outstanding foreign currency forward exchange contracts and theCompany’s derivative instruments measured at gross fair value of the TRSas reflected in the Condensed Consolidated Balance Sheets respectively, is immaterial.

as of September 30, 2022 and July 1, 2022:
As of September 30, 2022
 Derivative AssetsDerivative Liabilities
(Dollars in millions)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:    
Foreign currency forward exchange contractsOther current assets$— Accrued expenses$(29)
Interest rate swapOther current assets9 Accrued expenses(3)
Derivatives not designated as hedging instruments:  
Foreign currency forward exchange contractsOther current assets— Accrued expenses(11)
Total return swapOther current assets— Accrued expenses(11)
Total derivatives $9  $(54)

18
Table of Contents
As of July 1, 2022
 Derivative AssetsDerivative Liabilities
(Dollars in millions)Balance Sheet LocationFair ValueBalance Sheet LocationFair Value
Derivatives designated as hedging instruments:    
Foreign currency forward exchange contractsOther current assets$— Accrued expenses$(14)
Interest rate swapOther current assets65 Accrued expenses— 
Derivatives not designated as hedging instruments:  
Foreign currency forward exchange contractsOther current assets— Accrued expenses(5)
Total return swapOther current assets— Accrued expenses(4)
Total derivatives $65  $(23)
The following tables show the effect of the Company’s derivative instruments on the Condensed Consolidated StatementStatements of Comprehensive Income and the Condensed Consolidated StatementStatements of Operations for the three and six months ended December 29, 2017.

                                                                        

(Dollars in millions)

Derivatives Not Designated as Hedging Instruments

    Location of Gain or
(Loss) Recognized in
Income on Derivatives		    Amount of Gain or
(Loss) Recognized in
Income on Derivatives		 
        For the Three Months     For the Six Months 

Foreign currency forward exchange contracts

    Other, net    $—       $—   

Total return swap

    Operating expenses     4      7 

September 30, 2022:

(Dollars in millions)
Derivatives Not Designated as Hedging Instruments
Location of Gain/(Loss) Recognized in Income on DerivativesAmount of Gain/(Loss) Recognized in Income on Derivatives
Foreign currency forward exchange contractsOther, net$(10)
Total return swapOperating expenses(8)

(Dollars in millions)
Derivatives Designated as Hedging Instruments
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Location of Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)Amount of Gain/(Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign currency forward exchange contracts$(20)Cost of revenue$(7)Other, net$(1)
Interest rate swap52 Interest expense2 Interest expense— 
The following tables showtable shows the effect of the Company’s derivative instruments on the Condensed Consolidated StatementStatements of Comprehensive Income and the Condensed Consolidated StatementStatements of Operations for the three and six months ended December 30, 2016:

                                                                                                                                                                                                

(Dollars in millions)

Derivatives Designated as Hedging Instruments

    Amount of
Gain or
(Loss)
Recognized
in OCI on
Derivatives
(Effective
Portion)		   Location of
Gain or (Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)		   Amount of
Gain or
(Loss)
Reclassified
from
Accumulated
OCI into
Income
(Effective
Portion)		   Location of
Gain or (Loss)
Recognized in
Income on
Derivatives
(Ineffective
Portion and
Amount Excluded
from
Effectiveness
Testing)		   Amount of
Gain
or (Loss)
Recognized in
Income
(Ineffective
Portion and
Amount
Excluded from
Effectiveness
Testing) (a)		 
    For the
Three
Months		   For the
Six
Months		     For the
Three
Months		   For the
Six
Months		     For the
Three
Months		   For the
Six
Months		 

Foreign currency forward exchange contracts

    $(2)   $(3)    Cost of revenue   $  —     $(1)    Cost of revenue   $  —     $  —   

                                                                        

Derivatives Not Designated as Hedging Instruments

    Location of Gain or
(Loss)  Recognized in
Income on Derivatives		    Amount of Gain or
(Loss) Recognized in
Income on Derivatives		 
        For the Three Months     For the Six Months 

Foreign currency forward exchange contracts

    Other, net    $(2)     $(3) 

Total return swap

    Operating expenses     1     $4 

October 1, 2021:
(a)The amount
(Dollars in millions)
Derivatives Not Designated as Hedging Instruments
Location of gain or (loss) recognizedGain/(Loss) Recognized in income related to the ineffective portionIncome on DerivativesAmount of the hedging relationships and the amount excluded from the assessment of hedge effectiveness were less than $1 million for the three and six months ended December 30, 2016.Gain/(Loss) Recognized in Income on Derivatives
Foreign currency forward exchange contractsOther, net$(4)
Total return swapOperating expenses(1)

9.Fair Value


(Dollars in millions)
Derivatives Designated as Hedging Instruments
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)Location of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Amount of Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion)Location of Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)Amount of Gain/(Loss) Recognized in Income (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Foreign currency forward exchange contracts$(9)Cost of revenue$(2)Other, net$1 
Interest rate swap— Interest expense(1)Interest expense— 
19
Table of Contents
7.Fair Value
Measurement of Fair Value

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact, and it considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

A fair value hierarchy is based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflectsreflect the Company’s own assumptions of market participant valuation (unobservable inputs). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of inputs that may be used to measure fair value are:

Level 1 —- Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 —- Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or

Level 3 —- Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement.

The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate, the Company’s or the counterparty’snon-performance risk is considered in determining the fair values of liabilities and assets, respectively.

20
Table of Contents
Items Measured at Fair Value on a Recurring Basis

The following tables present the Company’s assets and liabilities, by financial instrument type and balance sheet line item, that are measured at fair value on a recurring basis, excluding accrued interest components, as of:
September 30, 2022July 1, 2022
 Fair Value Measurements at Reporting Date UsingFair Value Measurements at Reporting Date Using
(Dollars in millions)Quoted Prices in Active Markets for Identical Instruments (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total BalanceQuoted Prices in Active Markets for Identical Instruments (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total Balance
Assets:
Money market funds$158 $— $— $158 $59 $— $— $59 
Total cash equivalents158 — — 158 59 — — 59 
Restricted cash and investments:    
Money market funds1 — — 1 1 — — 1 
Time deposits and certificates of deposit— 1 — 1 — 1 — 1 
Other debt securities— — 16 16 — — 23 23 
Derivative assets— 9 — 9 — 65 — 65 
Total assets$159 $10 $16 $185 $60 $66 $23 $149 
Liabilities:    
Derivative liabilities$— $54 $— $54 $— $23 $— $23 
Total liabilities$— $54 $— $54 $— $23 $— $23 
September 30, 2022July 1, 2022
 Fair Value Measurements at Reporting Date UsingFair Value Measurements at Reporting Date Using
(Dollars in millions)Quoted Prices in Active Markets for Identical Instruments (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total BalanceQuoted Prices in Active Markets for Identical Instruments (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Total Balance
Assets:    
Cash and cash equivalents$158 $— $— $158 $59 $— $— $59 
Other current assets1 10 — 11 1 66 — 67 
Other assets, net— — 16 16 — — 23 23 
Total assets$159 $10 $16 $185 $60 $66 $23 $149 
Liabilities:    
Accrued expenses$— $54 $— $54 $— $23 $— $23 
Total liabilities$— $54 $— $54 $— $23 $— $23 
21
Table of December 29, 2017:

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		   Total
Balance		 

Assets:

          

Money market funds

    $673   $—     $—     $673 

Time deposits

     —      387    —      387 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents

     673    387    —      1,060 
    

 

 

   

 

 

   

 

 

   

 

 

 

Restricted cash and investments:

          

Money market funds

     1    —      —      1 

Time deposits and certificates of deposit

     —      3    —      3 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $674   $390   $—     $1,064 
    

 

 

   

 

 

   

 

 

   

 

 

 

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		   Total
Balance		 

Assets:

          

Cash and cash equivalents

    $673   $387   $—     $1,060 

Other current assets

     1    3    —      4 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $674   $390   $—     $1,064 
    

 

 

   

 

 

   

 

 

   

 

 

 

The following tables present the Company’s assets and liabilities, by financial instrument type and balance sheet line item that are measured at fair value on a recurring basis, excluding accrued interest components, as of June 30, 2017:

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		   Total
Balance		 

Assets:

          

Money market funds

    $593   $—     $—     $593 

Time deposits

     —      581    —      581 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total cash equivalents

     593    581    —      1,174 
    

 

 

   

 

 

   

 

 

   

 

 

 

Restricted cash and investments:

          

Money market funds

     1    —      —      1 

Time deposits and certificates of deposit

     —      3    —      3 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $594   $584   $—     $1,178 
    

 

 

   

 

 

   

 

 

   

 

 

 

                                                                                                
     Fair Value Measurements at Reporting Date Using 

(Dollars in millions)

    Quoted Prices
in Active
Markets for
Identical
Instruments
(Level 1)		   Significant
Other
Observable
Inputs
(Level 2)		   Significant
Unobservable
Inputs
(Level 3)		   Total
Balance		 

Assets:

          

Cash and cash equivalents

    $593   $581   $—     $1,174 

Other current assets

     1    3    —      4 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

    $594   $584   $—     $1,178 
    

 

 

   

 

 

   

 

 

   

 

 

 

Contents

The Company classifies items in Level 1 if the financial assets consist of securities for which quoted prices are available in an active market.

The Company classifies items in Level 2 if the financial asset or liability is valued using observable inputs. The Company uses observable inputs including quoted prices in active markets for similar assets or liabilities. Level 2 assets include: agency bonds, corporate bonds, commercial paper, municipal bonds, U.S. Treasuries, time deposits and certificates of deposit. These debt investments are priced using observable inputs and valuation models which vary by asset class. The Company uses a pricing service to assist in determining the fair valuesvalue of all of its cash equivalents. For the cash equivalents and short-term investments in the Company’s portfolio, multiple pricing sources are generally available. The pricing service uses inputs from multiple industry standardindustry-standard data providers or other third partythird-party sources and various methodologies, such as weighting and models, to determine the appropriate price at the measurement date. The Company corroborates the prices obtained from the pricing service against other independent sources and, as of December 29, 2017,September 30, 2022, has not found it necessary to make any adjustments to the prices obtained. The Company’s derivative financial instruments are also classified within Level 2. The Company’s derivative financial instruments consist of foreign currency forward exchange contracts, interest rate swaps and the TRS. The Company recognizes derivative financial instruments in its condensed consolidated financial statements at fair value. The Company determines the fair value of these instruments by considering the estimated amount it would pay or receive to terminate these agreements at the reporting date.

As of December 29, 2017 and June 30, 2017, the Company had no Level 3 assets or liabilities measured at fair value on a recurring basis.

Items Measured at Fair Value on aNon-Recurring Basis

From time to time, the Company enters into certain strategic investments for the promotion of business and strategic objectives. These strategic investments primarily include cost basis investments representing those whereobjectives, which are accounted for either under the Company does not have the ability to exercise significant influence as well as equity method investments representing those whereor the Company does have the ability to exercise significant influence but does not have control. These investments are included in Other assets, netmeasurement alternative. If measured at fair value in the Condensed Consolidated Balance Sheets, these investments would generally be classified in Level 3 of the fair value hierarchy.
For the investments that are accounted for under the equity method, the Company recorded a net loss of $3 million and gain of $3 million for the three months ended September 30, 2022 and October 1, 2021, respectively. The adjusted carrying value of the investments accounted for under the equity method amounted to $58 million and $61 million as of September 30, 2022 and July 1, 2022, respectively.
For the investments that are periodically analyzedaccounted for under the measurement alternative, the Company recorded $3 million of net gains, which remains unrealized, for the three months ended September 30, 2022, related to determine whether or not there are indicatorsupward adjustments due to observable price changes. The Company recorded a net gain of impairment. The$6 million for the three months ended October 1, 2021, of which $5 million is unrealized as of October 1, 2021, related to upward adjustments due to observable price changes. As of September 30, 2022 and July 1, 2022, the carrying value of the Company’s strategic investments at December 29, 2017 and June 30, 2017 totaled $129under the measurement alternative was $99 million and $125$88 million respectively, and consisted primarily of privately held equity securities without a readily determinable fair value.

For the three and six months ended December 29, 2017, the Company did not have any equity investments accounted for under the cost method that were other-than-temporarily impaired and did not record any impairment charges. For the six months ended December 30, 2016, the Company determined that a certain equity investment accounted for under the cost method was other-than-temporarily impaired, and recognized a charge of $25 million in order to write down the carrying amount of the investment to zero. Since there was no active market for the equity securities of the investee, the Company estimated fair value of the investee by analyzing the underlying cash flows and future prospects of the investee. These amounts were recorded in Other, net in the Condensed Consolidated Statements of Operations. The Company did not record any impairment charges in the three months ended December 30, 2016.

As of December 29, 2017 and June 30, 2017, the Company had $77 million held for sale assets included in Other current assets on the Condensed Consolidated Balance Sheets, which primarily consisted of $37 million of land and building in Korea and $26 million of land and building in China, with the remainder of the balance comprised of property at other locations (collectively, the “properties”). The respective properties to be sold met the criteria to be classified as held for sale during the quarters ended March 31, 2017 and June 30, 2017. Depreciation related to the properties ceased as of the date these were determined to be held for sale. During fiscal year 2017, the Company recorded impairment charges of $35 million to write down the carrying amount of such properties to their estimated fair values less costs to sell. The impairment charges were recorded in Operating expenses in the Condensed Consolidated Statement of Operations. No additional impairment charges related to these properties were recorded during the three and six months period ended December 29, 2017. The fair values were measured with the assistance of third-party valuation models which used inputs such as comparable market data for similar land sale transactions adjusted for differences in comparable properties to derive the estimated fair value of the subject properties and the cost approach valuation techniques for buildings as part of the analysis. The fair value measurement was categorized as Level 3 as significant unobservable inputs were used in the valuation analysis.

, respectively.

Other Fair Value Disclosures

The Company’s debt is carried at amortized cost. The estimated fair value of the Company’s debt is derived using the closing price of the same debt instruments as of the date of valuation, which takes into account the yield curve, interest rates and other observable inputs. Accordingly, these fair value measurements are categorized as Level 2. The following table presents the fair value and amortized cost of the Company’s debt in order of maturity:
22
Table of Contents
 September 30, 2022July 1, 2022
(Dollars in millions)Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
4.750% Senior Notes due June 2023$540 $537 $540 $538 
4.875% Senior Notes due March 2024499 489 499 494 
4.750% Senior Notes due January 2025479 457 479 471 
4.875% Senior Notes due June 2027504 457 504 483 
4.091% Senior Notes due June 2029468 396 466 427 
3.125% Senior Notes due July 2029500 368 500 396 
4.125% Senior Notes due January 2031500 375 500 410 
3.375% Senior Notes due July 2031500 350 500 393 
5.750% Senior Notes due December 2034489 386 489 433 
SOFR Based Term Loan A1 due September 2025 (1)
600 589 600 588 
SOFR Based Term Loan A2 due July 2027 (1)
600 581 600 586 
SOFR Based Term Loan A3 due July 2027600 584 — — 
$6,279 $5,569 $5,677 $5,219 
Less: unamortized debt issuance costs(30)— (31)— 
Debt, net of debt issuance costs$6,249 $5,569 $5,646 $5,219 
Less: current portion of debt, net of debt issuance costs(636)(630)(584)(582)
Long-term debt, less current portion, net of debt issuance costs$5,613 $4,939 $5,062 $4,637 

                                                                                                
     December 29, 2017   June 30, 2017 

(Dollars in millions)

    Carrying
Amount		   Estimated
Fair Value		   Carrying
Amount		   Estimated
Fair Value		 

3.75% Senior Notes due November 2018

    $560   $567   $710   $726 

4.25% Senior Notes due March 2022

     748    758    748    765 

4.75% Senior Notes due June 2023

     951    972    951    987 

4.875% Senior Notes due March 2024

     497    504    497    511 

4.75% Senior Notes due January 2025

     975    961    975    984 

4.875% Senior Notes due June 2027

     695    668    695    698 

5.75% Senior Notes due December 2034

     489    473    489    488 
    

 

 

   

 

 

   

 

 

   

 

 

 
    $4,915   $4,903   $5,065   $5,159 

Less: debt issuance costs

     (39)    —      (44)    —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, net of debt issuance costs

    $4,876   $4,903   $5,021   $5,159 

Less: current portion of long-term debt

     (560)    (567)    —      —   
    

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt, less current portion

    $4,316   $4,336   $5,021   $5,159 
    

 

 

   

 

 

   

 

 

   

 

 

 

10.Equity

(1) On August 18, 2022, the Sixth Amendment to the Credit Agreement replaced the LIBOR interest rates plus variable margin of Term Loans A1 and A2 with the SOFR interest rates plus a variable margin. Refer to “Note 3. Debt” for more details.

8.Shareholders’ Deficit
Share Capital

The Company’s authorized share capital isis $13,500 and consists of 1,250,000,000 ordinary shares, par value $0.00001, of which 284,573,784206,434,139 shares were outstanding as of December 29, 2017, September 30, 2022, and 100,000,000 preferred shares, par value $0.00001, of which none were issued or outstanding as of December 29, 2017.

September 30, 2022.

Ordinary shares—- Holders of ordinary shares are entitled to receive dividends aswhen and whenas declared by the Company’s board of directors (the “Board of Directors”). Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of preferred shares, any remaining assets of the Company will be distributed ratably to holders of the preferred and ordinary shares. Holders of shares are entitled to one vote per share on all matters upon which the ordinary shares are entitled to vote, including the election of directors.

Preferred shares—- The Company may issue preferred shares in one or more series, up to the authorized amount, without shareholder approval. The Board of Directors is authorized to establish from time to time the number of shares to be included in each series, and to fix the rights, preferences and privileges of the shares of each wholly unissued series and any of its qualifications, limitations or restrictions. The Board of Directors can also increase or decrease the number of shares of a series, but not below the number of shares of that series then outstanding, without any further vote or action by the shareholders.

The Board of Directors may authorize the issuance of preferred shares with voting or conversion rights that could harm the voting power or other rights of the holders of the ordinary shares. The issuance of preferred shares, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company and might harm the market price of its ordinary shares and the voting and other rights of the holders of ordinary shares.

Repurchases of Equity Securities

On April 22, 2015, the Board of Directors authorized the Company to repurchase $2.5 billion of its outstanding ordinary shares.

All repurchases are effected as redemptions in accordance with the Company’s Articles of Association.

Constitution.

As of December 29, 2017, $0.9September 30, 2022, $1.9 billion remained available for repurchase under the existing repurchase authorization limit.

The following table sets forth information with respect to repurchases of the Company’s ordinary shares during the sixthree months ended December 29, 2017:

                                                

(In millions)

    Number of Shares
Repurchased		   Dollar Value of Shares
Repurchased		 

Repurchases of ordinary shares

     10   $361 

Tax withholding related to vesting of equity awards

     1    21 
    

 

 

   

 

 

 

Total

     11   $382 
    

 

 

   

 

 

 

11.Share-based Compensation

The Company recorded approximately $27 million and $59 millionSeptember 30, 2022:

23
Table of share-based compensation expense duringContents
(In millions)Number of Shares RepurchasedDollar Value of Shares Repurchased
Repurchases of ordinary shares (1)
5 $400 
Tax withholding related to vesting of equity awards1 39 
Total6 $439 

(1) These amounts differ from the three and six months ended December 29, 2017, respectively. The Company recorded approximately $33 million and $73 millionrepurchases of share-based compensation expense during the three and six months ended December 30, 2016, respectively.

12.Guarantees

Indemnifications to Officers and Directors

On May 4, 2009, Seagate Technology, an exempted company incorporated with limited liability under the laws of the Cayman Islands (“Seagate-Cayman”), then the parent company, entered into a new form of indemnification agreement (the “Revised Indemnification Agreement”) with its officers and directors of Seagate-Cayman and its subsidiaries (each, an “Indemnitee”). The Revised Indemnification Agreement provides indemnification in addition to any of Indemnitee’s indemnification rights under Seagate-Cayman’s Articles of Association, applicable law or otherwise, and indemnifies an Indemnitee for certain expenses (including attorneys’ fees), judgments, fines and settlementordinary shares amounts actually and reasonably incurred by him or her in any action or proceeding, including any action by or in the rightcondensed consolidated statements of Seagate-Cayman or any of its subsidiaries, arising out of his or her service as a director, officer, employee or agent of Seagate-Cayman or any of its subsidiaries or of any other entitycash flows due to which he or shetiming differences between repurchases and cash settlement thereof.

9.Revenue
The following table provides services at Seagate-Cayman’s request. However, an Indemnitee shall not be indemnified under the Revised Indemnification Agreement for (i) any fraud or dishonesty in the performance of Indemnitee’s duty to Seagate-Cayman or the applicable subsidiary of Seagate- Cayman or (ii) Indemnitee’s conscious, intentional or willful failure to act honestly, lawfullyinformation about disaggregated revenue by sales channel and in good faith with a view to the best interests of Seagate-Cayman or the applicable subsidiary of Seagate-Cayman. In addition, the Revised Indemnification Agreement provides that Seagate-Cayman will advance expenses incurred by an Indemnitee in connection with enforcement of the Revised Indemnification Agreement or with the investigation, settlement or appeal of any action or proceeding against him or her as to which he or she could be indemnified.

On July 3, 2010, pursuant to a corporate reorganization, the common shareholders of Seagate-Cayman became ordinary shareholders of Seagate Technology plc (the “Company”) and Seagate-Cayman became a wholly owned subsidiary of the Company, as described more fully in the Current Report on Form8-K filed by the Company on July 6, 2010 (the “Redomestication”). On July 27, 2010, in connection with the Redomestication, the Company, as sole shareholder of Seagate-Cayman, approved a form of deed of indemnity (the “Deed of Indemnity”), which providesgeographical region for the indemnification by Seagate-Cayman of any director, officer, employee or agent of theCompany’s single reportable segment:
For the Three Months Ended
(Dollars in millions)September 30,
2022		October 1,
2021
Revenues by Channel 
OEMs$1,545 $2,288 
Distributors299 507 
Retailers191 320 
Total$2,035 $3,115 
Revenues by Geography (1)
Asia Pacific$801 $1,583 
Americas936 1,079 
EMEA298 453 
Total$2,035 $3,115 

(1) Revenue is attributed to geography based on bill from locations.
10.Guarantees
Indemnification Obligations
The Company Seagate-Cayman or any subsidiary of the Company (each, a “Deed Indemnitee”), in addition to any of a Deed Indemnitee’s indemnification rights under the Company’s Articles of Association, applicable law or otherwise, with a similar scope to the Revised Indemnification Agreement. Seagate-Cayman entered into the Deed of Indemnity with certain Deed Indemnitees effective as of July 3, 2010 and continues to enter into the Deed of Indemnity with additional Deed Indemnitees from time to time.

time enters into agreements with customers, suppliers, partners and others in the ordinary course of business that provide indemnification for certain matters including, but not limited to, intellectual property infringement claims, environmental claims and breach of agreement claims. The nature of thesethe Company’s indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay on behalf of its officers and directors.pay. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanyingCompany’s condensed consolidated financial statements with respect to these indemnification obligations.

Intellectual Property Indemnification Obligations

The Company has entered into agreements with customers and suppliers that include limited intellectual property indemnification obligations that are customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result

24
Table of third party intellectual property claims arising from these transactions. The nature of the intellectual property indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its customers and suppliers. Historically, the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying condensed consolidated financial statements with respect to these indemnification obligations.

Contents

Product Warranty

The Company estimates probable product warranty costs at the time revenue is recognized. The Company generally warrants its products for a period of 1 to 5 years. The Company uses estimated repair or replacement costs and uses statistical modeling to estimate product warranty return rates in order to determine its warranty obligation. Changes in the Company’s product warranty liability during the three and six months ended December 29, 2017September 30, 2022 and December 30, 2016October 1, 2021 were as follows:

                                                                                                
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Balance, beginning of period

    $230   $216   $233   $206 

Warranties issued

     40    34    75    65 

Repairs and replacements

     (27)    (29)    (54)    (59) 

Changes in liability forpre-existing warranties, including expirations

     (7)    1    (18)    10 
    

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

    $236   $222   $236   $222 
    

 

 

   

 

 

   

 

 

   

 

 

 

13.Earnings Per Share

 For the Three Months Ended
(Dollars in millions)September 30,
2022		October 1,
2021
Balance, beginning of period$148 $136 
Warranties issued13 21 
Repairs and replacements(24)(23)
Changes in liability for pre-existing warranties, including expirations12 6 
Balance, end of period$149 $140 

11.Earnings Per Share
Basic earnings per share is computed by dividing income available to shareholders by the weighted-average number of shares outstanding during the period. Diluted earnings per share is computed by dividing income available to shareholders by the weighted-average number of shares outstanding during the period and the number of additional shares that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding options, unvested restricted stockshare units and performance-based share units and shares to be purchased under the Employee Stock Purchase Plan (“ESPP”).Plan. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in fair market value of the Company’s share price can result in a greater dilutive effect from potentially dilutive securities. The following table sets forth the computation of basic and diluted net income per share attributable to the shareholders of the Company:

                                                                                                
     For the Three Months Ended   For the Six Months Ended 

(In millions, except per share data)

    December 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Numerator:

          

Net income

    $159   $297   $340   $464 
    

 

 

   

 

 

   

 

 

   

 

 

 

Number of shares used in per share calculations:

          

Total shares for purposes of calculating basic net income per share

     288    296    289    297 

Weighted-average effect of dilutive securities:

          

Employee equity award plans

     3    2    2    2 
    

 

 

   

 

 

   

 

 

   

 

 

 

Total shares for purpose of calculating diluted net income per share

     291    298    291    299 
    

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

          

Basic

    $0.55   $1.00   $1.18   $1.56 

Diluted

    $0.55   $1.00   $1.17   $1.55 

 For the Three Months Ended
(In millions, except per share data)September 30,
2022		October 1,
2021
Numerator:  
Net income$29 $526 
Number of shares used in per share calculations:  
Total shares for purposes of calculating basic net income per share208 226 
Weighted-average effect of dilutive securities:  
Employee equity award plans2 5 
Total shares for purposes of calculating diluted net income per share210 231 
Net income per share:  
Basic$0.14 $2.33 
Diluted$0.14 $2.28 
The anti-dilutive shares related to employee equity award plans that were excluded from the computation of diluted net income per share were 1 million and 2 millionnot material for the three and six months ended December 29, 2017, respectively,September 30, 2022 and October 1, million2021.
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12.Legal, Environmental and 2 million for the three and six months ended December 30, 2016, respectively.

14.Legal, Environmental and Other Contingencies

Other Contingencies

The Company assesses the probability of an unfavorable outcome of all its material litigation, claims or assessments to determine whether a liability had been incurred and whether it is probable that one or more future events will occur confirming the fact of the loss. In the event that an unfavorable outcome is determined to be probable and the amount of the loss can be reasonably estimated, the Company establishes an accrual for the litigation, claim or assessment. In addition, in the event an unfavorable outcome is determined to be less than probable, but reasonably possible, the Company will disclose an estimate of the possible loss or range of such loss; however, when a reasonable estimate cannot be made, the Company will provide disclosure to that effect. Litigation is inherently uncertain and may result in adverse rulings or decisions. Additionally, the Company may enter into settlements or be subject to judgments that may, individually, or in the aggregate, have a material adverse effect on its results of operations. Accordingly, actual results could differ materially.

Intellectual Property

Litigation

Convolve, Inc. (“Convolve”) and Massachusetts Institute of Technology (“MIT”) v. Seagate Technology LLC, et al. On July 13, 2000, Convolve and MIT filed suit against Compaq Computer Corporation and Seagate Technology LLC in the U.S. District Court for the Southern District of New York, alleging infringement of U.S. Patent No. 4,916,635 (the “‘635 patent”) and U.S. Patent No. 5,638,267 (the “‘267 patent”), misappropriation of trade secrets, breach of contract, and other claims. On January 16, 2002, Convolve filed an amended complaint, alleging defendants infringe U.S. Patent No. 6,314,473 (the “‘473 patent”). The district court ruled in 2010 that the ‘267 patent was out of the case.

On August 16, 2011, the district court granted in part and denied in part the Company’s motion for summary judgment. On July 1, 2013, the U.S. Court of Appeals for the Federal Circuit: 1) affirmed the district court’s summary judgment rulings that Seagate did not misappropriate any of the alleged trade secrets and that the asserted claims of the ‘635 patent are invalid; 2) reversed and vacated the district court’s summary judgmentof non-infringement with respect to the ‘473 patent; and 3) remanded the case for further proceedings on the ‘473 patent. On July 11, 2014, the district court granted the Company’s further summary judgment motion regarding the ‘473 patent. On February 10, 2016, the U.S. Court of Appeals for the Federal Circuit: 1) affirmed the district court’s summary judgment of no direct infringement by Seagate because Seagate’s ATA/SCSI disk drives do not meet the “user interface” limitation of the asserted claims of the ‘473 patent; 2) affirmed the district court’s summary judgment of non-

infringement by Compaq’s products as to claims 1, 3, and 5 of the ‘473 patent because Compaq’s F10 BIOS interface does not meet the “commands” limitation of those claims; 3) vacated the district court’s summary judgmentof non-infringement by Compaq’s accused products as toclaims 7-15 of the ‘473 patent; 4) reversed the district court’s summary judgmentof non-infringement based on intervening rights; and 5) remanded the case to the district court for further proceedings on the ‘473 patent. In view of the rulings made by the district court and the Court of Appeals and the uncertainty regarding the amount of damages, if any, that could be awarded Convolve in this matter, the Company does not believe that it is currently possible to determine a reasonable estimate of the possible range of loss related to this matter.

Enova Technology Corporation v. Seagate Technology (US) Holdings, Inc., et al.On June 5, 2013, Enova Technology Corporation (“Enova”) filed a complaint against Seagate Technology (US) Holdings, Inc. and Seagate Technology LLC in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent No. 7,136,995 (the “‘995 patent”), “Cryptographic Device,” and U.S. Patent No. 7,900,057 (the “‘057 patent”), “Cryptographic Serial ATA Apparatus and Method.” The Company believes the claims are without merit and intends to vigorously defend this case. On April 27, 2015, the district court ordered a stay of the case, in view of proceedings regarding the ‘995 and ‘057 patents before the Patent Trial and Appeal Board (“PTAB”) of the U.S. Patent and Trademark Office. On September 2, 2015, PTAB issued its final written decision thatclaims 1-15 of the ‘995 patent are held unpatentable. On December 18, 2015, PTAB issued its final written decisions thatclaims 1-32 and 40-53 of the ‘057 patent are held unpatentable. On February 4, 2016, PTAB issued its final written decision thatclaims 33-39 of the ‘057 patent are held unpatentable. Enova appealed PTAB’s decisions on the ‘995 patent and the ‘057 patent to the U.S. Court of Appeals for the Federal Circuit. On March 20, 2017, the court of appeals issued its judgment affirming PTAB’s decision on the ‘995 patent. On September 6, 2017, the court of appeals issued its judgment affirming PTAB’s decision on the ‘057 patent. On November 27, 2017, Enova filed a petition for writ of certiorari with the U.S. Supreme Court challenging the court of appeals’ decision on the ‘057 Patent. The Supreme Court has not yet ruled on this petition. The district court case remains stayed. In view of the uncertainty regarding the amount of damages, if any, that could be awarded in this matter, the Company does not believe that it is currently possible to determine a reasonable estimate of the possible range of loss related to this matter.

Lambeth Magnetic Structures LLC, v. Seagate Technology (US) Holdings, Inc., et al.On April 29, 2016, Lambeth Magnetic Structures LLC filed a complaint against Seagate Technology (US) Holdings, Inc. and Seagate Technology LLC in the U.S. District Court for the Western District of Pennsylvania, alleging infringement of U.S. Patent No. 7,128,988, “Magnetic Material Structures, Devices and Methods.”Methods”. The complaint seeks damages as well as additional relief. The Company believes the claims asserted in the complaint are without merit and intends to vigorously defend this case. The court issued its claim construction ruling on October 18, 2017. NoThe trial began on April 4, 2022. On April 14, 2022, the jury returned a verdict of non-infringement for Seagate finding that Seagate had not infringed any of the asserted claims. The district court entered judgement in favor of Seagate on April 19, 2022. The parties filed post-trial motions with the district court in May 2022. The court has not yet set a hearing date for these motions.
Seagate Technology LLC, et al. v. Headway Technologies, Inc, et al. On February 18, 2020, Seagate Technology LLC, Seagate Technology (Thailand) Ltd., Seagate Singapore International Headquarters Pte. Ltd. and Seagate Technology International (collectively, the “Seagate Entities”) filed a complaint in the United States District Court for the Northern District of California against defendant suppliers of HDD suspension assemblies. Defendants include NHK Spring Co. Ltd., TDK Corporation, Hutchinson Technology Inc. and several of their subsidiaries and affiliates. The complaint includes federal and state antitrust law claims, as well as a breach of contract claim. The complaint alleges that defendants and their co-conspirators knowingly conspired for more than twelve years not to compete in the supply of suspension assemblies; that defendants misused confidential information that the Seagate Entities had provided pursuant to nondisclosure agreements, in breach of their contractual obligations; and that the Seagate Entities paid artificially high prices on purchases of suspension assemblies. The Seagate Entities seek to recover the overcharges they paid for suspension assemblies, as well as additional relief permitted by law. On March 22, 2022, the Seagate Entities dismissed with prejudice all claims being asserted against Defendants TDK Corporation, Hutchinson Technology Inc. and their subsidiaries and affiliates (collectively “TDK”) relating to the antitrust law claims, the breach of contract claim and other matters described in the complaint. On April 1, 2022, the Seagate Entities and TDK filed a Stipulation for Dismissal with Prejudice to dismiss with prejudice all claims against TDK. On August 2, 2022, NHK Spring Co. Ltd. filed a motion for Partial Summary Judgment Regarding Foreign Commerce and on October 14, 2022, Seagate Entities’ filed its corresponding opposition. A trial date has not been set. In view of the uncertainty regarding the amount of damages, if any, that could be awarded in this matter, the Company does not believe that it is currently possible to determine a reasonable estimate of the possible range of loss related to this matter.

Environmental Matters

The Company’s operations are subject to 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 the Company’s 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.

The Company has established environmental management systems and continually updates its environmental policies and standard operating procedures for its operations worldwide. The Company believes that its operations are in material compliance with applicable environmental laws, regulations and permits. The Company budgets for operating and capital costs on an ongoing basis to comply with environmental laws. If additional or more stringent requirements are imposed on the Company in the future, it could incur additional operating costs and capital expenditures.

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Some environmental laws, such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (as amended, the “Superfund” law) and its state equivalents, 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. The Company has been identified as a responsible or potentially responsible party at several sites. At each of these sites, the Company has an assigned 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. The Company has fulfilled its responsibilities at some of these sites and remains involved in only a few at this time.

While the Company’s ultimate costs in connection with these sites is difficult to predict with complete accuracy, based on its current estimates of cleanup costs and its expected allocation of these costs, the Company does not expect costs in connection with these sites to be material.

The Company may be subject to various state, federal and international laws and regulations governing the environment, including those restricting the presence of certain substances in electronic products. For example, the European Union (“EU”) enacted the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (2011/65/EU), which prohibits the use of certain substances, including lead, in certain products, including disk drives and server storage products, put on the market after July 1, 2006. Similar legislation has been or may be enacted in other jurisdictions, including in the United States,U.S., Canada, Mexico, Taiwan, China, Japan and others. The European UnionEU REACH Directive (Registration, Evaluation, Authorization and Restriction of Chemicals, EC 1907/2006) also restricts substances of very high concern (“SVHCs”) in products. If the Company or its suppliers fails to comply with the substance restrictions, recycle requirements or other environmental requirements as they are enacted worldwide, it could have a materially adverse effect on the Company’s business.

Other Matters

On August 29, 2022, the Company received a proposed charging letter (“PCL”) from the U.S. Commerce Department’s Bureau of Industry and Security (“BIS”), alleging violations of the U.S. Export Administration Regulations (“EAR”). The PCL alleges the Company acted in violation of the EAR by providing its HDDs to a customer and its affiliates listed on the BIS Entity List between August 2020 and September 2021. The Company believes these allegations are without merit and will defend itself vigorously. The Company has responded to the PCL, setting forth its position that it did not engage in prohibited conduct as alleged by BIS, because, among other reasons, Seagate’s HDDs are not subject to the EAR.
The matters raised by the PCL remain unresolved at this time, and there can be no assurance as to the timing or terms of any final outcome. The Company is unable at this time to estimate the range of loss and/or penalty, if any, although it is possible that the outcome could have a material impact on its business, results of operations, financial condition, and cash flows. The Company believes that it has complied with all relevant export control laws and regulations. The Company has committed to compliance through its global team of international trade compliance and legal professionals and by maintaining robust trade controls, compliance policies and procedures. The Company has been cooperating with BIS and intends to continue to engage with BIS to seek a resolution of this matter.
The Company is involved in a number of other judicial, regulatory or administrative proceedings and investigations incidental to its business, and the Company may be involved in such proceedings and investigations arising in the normal course of its business in the future. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters will not have a material adverse effect on its financial position or results of operations.

15. Commitments

Investment commitment to acquire preferred equity securities.On September 28, 2017,

13.Subsequent Events
Dividend Declared
On October 26, 2022, the Company entered into an Equity Commitment Letter (“ECL”) with a consortium of investors led by Bain Capital Private Equity for the acquisition of Toshiba Memory Corporation (“TMC”). The ECL contemplates that, upon the closing of the acquisition, the Company or one of its subsidiaries would purchase up to JPY 139.5 billion (approximately USD 1.24 billion based on an exchange rate as of December 29, 2017), of a newly issuednon-convertible preferred equity security of a newly formed company, K. K. Pangea, for the purpose of acquiring TMC. The closing of the acquisition is subject to regulatory approvals and other closing conditions.

16. Subsequent Events

Dividend Declared

On January 29, 2018, the Company’sCompany’s Board of Directors announceddeclared a quarterly cash dividend of $0.63$0.70 per share, which will be payable on April 4, 2018January 5, 2023 to shareholders of record as of the close of business on MarchDecember 21, 2018.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

2022.

Restructuring Plan
On October 24, 2022, the Company’s Board of Directors approved and committed to a plan to reduce its cost structure to better align the Company’s operational needs to current economic conditions while continuing to support the long-term business strategy.See “Note5. Restructuring and Exit Costs” for more information.


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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition, changes in financial condition and results of operations for our fiscal quarters ended December 29, 2017, September 29, 201730, 2022, July 1, 2022 and December 30, 2016,October 1, 2021, referred to herein as the “December 2017“September 2022 quarter,” the “September 2017“June 2022 quarter,” and the “December 2016“September 2021 quarter,” respectively. We operate and report financial results on a fiscal year of 52 or 53 weeks ending on the Friday closest to June 30. The December 2017, September 20172022 quarter, June 2022 quarter and December 2016 quartersthe September 2021 quarter were alleach 13 weeks.

You should read this discussion in conjunction with financial information and related notes included elsewhere in this report. Unless the context indicates otherwise, as used herein, the terms “we,” “us,” “Seagate,” the “Company” and “our” refer collectively to Seagate Technology Holdings plc, an Irish public limited company, and its subsidiaries. References to “$” or “dollars” are to United States dollars.

Some of the statements and assumptions included in this

This Quarterly Reporton Form 10-Q arecontains forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933 or Section 21E1995. Forward-looking statements provide current expectations of the Securities Exchange Act of 1934, each as amended, including,future events based on certain assumptions and include any statement that does not directly relate to any historical fact. Forward-looking statements contained in particular,this Quarterly Report on Form 10-Q include, among other things, statements about our plans, strategies and prospects,prospects; market demand for our products,products; shifts in technology,technology; estimates of industry growth,growth; effects of the economic conditions worldwide resulting from the COVID-19 pandemic; expectations regarding the outcome of the U.S. Commerce Department’s Bureau of Industry and Security’s inquiry and proposed charging letter; our ability to effectively manage our cash liquidity position and debt obligations and comply with the covenants in our credit facilities; our restructuring efforts,efforts; the impactsufficiency of the Tax Cuts and Jobs Act on our financial statements, and the projected costs savingssources of cash to meet cash needs for the fiscal quarter ending March 30, 2018next 12 months; our expectations regarding capital expenditures; and projected cost savings for the fiscal year ending June 29, 2018 and beyond. These30, 2023. Forward-looking statements identify prospective information and may includegenerally can be identified by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “projects,” “may,” “will,” “will continue,” “can,” “could,” or negativesnegative of these words, variations of these words and comparable terminology. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These forward-looking statements are based on information available to the Company as of the date of this Quarterly Reporton Form 10-Q and are based on management’s current views and assumptions. These forward-looking statements are conditioned upon and also involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or events to differ materially from those anticipated by these forward-looking statements. Such risks, uncertainties and other factors may be beyond our control and may pose a risk to our operating and financial condition. Such risks and uncertainties include, but are not limited to:
•the uncertainty in the global economy including higher inflationary pressures, increase in interest rates and other adverse changes in the level of economic conditions,activity in the impactmajor regions in which we do business;
•changes in or adverse outcomes in the Company’s legal proceedings, including regulatory inquires and investigations and related matters;
•the timing of the variable demand and adverse pricing environment for disk drives, any regulatory, legal, logistical or other impediments to our ability to execute on our restructuring efforts, our ability to achieve projected cost savings in connection with our restructuring plans and consolidation of our manufacturing activities; our ability to successfully qualify, manufacture and sell our disk drive products in increasing volumes on a cost-effective basis and with acceptable quality, particularly the new disk drive products with lower cost structures; the impact of competitive product announcements; possible excess industry supply with respect to particular disk drive products; disruptions to our supply chain or production capabilities; the development and introduction of products based on new technologies and expansion into new data storage markets; markets and market acceptance of new products;
•the impact of competitive product announcements and unexpected advances in competing technologies or changes in market trends; consolidation trends
•the impact of variable demand, including ongoing demand variation related to the COVID-19 pandemic, changes in market demand and an adverse pricing environment for storage products;
•the dataeffects of the COVID-19 pandemic and related individual, business and government responses on the global economy and their impact on the Company's business, operations and financial results, including impacts to the Company's supply chain resulting from governments' policies and approaches to containing COVID-19;
•the Company’s ability to effectively manage its debt obligations and comply with certain covenants in its credit facilities with respect to financial ratios and financial condition tests and its ability to maintain a favorable cash liquidity position;
•the Company’s ability to successfully qualify, manufacture and sell its storage industry; products in increasing volumes on a cost-effective basis and with acceptable quality;
•any price erosion or volatility of sales volumes through the Company’s distributor and retail channel;
•disruptions to the Company’s supply chain or production capabilities, including ongoing shortages of certain materials, any electricity restrictions and increases in logistical, materials and operation costs;
•currency fluctuations that may impact the Company’s margins, international sales and results of operations;
•changes in tax laws, such as global tax developments applicable to multinational businesses; the impact of trade barriers, such as import/export duties and restrictions, sanctions, tariffs and quotas, imposed by the U.S. or other countries in which the Company conducts business; the evolving legal and regulatory, economic, environmental and administrative climate in the international sales; markets where the Company operates;
•the effect of geopolitical uncertainties, such as international conflicts, on international commerce, the global economy and/or our business;
•the difficulties in implementing a new global enterprise resource planning system; and
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•cyber-attacks or other data breaches that disrupt itsthe Company’s operations or resultsresult in the dissemination of proprietary or confidential information and cause reputational harm; our ability to comply with certain covenants in our credit facilities with respect to financial ratiosharm.
Information concerning these and financial condition tests; the riskof non-compliance with the legal, regulatory, administrative and environmental regimes in the markets where we operate; and fluctuations in interest rates. Information concerningother risks, uncertainties and other factors, among others, that could cause results to differ materially from those projected in such forward-lookingour expectations statements is also set forth in “Item“Part II, Item 1A. Risk Factors” of the Annualthis Quarterly Reporton Form 10-K for the fiscal year ended June 30, 2017,10-Q, which we encourage you to carefully read. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date on which they were made and we undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

except as required by law.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided in addition to the accompanying condensed consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. Our MD&A is organized as follows:

•Our Company. Overview of our business.

•Overview of the December 2017 Quarter. Highlights of events in the December 2017 quarter that impacted our financial position.

•Results of Operations. An analysis of our financial results comparing the December 2017 quarter to the September 2017 quarter and the December 2016 quarter.

•Liquidity and Capital Resources. An analysis of changes in our balance sheet and cash flows, and discussion of our financial condition including the credit quality of our investment portfolio and potential sources of liquidity.

•Contractual Obligations and Commitments. Overview of contractual obligations and contingent liabilities and commitments outstanding as of December 29, 2017.

•Critical Accounting Policies. Accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

Our Company

We are a leading provider of data storage technology and solutions. Our principal products are hard disk drives, commonly referred to as disk drives, hard drives or HDDs. In addition to HDDs, we produce a broad range of data storage products including solid state drives (“SSD”) and their related controllers, solid state hybrid drives (“SSHD”) and storage subsystems.

Hard disk drives are devices that store digitally encoded data on rapidly rotating disks with magnetic surfaces. Disk drives continue to be the primary medium of mass data storage due to their performance attributes, high quality and cost effectiveness. Complementing existing data center storage architecture, solid-state storage devices use integrated circuit assemblies as memory to store data with most SSDs using NAND-based flash memory. In addition to HDDs and SSDs, SSHDs combine the features of SSDs and HDDs in the same unit, containing a large hard disk drive and an SSD cache to improve performance of frequently accessed data.

Our products are designed for mission critical and nearline applications in enterprise servers and storage systems; edge compute / client compute applications, where our products are designed primarily for desktop and mobile computing; and edgenon-compute /client non-compute applications, where our products are designed for a wide variety of end user devices such as portable external storage systems, surveillance systems, network-attached storage (“NAS”), digital video recorders (“DVRs”) and gaming consoles.

Our cloud systems and solutions extend innovation from the device into the information infrastructure, onsite and in the cloud. Our portfolio includes modular original equipment manufacturer (“OEM”) storage systemsand scale-out storage servers.

•Overview of the December 2017 Quarter

September 2022 quarter. Highlights of events in the September 2022 quarter that impacted our financial position.

•Results of Operations. Analysis of our financial results comparing the September 2022 quarter to the June 2022 quarter and the September 2021 quarter.
•Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows, discussion of our financial condition including potential sources of liquidity and material cash requirements and their general purpose.
•Critical Accounting Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.
For an overview of our business, see “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies—Organization.”
Overview of the September 2022 quarter
During the December 2017September 2022 quarter, we shipped 88118 exabytes of HDD storage capacity, generatingcapacity. We generated revenue of approximately $2.9$2.0 billion andwith a gross margin of 30%. Our24% and our operating cash flow was $850 million.$245 million. We amended our credit agreement and borrowed an additional $600 million term loan facility. We repurchased approximately 5 million of our ordinary shares for $195$408 million and paid $182$147 million in dividends,dividends.
Recent Development, Economic Conditions and Challenges
During the September 2022 quarter, the data storage industry and our business were impacted by intensified macroeconomic headwinds. We experienced broad-based delay in customers’ purchase plans, particularly in mass capacity market, given overall macroeconomic slowdowns and supply chain shortages for other non-HDD electronic components. The ongoing economic slowdown in China due to the pandemic-related governmental lockdown measures, as well as paid $130 million for the repurchase ofnegative impact from the higher inflationary pressures in the consumer markets continued to impact our business during the September 2022 quarter. Additionally, our customers continued to experience demand disruptions, resulting in demand variations across certain of our outstanding debt.

end markets. These recent reductions in demand have required us to reduce manufacturing production plans and incur manufacturing underutilization charges, which may continue.

We continue to actively monitor the effects and potential impacts of themacroeconomic conditions, pandemic and other factors on all aspects of our business, supply chain, liquidity and capital resources. We are also actively working on opportunities to lower our cost structure, drive further operational efficiencies and maintain supply chain discipline including adjusting our manufacturing production plans, annual capital expenditure plans and other meaningful cost savings measures in response to these business conditions. We are complying with governmental rules and guidelines across all of our sites. We expect these factors will continue to impact our business and results of operations over the near-term. For a further discussion of the uncertainties and risks associated with macroeconomic conditions and the COVID-19 pandemic, among others, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

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Results of Operations

We list in the tables below summarized information from our Condensed Consolidated Statements of Operations by dollars and as a percentage of revenue:

                                                                                                                        
     For the Three Months Ended For the Six Months Ended

(Dollars in millions)

    December 29,
2017		 September 29,
2017		 December 30,
2016		 December 29,
2017		 December 30,
2016

Revenue

    $2,914  $2,632  $2,894  $5,546  $5,691 

Cost of revenue

     2,037   1,896   2,003   3,933   3,999 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

     877   736   891   1,613   1,692 

Product development

     250   263   305   513   620 

Marketing and administrative

     142   145   155   287   308 

Amortization of intangibles

     19   22   28   41   57 

Restructuring and other, net

     33   51   33   84   115 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

     433   255   370   688   592 

Other expense, net

     (62)   (67)   (60)   (129)   (109) 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

     371   188   310   559   483 

Provision for income taxes

     212   7   13   219   19 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

    $159  $181  $297  $340  $464 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     For the Three Months Ended For the Six Months Ended

 

    December 29,
2017		 September 29,
2017		 December 30,
2016		 December 29,
2017		 December 30,
2016

Revenue

     100%   100%   100%   100%   100% 

Cost of revenue

     70   72   69   71   70 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

     30   28   31   29   30 

Product development

     9   10   11   9   11 

Marketing and administrative

     5   5   5   5   6 

Amortization of intangibles

     —     1   1   1   1 

Restructuring and other, net

     1   2   1   2   2 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

     15   10   13   12   10 

Other expense, net

     (3)   (3)   (2)   (2)   (2) 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

     12   7   11   10   8 

Provision for income taxes

     7   —     1   4   —   
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

     5%   7%   10%   6%   8% 
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
(Dollars in millions)September 30,
2022		July 1,
2022		October 1,
2021
Revenue$2,035 $2,628 $3,115 
Cost of revenue1,553 1,869 2,159 
Gross profit482 759 956 
Product development234 247 233 
Marketing and administrative129 149 133 
Amortization of intangibles3 2 3 
Restructuring and other, net9 1 1 
Income from operations107 360 586 
Other expense, net(80)(79)(53)
Income before income taxes27 281 533 
(Benefit from) provision for income taxes(2)5 7 
Net income$29 $276 $526 

 For the Three Months Ended
September 30,
2022		July 1,
2022		October 1,
2021
Revenue100 %100 %100 %
Cost of revenue76 71 69 
Gross margin24 29 31 
Product development12 9 8 
Marketing and administrative7 6 4 
Amortization of intangibles— — — 
Restructuring and other, net— — — 
Operating margin5 14 19 
Other expense, net(4)(3)(2)
Income before income taxes1 11 17 
(Benefit from) provision for income taxes— — — 
Net income1 %11 %17 %
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Revenue

The following table summarizes HDD information regarding average drive selling prices (“ASPs”), exabytes shipped, andconsolidated revenues by channel, geography and geography:market and HDD exabytes shipped by market and price per terabyte:
 For the Three Months Ended
September 30,
2022		July 1,
2022		October 1,
2021
Revenues by Channel (%)  
OEMs76 %81 %74 %
Distributors15 %10 %16 %
Retailers9 %9 %10 %
Revenues by Geography (%) (1)
   
Asia Pacific39 %39 %51 %
Americas46 %48 %35 %
EMEA15 %13 %14 %
Revenues by Market (%)
Mass capacity68 %73 %65 %
Legacy19 %19 %27 %
Other13 %8 %8 %
HDD Exabytes Shipped by Market
Mass capacity104 139 132 
Legacy14 16 27 
Total118 155 159 
HDD Price per Terabyte$15 $16 $18 

                                                                                                                        
     For the Three Months Ended For the Six Months Ended

 

    December 29,
2017		 September 29,
2017		 December 30,
2016		 December 29,
2017		 December 30,
2016

ASPs (per unit)

    $68  $64  $67  $66  $67 

Exabytes Shipped

     88   70   68   158   135 

Revenues by Channel (%)

        

OEMs

     67%   67%   66%   67%   68% 

Distributors

     17%   17%   18%   17%   18% 

Retailers

     16%   16%   16%   16%   14% 

Revenues by Geography (%)

        

Americas

     26%   26%   30%   26%   32% 

EMEA

     19%   18%   19%   18%   17% 

Asia Pacific

     55%   56%   51%   56%   51% 

(1) Revenue is attributed to geography based on bill from locations.
Revenue in the December 2017September 2022 quarter increaseddecreased by $282$593 million from the June 2022 quarter and decreased by $1.1 billion from the September 20172021 quarter primarily due to the decrease in exabytes shipped as a result of an increase in exabytes shipped driven primarily by higher seasonallower market demand in mass capacity and legacy markets that were impacted by macroeconomic and pandemic-related headwinds. We expect the consumer marketchallenge from the demand environment including the macroeconomic conditions and higher demand for the Company’s high capacity HDD product portfolio, partially offset by price erosion.

Comparedpandemic-related impacts will continue to the December 2016 quarter, revenuepersist in the December 2017second quarter increased modestly primarily due to increase in exabytes shipped, offset by price erosion.

Revenue for the six months ended December 2017 quarter decreased by $145 million from the six months ended December 2016 quarter as a result of price erosion, partially offset by an improved product mix.

fiscal year 2023.

We maintain various sales incentive programs such as channel rebates and price masking.OEM rebates. Sales incentive programs were approximately 12%, 11% and 11%18% of gross drive revenue for the December 2017September 2022 quarter, September 201715% for the June 2022 quarter and December 201613% for the September 2021 quarter respectively.. Adjustments to revenues due to under or over accruals for sales incentive programs related to revenues reported in prior quarterly periods were less than 1% of quarterly gross revenue in all periods presented.

Cost of Revenue and Gross Margin

                                                                                                                        
     For the Three Months Ended For the Six Months Ended

(Dollars in millions)

    December 29,
2017		 September 29,
2017		 December 30,
2016		 December 29,
2017		 December 30,
2016

Cost of revenue

    $2,037  $1,896  $2,003  $3,933  $3,999 

Gross margin

     877   736   891   1,613   1,692 

Gross margin percentage

     30%   28%   31%   29%   30% 

 For the Three Months Ended
(Dollars in millions)September 30,
2022		July 1,
2022		October 1,
2021
Cost of revenue$1,553 $1,869 $2,159 
Gross profit482 759 956 
Gross margin24 %29 %31 %

Gross margin as a percentage of revenue for the December 2017September 2022 quarter increased by 200 basis points fromdecreased compared to both the June 2022 quarter and the September 20172021 quarter primarily driven by favorableapproximately $60 million of factory under-utilization cost associated with lower production levels and pandemic-related lockdown in one of our factories, price erosion and unfavorable product mix and improved absorptionas the higher margin mass capacity market declined faster than the legacy markets.
31
Table of factories due to higher demand for the Company’s high capacity HDD product portfolio, partially offset by price erosion.

Compared to the corresponding three and six months ended December 2016 quarter, gross margin as a percentage of revenue for the three and six months ended December 2017 quarter decreased by 100 basis points in both periods, primarily driven by price erosion, partially offset by favorable product mix and improved factory utilization resulting from cost savings due to our workforce reductions and manufacturing consolidation activities.

Contents

In the December 2017September 2022 quarter, total warranty cost was within the historical range of 1% to 1.5%1.2% of revenue and included a favorablean unfavorable change in estimates of prior warranty accruals of less than 0.2%0.6% of revenue.revenue primarily due to changes to our estimated future product return rates. Warranty cost related to new shipments was 1.4%, 1.3%,0.6% and 1.2%0.7% of revenuerevenue for each of the December 2017, September 20172022 quarter and December 2016 quarters,September 2021 quarter, respectively.

Operating Expenses

                                                                                                                        
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017		   September 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Product development

    $250   $263   $305   $513   $620 

Marketing and administrative

     142    145    155    287    308 

Amortization of intangibles

     19    22    28    41    57 

Restructuring and other, net

     33    51    33    84    115 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

    $444   $481   $521   $925   $1,100 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 For the Three Months Ended
(Dollars in millions)September 30,
2022		July 1,
2022		October 1,
2021
Product development$234 $247 $233 
Marketing and administrative129 149 133 
Amortization of intangibles3 2 3 
Restructuring and other, net9 1 1 
Operating expenses$375 $399 $370 

Product development expense.Product development expense for the December 2017 quarterexpenses decreased by $13 million fromin the September 20172022 quarter compared to the June 2022 quarter primarily due to a $4 million decrease in salaries and employee benefits as a result of the restructuring of our workforce in prior periods, a $13 million decrease due to related operational efficiencies, partially offset by an increase in variable compensation expense.

Compared to the December 2016 quarter, product development expense decreased by $55 million primarily due to a $17 million decrease in salaries and employee benefits as a result of the restructuring of our workforce in prior periods, a $25 million decrease due to related operational efficiencies and a $13$14 million decrease in variable compensation and share-based compensationrelated benefit expense and a $4 million decrease in materials, partially offset by an $8 million increase in depreciation expenses.

Compared

Product development expenses increased by $1 million in the September 2022 quarter compared to corresponding six months ended December 2016the September 2021 quarter product development expense decreased by $107 million primarily due to a $47$23 million decreaseincrease in salaries and employee benefits as a result of the restructuring of our workforce in prior periods, a $36 million decrease due to related operational efficienciesdepreciation expenses and a $24$3 million increase in materials expense, partially offset by a $22 million decrease in variable compensation and share-based compensation expenses.

related benefit expense.

Marketing and administrative expense.Marketing and administrative expenseexpenses decreased by $20 million for the December 2017September 2022 quarter decreased by $3 million from the September 2017 quarter primarily due to a decrease in salaries and related benefits as a result of the restructuring of our workforce in prior periods, partially offset by an increase in variable compensation expense.

Comparedcompared to the December 2016June 2022 quarter Marketing and administrative expense decreased by $13 million, primarily due to a $9 million decrease in salariesvariable compensation and related benefit expense, an $8 million decrease in compensation and other employee benefits as a result of the restructuring of our workforcea decrease in prior periods,share-based compensation and a $4 million decrease in variable compensationoutside services expense.

Compared to corresponding six months ended December 2016 quarter, marketing

Marketing and administrative expenseexpenses decreased by $21$4 million in the September 2022 quarter compared to the September 2021 quarter primarily due to a $13$15 million decrease in salariesvariable compensation expense and relateda $3 million decrease in compensation and other employee benefits due to a decrease in share-based compensation, partially offset by a $5 million increase in travel expenses as a result of the restructuringeasing of our workforcepandemic-related travel restrictions, a $2 million increase in prior periodsoutside services expense and a $8$2 million decreaseincrease in variable compensation expense.

advertising costs.

Amortization of intangibles.intangibles. Amortization of intangibles for the threeSeptember 2022 quarter remained relatively flat compared to the June 2022 quarter and six months ended December 2017 quarter decreased by $3 million,the September 2021 quarter.
Restructuring and other, net. Restructuring and other, net was $9 million in the September 2022 quarter primarily related to cost incurred as part of restructuring of our workforce.
Other Expense, Net
 For the Three Months Ended
(Dollars in millions)September 30,
2022		July 1,
2022		October 1,
2021
Other expense, net$(80)$(79)$(53)
Other expense, net. Other expense, net increased by $1 million for the September 2022 quarter compared to the June 2022 quarter primarily due to a $5 million increase in interest expense and $16a $2 million respectively,increase in foreign exchange remeasurement expense partially offset by a net $6 million higher non-recurring loss from our strategic investments in the June 2022 quarter.
Other expense, net increased by $27 million for the September 2022 quarter compared to the September 2021 quarter primarily due to a $12 million increase in interest expense, a net $10 million higher non-recurring gain from our strategic investments in the September 2021 quarter and a $4 million increase in foreign exchange remeasurement expense.

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Income Taxes
 For the Three Months Ended
(Dollars in millions)September 30,
2022		July 1,
2022		October 1,
2021
(Benefit from) provision for income taxes$(2)$5 $7 
We recorded an income tax benefit of $2 million for the three months ended September 2017 quarter and the three and six months ended December 2016 quarter due to certain intangible assets reaching the end of their useful life.

Restructuring and other, net. Restructuring and other, net30, 2022. The income tax benefit for the three and six months ended December 2017 quarterSeptember 30, 2022 included approximately $7 million of net discrete tax benefit, primarily associated with the excess tax benefits related to share-based compensation expense.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was comprisedenacted into U.S. law. The legislation includes a new corporate alternative minimum tax (the “CAMT”) of restructuring charges15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period. The CAMT is effective for us beginning in fiscal year 2024. We assessed the potential impact of the CAMT and do not expect to reducehave a material impact to our global workforcefinancial statements or results of operations.
During the three months ended September 30, 2022, our unrecognized tax benefits excluding interest and penalties increased by 500 and 1100 employees, respectively.

Restructuring and other, netapproximately $1 million to$115 million, substantially all of which would impact the effective tax rate, if recognized, subject to certain future valuation allowance reversals. We do not expect material changes to our unrecognized tax benefits in the next twelve months beginning October 1, 2022.

We recorded an income tax provision of $7 million for the three and six months ended December 2016 quarter was primarily comprised of restructuring charges to reduce our global workforce by 6,500 employees. Each of these restructuring activities have reduced our workforce as we continue to consolidate our global footprint across Asia, EMEA and the Americas. See “Part I, Item 1. Financial Statements—Note 7. Restructuring and Exit Costs” for more details.

Other Expense, Net

                                                                                                                        
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017		   September 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Other expense, net

    $(62)   $(67)   $(60)   $(129)   $(109) 

Other expense, net decreased by $5 million from the September 2017 quarter primarily due to a favorable $9 million change in foreign currency exchange rates, partially offset by a $2 million loss on repurchase of debt in the December 2017 quarter.

Compared to December 2016 quarter, Other expense, net increased by $2 million in the December 2017 quarter primarily due to a $16 million of unfavorable change in foreign currency exchange rates and a $10 million increase in interest expense on the issuance of $750 million of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024 in the quarter ended March 31, 2017, offset by the absence of a $25 million charge related to the impairment of a strategic investment in the December 2016 quarter.

Other expense, net for the six months ended December 2017 quarter increased by $20 million from the corresponding period in the prior year, primarily due to a $22 million increase in interest expense on the issuance of $750 million of 4.25% Senior Notes due 2022 and $500 million of 4.875% Senior Notes due 2024, a $26 million unfavorable change in foreign currency exchange rates, offset by the absence of a $25 million charge related to the impairment of a strategic investment in the December 2016 quarter.

Income Taxes

                                                                                                                        
     For the Three Months Ended   For the Six Months Ended 

(Dollars in millions)

    December 29,
2017		   September 29,
2017		   December 30,
2016		   December 29,
2017		   December 30,
2016		 

Provision for income taxes

    $212   $7   $13   $219   $19 

We recorded income tax provisions of $212 million and $219 million in the three and six months ended December 2017 quarter, respectively.October 1, 2021. The income tax provision for the three and six months ended December 2017 quarter October 1, 2021 included approximately $197approximately $10 million of net discrete tax expense,benefit, primarily associated with the revaluation of U.S. deferred tax assets as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017, partially offset by the recognition of previously unrecognizednet excess tax benefits associated with the expiration of certain statutes of limitation.

related to share-based compensation expense.

Our income tax provision recorded for the three and six months ended December 2017 quarterSeptember 30, 2022 and October 1, 2021 differed from the provision for income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. (i) non-Irish earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a reduction in the net U.S. deferred tax assets associated with revaluation to a lower U.S. tax rate.

During the six months ended December 2017 quarter, our unrecognized tax benefits excluding interest and penalties increased by approximately $1 million to $75 million. The unrecognized tax benefits that, if recognized, would impact the effective tax rate were $75 million at December 29, 2017, subject to certain future changes in valuation allowance. During the twelve months beginning December 30, 2017, we expect that our unrecognized tax benefits could be reduced by approximately $2 million, primarily as a resultcurrent year generation of the expiration of certain statutes of limitation.

Our income tax provision recorded for the six months ended December 2016 quarter included approximately $4 million of net discrete tax benefits, primarily associated with the release of tax reserves associated with the expiration of certain statutes of limitation.

Our income tax provision recorded for the three and six months ended December 2016 quarter differed from the provision from income taxes that would be derived by applying the Irish statutory rate of 25% to income before income taxes, primarily due to the net effect of (i) tax benefits related tonon-U.S. earnings generated in jurisdictions that are subject to tax incentive programs and are considered indefinitely reinvested outside of Ireland and (ii) a decrease in valuation allowance for certain deferred tax assets.

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted into law in the United States. The Act significantly revises U.S. corporate income tax law by, among other things, lowering corporate income tax rates from 35% to 21%, implementing a territorial tax system and imposing a tax on deemed repatriated earnings ofnon-U.S. subsidiaries. The Act’s new international rules, including the Global IntangibleLow-Taxed Income, the Foreign Derived Intangible Income and the Base Erosion Anti-Avoidance Tax, are not expected to have a material impact on our financial statements. However, these assessments are based on preliminary review and analysis of the Act and are subject to change as we continue to evaluate these highly complex rules as additional interpretive guidance is issued.

Pursuant to SEC Staff Accounting Bulletin (SAB) 118 (regarding the application of ASC 740 associated with the enactment of the Act), we recorded a provisional tax expense of approximately $208 million for the three months ended December 29, 2017 tore-measure our U.S. deferred tax assets at the newly enacted 21% tax rate. The tax expense is provisional because we continue to evaluate the impact of various domestic and international provisions of the Act as well as the impact of additional guidance that may be provided. This provisional tax expense increased our effective tax rate for the three months ended December 29, 2017 to approximately 56%. Many of the other U.S. tax changes are not expected to impact our tax expense in the short-term due to our large net operating loss and tax credit carryovers.

research credits.

Liquidity and Capital Resources

The following sections discuss our principal liquidity requirements, as well as our sources and uses of cash and our liquidity and capital resources. Our cash and cash equivalents are maintained in investments with remaining maturities of 90 days or less at the time of purchase. Our short-term investments consist primarily of money market funds, time deposits and certificates of deposit. The principal objectives of our investment policy are the preservation of principal and maintenance of liquidity. We believe our cash equivalents and short-term investments are liquid and accessible. We operate in some countries that have restrictive regulations over the movement of cash and/or foreign exchange across their borders. However, we believe our sources of cash have been and will continue to be sufficient to fund our operations and meet our cash needsrequirements for the next 12 months. Although there can be no assurance, we believe that our financial resources, along with controlling our costs, capital expenditures and share repurchase levels, will allow us to manage the ongoing impacts of macroeconomic and pandemic-related headwinds including higher inflationary pressures, inventory adjustments by our customers and the overall market demand disruptions on our business operations for the foreseeable future. However, some challenges to our industry and to our business continue to remain uncertain and cannot be predicted at this time. Consequently, we will continue to evaluate our financial position in light of future developments, particularly those relating to the global economic factors and the pandemic.
We are not aware of any downgrades, losses or other significant deterioration in the fair value of our cash equivalents or short-term investments.

from the values reported as of September 30, 2022.

Cash and Cash Equivalents and Short-term Investments

                                                                        

(Dollars in millions)

    December 29,
2017		   June 30,
2017		   Change 

Cash and cash equivalents

    $2,556   $2,539   $17 

(Dollars in millions)September 30,
2022		July 1,
2022		Change
Cash and cash equivalents$761 $615 $146 

Our cash and cash equivalents as of September 30, 2022increased by $146 million from June 30, 2017 July 1, 2022 primarily as a result of an increase innet proceeds of $600 million from the issuance of long-term debt and net cash of $245 million provided by operating activities partially offset by net cash outflows forthe repurchases of our ordinary shares of $408 million, dividends paid to our shareholders repurchase of our ordinary shares,$147 million and payments for capital expenditures and repayments of long-term debt.

$133 million.

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Table of Contents
Cash Provided by Operating Activities

Cash provided by operating activities for the sixthree months ended December 29, 2017 of $1,087September 30, 2022 was $245 million and includes the effects of net income adjusted fornon-cash items including depreciation, amortization, deferred income taxes primarily due to the remeasurement of our U.S. deferred tax assets at the lower corporate tax rate, share-based compensation and:

•a decrease of $145$434 million in accounts receivable, primarily due to improvedin-quarter linearitytiming of shipments,collections; and
•an increase of $110 million cash proceeds received from the settlement of certain interest rate swap agreements; partially offset by higher revenue;

an increase•a decrease of $59$300 million in accounts payable, primarily due to timing of material purchases;

an increase of $32 milliona decrease in inventory, primarily due to an increase in units built;materials purchased;

•a decrease of $54$146 million in accrued employee compensation, primarily due to cash paid to our employees as part of our variable compensation plans in the September 2017 quarter;discretionary spending plans; and

a decrease•an increase of $42$41 million in vendor receivables, inventories, primarily due to timing of receipt of vendor payments.an increase in materials purchased.

Cash Used in Investing Activities

Cash used forin investing activities for the sixthree months ended December 29, 2017September 30, 2022 was $210$133 million, which was primarily attributableattributable to the payments for the purchase of property, equipment and leasehold improvementsimprovements.
Cash Provided by Financing Activities
Net cash provided by financing activities of $201 million.

Cash Used in Financing Activities

Cash used in financing activities of $865$34 million for the sixthree months ended December 29, 2017September 30, 2022 was primarily attributable to the following activities:

•$366600 million in net proceeds from the issuance of Term Loan A3; and
•$29 million in proceeds from the issuance of ordinary shares under employee stock plans; partially offset by
•$408 million in payments for repurchases of our ordinary shares;
•$147 million in dividend payments;payments; and

•$36139 million paid to repurchase ordinary shares;

$152 million of repayments of long-term debt;

$21 million paid in payments for taxes related to net share settlement of equity awards, partially offset by;awards.

$35 million in proceeds from the issuance of ordinary shares under employee stock plans.

Liquidity Sources Cash Requirements and Commitments

Our primary sources of liquidity as of December 29, 2017 consistedSeptember 30, 2022, consist of: (1) approximately $2.6 billionapproximately $761 million in cash and cash equivalents, (2) cash we expect to generate from operations and (3) a $700$1.75 billion available for borrowing under our Revolving Credit Facility, which is part of the Credit Agreement. On August 18, 2022, we entered into the Sixth Amendment to the Credit Agreement which permits us to increase the revolving loan commitments or obtain new term loans of up to $100 million senior revolving credit facility.

in aggregate, subject to the satisfaction of certain terms and conditions.

As of December 29, 2017,September 30, 2022, no borrowings had been drawn under the revolving credit facility or had been(including swing line loans) were outstanding and no commitments were utilized for letters of credit issued under this credit facility.the Revolving Credit Facility. The line of creditRevolving Credit Facility is available for borrowings, subject to compliance with financial covenants and other customary conditions to borrowing.

The credit agreement that governs our revolving credit facility, as amended,Credit Agreement includes three financial covenants: (1) minimum cash, cash equivalents and marketable securities;interest coverage ratio, (2) a fixed charge coverage ratio;total leverage ratio and (3) a net leverage ratio. On April 28, 2016, the Revolving Credit Agreement was amended in order to increase the allowable net leverage ratio to adjust for our current financialminimum liquidity position.amount. The term of the revolving credit facilityRevolving Credit Facility is through January 15, 2020 provided that ifOctober 14, 2026. As of September 30, 2022, we do not have Investment Grade Ratings (as defined in the revolving credit facility) on August 15, 2018, then the maturity date will be August 16, 2018 unless certain extension conditions have been satisfied. We were in compliance with all of the modified covenants asunder our debt agreements. We continue to evaluate our debt portfolio and structure to ensure we are able to comply with our financial debt covenants.
We believe that our sources of December 29, 2017cash will be sufficient to fund our operations and expect to be in compliancemeet our cash requirements for at least the next 12 months.

Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness, and to fund our quarterly dividend. Our ability to fund theseliquidity requirements beyond 12 months will depend on our future cash flows, which are determined by future operating performance, and therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control.

For additional information on risks and factors that could impact our ability to fund our operations and meet our cash requirements, including the pandemic, among others, see “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q.

Cash Requirements and Commitments
Our liquidity requirements are primarily to meet our working capital, product development and capital expenditure needs, to fund scheduled payments of principal and interest on our indebtedness and to fund our quarterly dividend and any future strategic investments. As of September 30, 2022, our contractual cash requirements have not changed materially since our Annual Report on Form 10-K for the fiscal year 2018, we expect capital expendituresended July 1, 2022, except for long-term debt obligations.


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Table of Contents
Long-term debt and interest payments on debt
The Sixth Amendment to the Credit Agreement provides for a new Term Loan A3 in the aggregate principal amount of $600 million. Term Loan A3 was borrowed in full at the closing of the Sixth Amendment. Term Loan A3 bears interest at a rate of SOFR plus a variable margin of 1.25% to 2.5%, in each case with such margin being determined based on the corporate credit rating of the Borrower or one of its parent entities. Term Loan A3 is repayable in quarterly installments beginning on December 31, 2022 and is scheduled to mature on July 30, 2027. The Sixth Amendment to the Credit Agreement also replaced the LIBOR interest rates plus variable margin of Term Loans A1 and A2 with the SOFR interest rates plus a variable margin that will be determined based on the corporate credit rating of the Borrower or one of its parent entities.
As of September 30, 2022, the future principal payment obligation on our long-term debt was $6.3 billion, of which $636 million will mature within one year. As of September 30, 2022, future interest payments on these outstanding debt is estimated to be less than 5%approximately $1.5 billion, of revenue.

which $293 million is expected to be paid within one year. From time to time, we may repurchase any of our outstanding senior notes in open market or privately negotiated purchases or otherwise, or we may repurchase outstanding senior notes pursuant to the terms of the applicable indenture.

Refer to “Item 1. Financial Statements—Note 3. Debt” for more details.

Dividends declared in
During the December 2017September 2022 quarter, of $179 million were subsequently paid on January 3, 2018. The Company’sour Board of Directors announceddeclared dividends of $0.70 per share, totaling $145 million, which was paid on October 5, 2022. On October 26, 2022, our Board of Directors declared a quarterly cash dividend of $0.63$0.70 per share, payable on January 29, 2018, which is payable on April 4, 20185, 2023 to shareholders of record at the close of business on MarchDecember 21, 2018.

2022. Our ability to pay dividends in the future will be subject to, among other things, general business conditions within the data storage industry, our financial results, the impact of paying dividends on our credit ratings and legal and contractual restrictions on the payment of dividends by our subsidiaries to us or by us to our ordinary shareholders, including restrictions imposed by covenants on our debt instruments.

Share repurchases
From time to time, at the Company’s discretion, we may repurchase any of our outstanding ordinary shares through private, open market, or broker-assisted purchases.purchases, tender offers, or other means, including through the use of derivative transactions. During the September 2022 quarter, we repurchased approximately 6 million of our ordinary shares including shares withheld for statutory tax withholdings related to vesting of employee equity awards. As of December 29, 2017, $0.9September 30, 2022, $1.9 billion remained remained available for repurchase under our existing repurchase authorization limit. We may limit or terminate the repurchase program at any time. All repurchases are effected as redemptions in accordance with our Constitution.
Other
For fiscal year 2023, we expect capital expenditures to be below our long-term targeted range of4% to 6% of revenue.We require substantial amounts of cash to fund any increased working capital requirements, future capital expenditures, scheduled payments of principal and interest on our indebtedness and payments of dividends. We will continue to evaluate and manage the Company’s Articlesretirement and replacement of Association.

Contractual Obligationsexisting debt and Commitments

Our contractual cashassociated obligations, including evaluating the issuance of new debt securities, exchanging existing debt securities for other debt securities and commitments asretiring debt pursuant to privately negotiated transactions, open market purchases, tender offers or other means or otherwise. In addition, we may selectively pursue strategic alliances, acquisitions, joint ventures and investments, which may require additional capital.

Subsequent event
On October 24, 2022, our Board of December 29, 2017, have been summarized inDirectors approved and committed to the table below:

                                                                                                                        
         Fiscal Year(s) 

(Dollars in millions)

    Total   Remainder of
2018		   2019-2020   2021-2022   Thereafter 

Contractual Cash Obligations:

            

Long-term debt

    $4,923   $—     $560   $750   $3,613 

Interest payments on debt

     1,720    115    430    420    755 

Purchase obligations(2)

     764    764    —      —      —   

Operating leases(1)

     122    9    25    13    75 

Capital expenditures

     127    116    10    1    —   

Other funding requirements(3)

     24    12    12    —      —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

     7,680    1,016    1,037    1,184    4,443 

Commitments:

            

Letters of credit or bank guarantees

     107    15    91    1    —   
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    $7,787   $1,031   $1,128   $1,185   $4,443 
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(1)Includes total future minimum rent expense undernon-cancelable leases for both occupied and vacated facilities (rent expense is shown net of sublease income).
(2)Purchase obligations are defined as contractual obligations for the purchase of goods or services, which are enforceable and legally binding on us, and that specify all significant terms.
(3)Consists of funding requirements related to strategic commitments.

On September 28, 2017, we entered into an Equity Commitment Letter (“ECL”) with a consortium of investors ledOctober 2022 Plan to reduce its cost structure to better align our operational needs to current economic conditions while continuing to support the long-term business strategy. The October 2022 Plan includes reducing our worldwide headcount by Bain Capital Private Equity for the acquisition of Toshiba Memory Corporation (“TMC”). The ECL contemplates that, upon the closingapproximately 3,000 employees, or 8% of the acquisition,global workforce, along with other cost saving measures.

The October 2022 Plan, which we would purchase upexpect to JPY 139.5 billion (approximately USD 1.24 billion based on an exchange rate as of December 29, 2017), of a newlyissued non-convertible preferred equity security of a newly formed company, K. K. Pangea, forbe substantially completed by the purpose of acquiring TMC. The closingend of the acquisition is subject to regulatory approvals and other closing conditions.

As of December 29, 2017, we had a liability for unrecognized tax benefits and an accrual for the payment of related interest totaling $11 million, none of whichfiscal second quarter 2023, is expected to result in total pre-tax charges between $60 million and $70 million. These charges are expected to be settled within one year. Outsideprimarily cash-based and consist of one year, we are unable to make a reasonably reliable estimate of when cash settlement with a taxing authority will occur.

employee severance and other one-time termination benefits.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations are based upon our Condensed Consolidated Financial Statements,condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of such statements requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period and the reported amounts of assets and liabilities as of the date of the financial statements. Our estimates are based on historical experience and other assumptions that we consider to be appropriate in the circumstances. However, actual future results may vary from our estimates.

Since our fiscal year ended June 30, 2017, there have been no material changes

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Other than as described in our critical accounting policies and estimates. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II, Item 7 of our Annual Report onForm 10-K for the fiscal year ended June 30, 2017, as filed with the SEC on August 4, 2017, for a discussion of our critical accounting policies and estimates.

Recent Accounting Pronouncements

See “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies”, there have been no other material changes in our critical accounting policies and estimates. Refer to “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended July 1, 2022, as filed with the SEC on August 5, 2022, for a discussion of our critical accounting policies and estimates.

Recent Accounting Pronouncements
See “Part I, Item 1. Financial Statements—Note 1. Basis of Presentation and Summary of Significant Accounting Policies” for information regarding the effect of new accounting pronouncements on our financial statements.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have exposure to market risks due to the volatility of interest rates, foreign currency exchange rates, credit rating changes and equity and bond markets. A portion of these risks may be hedged, but fluctuations could impact our results of operations, financial position and cash flows.

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our cash investment portfolio. As of December 29, 2017,September 30, 2022, we hadno available-for-sale debt securities that had been in a continuous unrealized loss position for a period greater than 12 months. The CompanyWe determinedno impairment related to credit losses for available-for-sale debt securities were other-than-temporarily impaired as of December 29, 2017. We currently do not use derivative financial instruments in our investment portfolio.

September 30, 2022.

We have fixed-ratefixed rate and variable rate debt obligations. We enter into these debt obligations to supportfor general corporate purposes including capital expenditures and working capital needs.

Our Term Loans bear interest at a variable rate equal to SOFR plus a variable margin.

We have entered into certain interest rate swap agreements to convert the variable interest rate on the Term Loans to fixed interest rates. The objective of the interest rate swap agreements is to eliminate the variability of interest payment cash flows associated with the variable interest rate under the Term Loans. We designated the interest rate swaps as cash flow hedges. As of September 30, 2022, the aggregate notional amount of the Company’s interest-rate swap contracts was $1.6 billion, of which $600 million will mature in September 2025 and $1 billion will mature in July 2027.
The table below presents principal amounts and related fixed or weighted-average interest rates by year of maturity for our investment portfolio and debt obligations as of December 29, 2017.

     Fiscal Years Ended     

(Dollars in millions, except percentages)

    2018 2019 2020   2021   2022 Thereafter Total Fair Value at
December 29, 2017		 

Assets

             

Cash equivalents:

             

Fixed rate

    $1,064  $—    $—     $—     $—    $—    $1,064  $1,064 

Average interest rate

     1.49%          1.49%  
    

 

 

 

 

 

 

 

 

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fixed income

    $1,064  $—    $—     $—     $—    $—    $1,064  $1,064 

Average interest rate

     1.49%          1.49%  

Debt

             

Fixed rate

    $—    $560  $—     $—     $750  $3,613  $4,923  $4,903 

Average interest rate

      3.75%       4.25%   4.93%   4.69%  

September 30, 2022.
Fiscal Years EndedFair Value at September 30 , 2022
(Dollars in millions, except percentages)20232024202520262027ThereafterTotal
Assets        
Money market funds, time deposits and certificates of deposit
Floating rate$160 $— $— $— $— $— $160 $160 
Average interest rate2.76 %2.76 %
Other debt securities        
Fixed rate$— $— $— $15 $— $1 $16 $16 
Debt        
Fixed rate$540 $500 $479 $— $505 $2,490 $4,514 $3,815 
Average interest rate4.75 %4.88 %4.75 %— %4.88 %4.09 %4.41 %
Variable rate$68 $114 $148 $629 $144 $698 $1,801 $1,754 
Average interest rate5.64 %5.64 %5.64 %5.67 %5.60 %5.60 %5.64 %

Foreign Currency Exchange Risk. From time to time, we may enter into foreign currency forward exchange contracts to manage exposure related to certain foreign currency commitments and anticipated foreign currency denominated expenditures. Our policy prohibits us from entering into derivative financial instruments for speculative or trading purposes. At this time, we have not identified any material exposure associated with the changes as a result of the British vote to exit the European Union.

We hedge portions of our foreign currency denominated balance sheet positions with foreign currency forward exchange contracts to reduce the risk that our earnings will be adversely affected by changes in currency exchange rates. The changeschange in fair value of these hedges arecontracts is recognized in earnings in the same period as the gains and losses from the remeasurement of the assets and liabilities. TheseAll foreign currency forward exchange contracts are not designated as hedging instruments under ASC 815,Derivativesmature within 12 months.
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We recognized a net loss of $7 million and Hedging.We had no outstanding foreign currency forward exchange contracts asgain of December 29, 2017.

We evaluate hedging effectiveness prospectively and retrospectively and record any ineffective portion of the hedging instruments$2 million in Cost of revenue onand Interest expense, respectively, related to the Condensed Consolidated Statementsloss of Operations. We did not have any material net gains (losses) recognized in Cost of revenue for cash flow hedges due to hedge ineffectiveness ordesignation on discontinued cash flow hedges during the three and six months ended December 29, 2017.September 30, 2022.

The table below provides information as of September 30, 2022 about our foreign currency forward exchange contracts. The table is provided in dollar equivalent amounts and presents the notional amounts (at the contract exchange rates) and the weighted-average contractual foreign currency exchange rates.
(Dollars in millions, except weighted-average contract rate)Notional AmountWeighted-Average Contract Rate
Estimated Fair Value(1)
Foreign currency forward exchange contracts:  
Singapore Dollar$243 $1.38 $(9)
Thai Baht179 $34.67 (15)
Chinese Renminbi119 $6.71 (6)
British Pound Sterling85 $0.81 (10)
Total$626  $(40)

(1) Equivalent to the unrealized net gain (loss) on existing contracts.
Other Market Risks. We have exposure to counterparty credit downgrades in the form of credit risk related to our foreign currency forward exchange contracts and our fixed income portfolio. We monitor and limit our credit exposure for our foreign currency forward exchange contracts by performing ongoing credit evaluations. We also manage the notional amount of contracts entered into with any one counterparty, and we maintain limits on maximum tenor of contracts based on the credit rating of the financial institution. Additionally, the investment portfolio is diversified and structured to minimize credit risk.
Changes in our corporate issuer credit ratings have minimal impact on our near-term financial results, but downgrades may negatively impact our future transaction costs andability to raise capital, our ability to execute transactions with various counterparties.

counterparties, and may increase the cost of such capital.

We are subject to equity market risks due to changes in the fair value of the notional investments selected by our employees as part of our Seagate Deferred Compensation Plan (the “SDCP”).non-qualified deferred compensation plan—the SDCP. In fiscal year 2014, we entered into a Total Return Swap (“TRS”)TRS agreement in order to manage the equity market risks associated with the SDCP liabilities. We pay a floating rate, based on LIBOR plus an interest rate spread, on the notional amount of the TRS. The TRS is designed to substantially offset changes in the SDCP liabilityliabilities due to changes in the value of the investment options made by employees. See “Part I, Item 1. Financial Statements—Note 8.6. Derivative Financial Instruments”Instruments” of this Quarterly Report onForm 10-Q.

ITEM 4.CONTROLS AND PROCEDURES

An

ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by the Exchange Act Rule 13a-15, we carried out an evaluation was performed under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on the evaluation, our management, including our chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of December 29, 2017. September 30, 2022. 
Changes in Internal Control over Financial Reporting
During the quarter ended December 29, 2017,September 30, 2022, there were no changes in our internal control over financial reporting that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.


PART II

OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

ITEM 1.LEGAL PROCEEDINGS
For a discussion of legal proceedings, see “Part I, Item 1. Financial Statements—Note 14.12. Legal, Environmental and Other Contingencies”Contingencies” of this Quarterly Report onForm 10-Q.

ITEM 1A.  RISK FACTORS

There have been no

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ITEM 1A.RISK FACTORS
Summary of Risk Factors
The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, results of operations, financial condition, cash flows, brand and/or the price of our outstanding ordinary shares, and make an investment in our ordinary shares speculative or risky. You should read this summary together with the more detailed description of each risk factor contained below. The descriptions below include any material changes to and supersede the description of the risk factors associated withaffecting our business previously disclosed in Part“Part I, Item 1A, “Risk1A. Risk Factors” in our Annual Report onForm 10-K for the fiscal year ended June 30, 2017. In additionJuly 1, 2022.
Risks Related to our Business, Operations and Industry
•Our ability to increase our revenue and maintain our market share depends on our ability to successfully introduce and achieve market acceptance of new products on a timely basis. If our products do not keep pace with customer requirements, our results of operations will be adversely affected.
•We operate in highly competitive markets and our failure to anticipate and respond to technological changes and other market developments, including price, could harm our ability to compete.
•We may be adversely affected by the loss of, or reduced, delayed or canceled purchases by, one or more of our key customers.
•We are dependent on sales to distributors and retailers, which may increase price erosion and the volatility of our sales.
•We must plan our investments in our products and incur costs before we have customer orders or know about the market conditions at the time the products are produced. If we fail to predict demand accurately for our products or if the markets for our products change, we may have insufficient demand or we may be unable to meet demand, which may materially adversely affect our financial condition and results of operations.
•Changes in demand for computer systems, data storage subsystems and consumer electronic devices may in the future cause a decline in demand for our products, or an increase in demand for our products that we are unable to meet.
•We have a long and unpredictable sales cycle for nearline storage solutions, which impairs our ability to accurately predict our financial and operating results in any period and may adversely affect our ability to forecast the need for investments and expenditures.
•We experience seasonal declines in the sales of our consumer products during the second half of our fiscal year which may adversely affect our results of operations.
•We may not be successful in our efforts to grow our systems, SSD and Lyve revenues.
•Our worldwide sales and manufacturing operations subject us to risks that may adversely affect our business related to disruptions in international markets, currency exchange fluctuations, increased costs and global health outbreaks.
•The ongoing COVID-19 pandemic has impacted our business, operating results and financial condition, as well as the operations and financial performance of many of the customers and suppliers in industries that we serve. We are unable to predict the extent to which the pandemic and related effects will adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.
•If we do not control our costs, we will not be able to compete effectively.
Risks Associated with Supply and Manufacturing
•Shortages or delays in the receipt of, or cost increases in, critical components, equipment or raw materials necessary to manufacture our products, may cause us to suffer lower operating margins, production delays and other material adverse effects.
•Shortages or delays in critical components, as well as reliance on single-source suppliers, can affect our production and development of products and may harm our operating results.
•If revenues fall or customer demand decreases significantly, we may not meet all of our purchase commitments to certain suppliers, which could result in penalties, increased manufacturing costs or excess inventory.
•Due to the complexity of our products, some defects may only become detectable after deployment.
Risks Related to Human Capital
•The loss of or inability to attract, retain and motivate key executive officers and employees could negatively impact our business prospects.
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•We are subject to risks related to corporate and social responsibility and reputation.
Risks Related to Financial Performance or General Economic Conditions
•Changes in the macroeconomic environment have impacted and may in the future negatively impact our results of operations.
•We may not be able to generate sufficient cash flows from operations and our investments to meet our liquidity requirements, including servicing our indebtedness.
•We are subject to counterparty default risks.
•Our quarterly results of operations fluctuate, sometimes significantly, from period to period, and may cause our share price to decline.
•Any cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business.
•The effect of geopolitical uncertainties, war, terrorism, natural disasters, public health issues and other information set forth in this report, you should carefully considercircumstances, on national and/ or international commerce and on the risk factors discussed in our Annual Report onForm 10-K as theyglobal economy, could materially adversely affect our results of operations and financial condition.
Legal, Regulatory and Compliance Risks
•Our business is subject to various laws, regulations, governmental policies, litigation, governmental investigations or governmental proceedings that may cause us to incur significant expense or adversely impact our results or operations and financial condition.
•Some of our products and services are subject to export control laws and other laws affecting the countries in which our products and services may be sold, distributed, or delivered, and any changes to or violation of these laws could have a material adverse effect on our business, results of operations, financial condition and cash flows.
•Changes in U.S. trade policy, including the imposition of sanctions or tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.
•We may be unable to protect our intellectual property rights, which could adversely affect our business, financial condition and results of operations.
•We are at times subject to intellectual property proceedings and claims which could cause us to incur significant additional costs or prevent us from selling our products, and which could adversely affect our results of operations and financial condition.
•Our business and certain products and services depend in part on IP and technology licensed from third parties, as well as data centers and infrastructure operated by third parties.
Risks Related to Information Technology, Data and Information Security
•We could suffer a loss of revenue and increased costs, exposure to significant liability including legal and regulatory consequences, reputational harm and other serious negative consequences in the event of cyber-attacks, ransomware or other cyber security breaches or incidents that disrupt our operations or result in unauthorized access to, or the loss, corruption, unavailability or dissemination of proprietary or confidential information of our customers or about us or our customers or other third parties.
•We must successfully maintain and upgrade our IT systems, and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.
Risks Related to Owning our Ordinary Shares
•The price of our ordinary shares may be volatile and could decline significantly.
•Any decision to reduce or discontinue the payment of cash dividends to our shareholders or the repurchase of our ordinary shares pursuant to our previously announced share repurchase program could cause the market price of our ordinary shares to decline significantly.
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RISKS RELATED TO OUR BUSINESS, OPERATIONS AND INDUSTRY
Our ability to increase our revenue and maintain our market share depends on our ability to successfully introduce and achieve market acceptance of new products on a timely basis. If our products do not keep pace with customer requirements, our results of operations will be adversely affected.
The markets for our products are characterized by rapid technological change, frequent new product introductions and technology enhancements, uncertain product life cycles and changes in customer demand. The success of our products and services also often depends on whether our offerings are compatible with our customers’ or third-parties’ products or services and their changing technologies. Our customers demand new generations of storage products as advances in computer hardware and software have created the need for improved storage, with features such as increased storage capacity, enhanced security, energy efficiency, improved performance and reliability and lower cost. We, and our competitors, have developed improved products, and we will need to continue to do so in the future.
Historically, our results of operations have substantially depended upon our ability to be among the first-to-market with new data storage product offerings. We may face technological, operational and financial challenges in developing new products. In addition, our investments in new product development may not yield the anticipated benefits. Our market share, revenue and results of operations in the future may be adversely affected if we fail to:
•develop new products, identify business strategies and timely introduce competitive product offerings to meet technological shifts, or we are unable to execute successfully;
•consistently maintain our time-to-market performance with our new products;
•produce these products in adequate volume;
•meet specifications or satisfy compatibility requirements;
•qualify these products with key customers on a timely basis by meeting our customers’ performance and quality specifications; or
•achieve acceptable manufacturing yields, quality and costs with these products.
Accordingly, we cannot accurately determine the ultimate effect that our new products will have on our results of operations. Our failure to accurately anticipate customers’ needs and accurately identify the shift in technological changes could materially adversely affect our long-term financial results.

The Risk Factors

In addition, the concentration of customers in our largest end markets magnifies the potential effect of missing a product qualification opportunity. If the delivery of our products is delayed, our customers may use our competitors’ products to meet their requirements.
When we develop new products with higher capacity and more advanced technology, our results of operations 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 experience increases in failure rates, are of low quality or are not reliable, customers may reduce their purchases of our products, our factory utilization may decrease and our manufacturing rework and scrap costs and our service and warranty costs may increase. In addition, a decline in the only risks facing us. Additional risksreliability of our products may make it more difficult for us to effectively compete with our competitors.
Additionally, we may be unable to produce new products that have higher capacities and uncertaintiesmore advanced technologies in the volumes and timeframes that are required to meet customer demand. We are transitioning to key areal density recording technologies that use HAMR technology to increase HDD capacities. If our transitions to more advanced technologies, including the transition to HDDs utilizing HAMR technology, require development and production cycles that are longer than anticipated or if we otherwise fail to implement new HDD technologies successfully, we may lose sales and market share, which could significantly harm our financial results.
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. If our new products are not currently knownsuccessful, our future results of operations may be adversely affected.
We operate in highly competitive markets and our failure to anticipate and respond to technological changes and other market developments, including price, could harm our ability to compete.
We face intense competition in the data storage industry. Our principal sources of competition include HDD and SSD manufacturers, and companies that provide storage subsystems, including electronic manufacturing services and contract electronic manufacturing.
The markets for our data storage products are characterized by technological change, which is driven in part by the adoption of new industry standards. These standards provide mechanisms to ensure technology component interoperability but they also hinder our ability to innovate or differentiate our products. When this occurs, our products may be deemed commodities, which could result in downward pressure on prices.
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We also experience competition from other companies that produce alternative storage technologies such as flash memory, where increasing capacity, decreasing cost, energy efficiency and improvements in performance have resulted in SSDs that offer increased competition with our lower capacity, smaller form factor HDDs and a declining trend in demand for HDDs in our legacy markets. Some customers for both mass capacity storage and legacy markets have adopted SSDs as an alternative to hard drives in certain applications. Further adoption of SSDs or other alternative storage technologies may limit our total addressable HDD market, impact the competitiveness of our product portfolio and reduce our market share. Any resulting increase in competition could have a material adverse effect on our business, financial condition and results of operations.
We may be adversely affected by the loss of, or reduced, delayed or canceled purchases by, one or more of our key customers.
Some of our key customers such as OEM customers including large hyperscale data center companies and CSPs account for a large portion of our revenue in our mass capacity markets. While we have long-standing relationships with many of our customers, if any key customers were to significantly reduce, defer or cancel their purchases from us or delay product acceptances, or we were prohibited from selling to those key customers, our results of operations would be adversely affected. Although sales to key customers may vary from period to period, a key customer that permanently discontinues or significantly reduces its relationship with us, or that we currently deemare prohibited from selling to, could be difficult to replace. In line with industry practice, new key customers usually require that we pass a lengthy and rigorous qualification process. Accordingly, it may be difficult or costly for us to attract new key customers.Conversely, if one of our key customers unexpectedly increases its orders, we may be unable to produce the additional product volumes in a timely manner or take advantage of any overall increased market demand. This could damage our customer relationships and reputation, which may adversely affect our results of operations. Additionally, some of our key customers are subject to cyclical demand which may result in variability of their orders and timing of their purchase with us and if one of our key customers unexpectedly reduces, delays or cancels orders, our revenues and results of operations may be adversely affected.
Furthermore, if there is consolidation among our customer base, our customers may be able to command increased leverage in negotiating prices and other terms of sale, which could adversely affect our profitability. Furthermore, if such customer pressures require us to reduce our pricing such that our gross margins are diminished, it might not be feasible to sell to a particular customer, which could result in a decrease in our revenue. Consolidation among our customer base may also lead to reduced demand for our products, replacement of our products by the combined entity with those of our competitors and cancellations of orders, each of which could adversely affect our results of operations. If a significant transaction or regulatory impact 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 and financial condition.
We are dependent on sales to distributors and retailers, which may increase price erosion and the volatility of our sales.
A substantial portion of our sales has been to distributors and retailers of disk drive products. Certain of our distributors and retailers may also market competing products. We face significant competition in this distribution channel as a result of limited product qualification programs and a focus on price, terms and product availability. Sales volumes through this channel are also less predictable and subject to greater volatility. In addition, deterioration in business and economic conditions could exacerbate price erosion and volatility as distributors or retailers lower prices to compensate for lower demand and higher inventory levels. Our distributors’ and retailers’ ability to access credit to fund their operations may also affect their purchases of our products. If prices decline significantly in this distribution channel or our distributors or retailers reduce purchases of our products or if distributors or retailers experience financial difficulties or terminate their relationships with us, our revenues and results of operations would be adversely affected.
We must plan our investments in our products and incur costs before we have customer orders or know about the market conditions at the time the products are produced. If we fail to predict demand accurately for our products or if the markets for our products change, we may have insufficient demand or we may be unable to meet demand, which may materially adversely affect our financial condition and results of operations.
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Our results of operation are highly dependent on strong cloud and enterprise and/or consumer spending and the resulting demand for our products. Reduced or weak demand, particularly from our key cloud and enterprise customers as a result of a significant change in macroeconomic conditions may result in a significant reduction or cancellation of their purchases from us which can and have materially adversely impacted our business and financial condition.
Our manufacturing process requires us to make significant product-specific investments in inventory for production at least three to six months in advance. As a result, we incur inventory and manufacturing costs in advance of anticipated sales that may never materialize or that may be substantially lower than expected. If actual demand for our products is lower than the forecast, we may also experience excess and obsolescence of inventory, higher inventory carrying costs, factory under-utilization charges and manufacturing rework costs, which have resulted in and could result in adverse material effects on our financial condition and results of operations. Conversely, if we underestimate demand, we may have insufficient inventory to satisfy demand and may have to forego sales.
Other factors that have affected and may continue to affect our ability to anticipate or meet the demand for our products and adversely affect our results of operations include:
•competitive product announcements or technological advances that result in excess supply when customers cancel purchases in anticipation of newer products;
•variable demand resulting from unanticipated upward or downward pricing pressures;
•our ability to successfully qualify, manufacture and sell our data storage products;
•changes in our product mix, which may adversely affect our gross margins;
•key customers deferring or canceling purchases or delaying product acceptances, or unexpected increases in their orders;
•manufacturing delays or interruptions, particularly at our manufacturing facilities in China, Malaysia, Northern Ireland, Singapore, Thailand or the United States;
•limited access to components that we obtain from a single or a limited number of suppliers; and
•the impact of changes in foreign currency exchange rates on the cost of producing our products and the effective price of our products to non-U.S. customers.
Changes in demand for computer systems, data storage subsystems and consumer electronic devices may in the future cause a decline in demand for our products, or an increase in demand for our products that we are unable to meet.
Our products are components in computers, data storage systems and consumer electronic devices. Historically, the demand for these products has been volatile. Unexpected slowdowns in demand for computers, data storage subsystems or consumer electronic devices generally result in sharp declines in demand for our products. Declines in customer spending on the systems and devices that incorporate our products could have a material adverse effect on demand for our products and on our financial condition and results of operations. Uncertain global economic and business conditions can exacerbate these risks.
We are dependent on our long-term investments to manufacture adequate products. Our investment decisions in adding new assembly and test capacity require significant planning and lead-time, and a failure to accurately forecast demand for our products could cause us to over-invest or under-invest, which would lead to excess capacity, under-utilization charges, impairments or loss of sales and revenue opportunities.
Sales to the legacy markets remain an important part of our business. These markets, however, have been, and we expect them to continue to be, immaterial alsoadversely affected by:
•announcements or introductions of major new operating systems or semiconductor improvements or shifts in customer preferences, performance requirements and behavior, such as the shift to tablet computers, smart phones, NAND flash memory or similar devices that meet customers’ cost and capacity metrics;
•longer product life cycles; and
•changes in macroeconomic conditions that cause customers to spend less, such as the imposition of new tariffs, increased laws and regulations, and increased unemployment levels.
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We believe that the deterioration of demand for disk drives in certain of the legacy markets has accelerated, and this deterioration may continue or further accelerate, which could cause our operating results to suffer.
In addition, we believe announcements regarding competitive product introductions from time to time have caused customers to defer or cancel their purchases, making certain inventory obsolete. Whenever an oversupply of products in the market causes our industry to have higher than anticipated inventory levels, we experience even more intense price competition from other manufacturers than usual, which may materially adversely affect our financial results.
We have a long and unpredictable sales cycle for nearline storage solutions, which impairs our ability to accurately predict our financial and operating results in any period and may adversely affect our ability to forecast the need for investments and expenditures.
Our nearline storage solutions are technically complex and we typically supply them in high quantities to a small number of customers. Many of our products are also tailored to meet the specific requirements of individual customers, and are often integrated by our customers into the systems and products that they sell. Factors that affect the length of our sales cycle include:
•the time required for developing, testing and evaluating our products before they are deployed;
•the size of the deployment; and
•the complexity of system configuration necessary to deploy our products.
As a result, our sales cycle for nearline storage solutions could exceed one year and frequently unpredictable. Additionally, our nearline storage solutions is subject to variability of sales primarily due to the timing of IT spending or a reflection of cyclical demand from CSPs based on the timing of their procurement and deployment requirements and their ability to procure other components needed to build out data center infrastructure. Given the length of development and qualification programs and unpredictability of the sales cycle, we may be unable to accurately forecast product demand, which may result in lost sales or excess inventory and associated inventory reserves or write-downs, each of which could harm our business, financial condition and results of operations.
We experience seasonal declines in the sales of our consumer products during the second half of our fiscal year which may adversely affect our results of operations.
In certain end markets, sales of computers, storage subsystems and consumer electronic devices tend to be seasonal, and therefore, we expect to continue to experience seasonality in our business as we respond to variations in our customers’ demand for our products. In particular, we anticipate that sales of our consumer products will continue to be lower during the second half of our fiscal year. Retail sales of certain of our legacy markets solutions traditionally experience higher demand in the first half of our fiscal year driven by consumer spending in the back-to-school season from late summer to fall and the traditional holiday shopping season from fall to winter. We experience seasonal reductions in the second half of our fiscal year in the business activities of our customers during international holidays like Lunar New Year, as well as in the summer months (particularly in Europe), which typically result in lower sales during those periods. Since our working capital needs peak during periods in which we are increasing production in anticipation of orders that have not yet been received, our results of operations will fluctuate even if the forecasted demand for our products proves accurate. Failure to anticipate consumer demand for our branded solutions as well as an inability to maintain effective working relationships with retail and online distributors may also adversely impact our future results of operations. Furthermore, it is difficult for us to evaluate the degree to which this seasonality may affect our business in future periods because of the rate and unpredictability of product transitions and new product introductions, as well as macroeconomic conditions. In particular, during periods where there are rapidly changing macroeconomic conditions, historical seasonality trends may not be a good indicator to predict our future performance and results of operations.
We may not be successful in our efforts to grow our systems, SSD and Lyve revenues.
We have made and continue to make investments to grow our systems, SSD and Lyve platform revenues. Our ability to grow systems, SSD and Lyve revenues is subject to the following risks:
•we may be unable to accurately estimate and predict data center capacity and requirements;
•we may not be able to offer compelling solutions or services to enterprises, subscribers, or consumers;
•we may be unable to obtain cost effective supply of NAND flash memory in order to offer competitive SSD solutions; and
•our cloud systems revenues generally have a longer sales cycle, and growth is likely to depend on relatively large customer orders, which may increase the variability of our results of operations and the difficulty of matching revenues with expenses.
Our results of operations and share price may be adversely affected if we are not successful in our efforts to grow our revenues as anticipated. In addition, our growth in these markets may bring us into closer competition with some of our customers or potential customers, which may decrease their willingness to do business with us.
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Our worldwide sales and manufacturing operations subject us to risks that may adversely affect our business related to disruptions in international markets, currency exchange fluctuations, increased costs and global health outbreaks.
We are a global company and have significant sales operations outside of the United States, including sales personnel and customer support operations. We also generate a significant portion of our revenue from sales outside the U.S. Disruptions in the economic, environmental, political, legal or regulatory landscape in the countries where we operate may have a material adverse impact on our manufacturing and sales operations. Disruptions in financial markets, the deterioration of global economic conditions, and geopolitical uncertainty and instability or war, such as the military action against Ukraine launched by Russia, have had and may continue to have an impact on our sales to customers and end-users located in the EMEA region.
Prices for our products are denominated predominantly in dollars, even when sold to customers that are located outside the U.S. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside of the U.S. where we sell in dollars. This could adversely impact our sales and market share in such areas or increase pressure on us to lower our price, and adversely impact our profit margins. In addition, we have revenue and expenses denominated in currencies other than the dollar, primarily the Thai Baht, Singaporean dollar, Chinese Renminbi and British Pound Sterling, which further exposes us to adverse movements in foreign currency exchange rates. A weakened dollar could increase the effective cost of our expenses such as payroll, utilities, tax and marketing expenses, as well as overseas capital expenditures. Any of these events could have a material adverse effect on our results of operations. We have attempted to manage the impact of foreign currency exchange rate changes by, among other things, entering into foreign currency forward exchange contracts from time to time, which could be designated as cash flow hedges or not designated as hedging instruments. Our hedging strategy may be ineffective, and specific hedges may expire and not be renewed or may not offset any or more than a portion of the adverse financial impact resulting from currency variations. The hedging activities may not cover our full exposure, subject us to certain counterparty credit risks and may impact our results of operations. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk— Foreign Currency Exchange Risk” of this report for additional information about our foreign currency exchange risk.
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 countries. Volatility in fuel costs, political instability or constraints in or increases in the costs of air transportation may lead us to develop alternative shipment methods, which could disrupt our ability to receive raw materials, or ship finished product, and as a result our business and results of operations may be harmed.
The occurrence of a pandemic disease, such as the recent COVID-19 pandemic, has impacted and may adversely impact our operations (including, without limitation, logistical and other operational costs) and the operations of some of our customers.
The ongoing COVID-19 pandemic has impacted our business, operating results and financial condition, as well as the operations and financial performance of many of the customers and suppliers in industries that we serve. We are unable to predict the extent to which the pandemic and related effects will adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.
The COVID-19 pandemic has resulted in a widespread health crisis and numerous disease control measures being taken to limit its spread. The impact of the pandemic on our business has included or could in the future include:
•disruptions to or restrictions on our ability to ensure the continuous manufacture and supply of our products and services, including insufficiency of our existing inventory levels and temporary or permanent closures or reductions in operational capacity of our facilities or the facilities of our direct or indirect suppliers or customers, and any supply chain disruptions;
•temporary shortages of skilled employees available to staff manufacturing facilities due to stay at home orders and travel restrictions within as well as into and out of countries;
•increases in operational expenses and other costs related to requirements implemented to mitigate the impact of the COVID-19 pandemic;
•delays or limitations on the ability of our customers to perform or make timely payments;
•reductions in short- and long-term demand for our products, or other disruptions in technology buying patterns;
•adverse effects on economies and financial markets globally or in various markets throughout the world, potentially leading to a prolonged economic downturn or reductions in business and consumer spending, which may result in decreased net revenue, gross margins, or earnings and/or in increased expenses and difficulty in managing inventory levels;
•delays to and/or lengthening of our sales or development cycles or qualification activity;
•challenges for us, our direct and indirect suppliers and our customers in obtaining financing due to turmoil in financial markets;
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•workforce disruptions due to illness, quarantines, governmental actions, other restrictions, and/or the social distancing measures we have taken to mitigate the impact of the COVID-19 pandemic in an effort to protect the health and well-being of our employees, customers, suppliers and of the communities in which we operate;
•increased vulnerability to cyberattacks due to the significant number of employees working remotely; and
•our management team continuing to commit significant time, attention and resources to monitoring the COVID-19 pandemic and seeking to mitigate its effects on our business and workforce.
The COVID-19 pandemic has increased economic and demand uncertainty. It continues to negatively affect our business and there is uncertainty around its duration and impact. The extent to which the COVID-19 pandemic will continue to impact our business, financial condition and results of operations is uncertain.
There are many factors outside of our control, such as new strains of COVID-19 virus, the distribution and efficacy of the existing or new vaccines, the response and measures taken by government authorities around the world, and the response of the financial and consumer markets to the prolonged pandemic and governmental measures. These impacts, individually or in the aggregate, could have a material and adverse effect on our business, results of operations and financial condition. Such effect may be exacerbated in the event the pandemic and the measures taken in response to it, and their effects, persist for an extended period of time, or if there is a resurgence of the outbreak or variants thereof. Under any of these circumstances, the resumption of normal business operations may be delayed or hampered by lingering effects of the COVID-19 pandemic on our operations, direct and indirect suppliers, partners, and customers. The COVID-19 pandemic may also heighten other risks described in this Risk Factors section.
If we do not control our costs, we will not be able to compete effectively.
We continually seek to make our cost structure and business processes more efficient. We are focused on increasing workforce flexibility and scalability, and improving overall competitiveness by leveraging our global capabilities, as well as external talent and skills, worldwide. Our strategy involves, to a substantial degree, increasing revenue and exabytes volume while at the same time controlling expenses. Because our vertical design and manufacturing strategy, our operations have higher costs that are fixed or difficult to reduce in the short-term, including our costs related to utilization of existing facilities and equipment. If we fail to forecast demand accurately or if there is a partial or complete reduction in long-term demand for our products, we could be required to write off inventory, record excess capacity charges which could negatively impact our gross margin and our financial results. If we do not control our manufacturing and operating expenses, our ability to compete in the marketplace may be impaired. In the past, activities to reduce costs have included closures and transfers of facilities, significant personnel reductions, restructuring efforts, asset write-offs and efforts to increase automation. Our restructuring efforts may not yield the intended benefits and may be unsuccessful or disruptive to our business operations which may materially adversely affect our financial results.
RISKS ASSOCIATED WITH SUPPLY AND MANUFACTURING
Shortages or delays in the receipt of, or cost increases in, critical components, equipment or raw materials necessary to manufacture our products, may cause us to suffer lower operating margins, production delays and other material adverse effects.
The cost, quality, availability and supply of components, subassemblies, certain equipment and raw materials used to manufacture our products and key components like recording media and heads are critical to our success. Particularly important for our products are components such as read/write heads, substrates for recording media, ASICs, spindle motors, printed circuit boards, suspension assemblies and NAND flash memory. In addition, the equipment we use to manufacture our products and components is frequently custom made and comes from a few suppliers and the lead times required to obtain manufacturing equipment can be significant. Our efforts to control our costs, including capital expenditures, may also affect our ability to obtain or maintain such inputs and equipment, which could affect our ability to meet future demand for our products.
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We rely on sole or a limited number of direct and indirect suppliers for some or all of these components that we do not manufacture, including substrates for recording media, read/write heads, ASICs, spindle motors, printed circuit boards, suspension assemblies and NAND flash memory. In light of this small, consolidated supplier base, if our suppliers increased their prices as a result of inflationary pressures from the current macroeconomic conditions or other changes in economic conditions, our results of operations would be negatively affected. Also, many of such direct and indirect component suppliers are geographically concentrated, making our supply chain more vulnerable to regional disruptions such as severe weather, the occurrence of local or global health issues or pandemics, acts of terrorism, war and an unpredictable geopolitical climate, which may have a material impact on the production, availability and transportation of many components. We have experienced and continue to experience disruptions in our supply chain due to the impact of the COVID-19 pandemic, which has also impacted and may adversely impact our operations (including, without limitation, logistical and other operational costs) and the operations of some of our key direct and indirect suppliers. If our direct and indirect vendors for these components are unable to meet our cost, quality, supply and transportation requirements, continue to remain financially viable or fulfill their contractual commitments and obligations, we could experience disruption in our supply chain, including shortages in supply or increases in production costs, which would materially adversely affect our results of operations. The current worldwide shortage of semiconductors exacerbates these risks.
Certain rare earth elements are critical in the manufacture of our products. We purchase components that contain rare earth elements from a number of countries, including China. We cannot predict whether any nation will impose regulations or trade barriers including tariffs, duties, quotas or embargoes upon the rare earth elements incorporated into our products that would restrict the worldwide supply of such metals or increase their cost. We have experienced and continuing to experience increased costs and production delays when we were unable to obtain the necessary equipment or sufficient quantities of some components, and/or have been forced to pay higher prices or make volume purchase commitments or advance deposits for some components, equipment or raw materials that were in short supply in the industry in general. Further, if our customers experience shortages of components or materials used in their products it could result in a decrease in demand for our products and have an adverse effect on our results of operations. If any major supplier were to restrict the supply available to us or increase the cost of the rare earth elements used in our products, we could experience a shortage in supply or an increase in production costs, which would adversely affect our results of operations.
Shortages or delays in critical components, as well as reliance on single-source suppliers, can affect our production and development of products and may harm our operating results.
We are dependent on a limited number of qualified suppliers who provide critical materials or components. If there is a shortage of, or delay in supplying us with, critical components, equipment or raw materials, 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 may 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 may be late in shipping products, causing potential customers to make purchases from our competitors, 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. The industry is currently experiencing a global shortage of semiconductors and other electronic components. In addition, many of our suppliers’ manufacturing facilities are fully utilized. If they fail to invest in additional capacity or deliver components in the required timeframe, such failure would have an impact on our ability to ramp new products, and may result in a loss of revenue or market share if our competitors did not utilize the same components and were not affected.
We often aim to lead the market in new technology deployments and leverage unique and customized technology from single source suppliers who are early adopters in the emerging market. Our options in supplier selection in these cases are limited and the supplier based technology has been and may continue to be single sourced until wider adoption of the technology occurs and any necessary licenses become available. In such cases, any technical issues in the supplier’s technology may cause us to delay shipments of our new technology deployments and harm our financial position.
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If revenues fall or customer demand decreases significantly, we may not meet all of our purchase commitments to certain suppliers, which could result in penalties, increased manufacturing costs or excess inventory.
From time to time, we enter into long-term, non-cancelable purchase commitments or make large up-front investments with certain suppliers in order to secure certain components or technologies for the production of our products or to supplement our internal manufacturing capacity for certain components. If our actual revenues in the future are lower than our projections or if customer demand decreases significantly below our projections, we may not meet all of our purchase commitments with these suppliers. As a result, it is possible that our revenues will not be sufficient to recoup our up-front investments, in which case we will have to shift output from our internal manufacturing facilities to these suppliers, resulting in higher internal manufacturing costs, or make penalty-type payments under the terms of these contracts. Additionally, because our markets are volatile, competitive and subject to rapid technology and price changes, we face inventory and other asset risks in the event we do not fully utilize purchase commitments. If we are unable to fully utilize our purchase commitments or if we shift output from our internal manufacturing facilities in order to meet the commitments, our gross margin and operating margin could be materially adversely impacted.
Due to the complexity of our products, some defects may only become detectable after deployment.
Our products are highly complex and are designed to operate in and form part of larger complex networks and storage systems. Our products may contain a defect or be perceived as containing a defect by our customers as a result of improper use or maintenance. Lead times required to manufacture certain components are significant, and a quality excursion may take significant time and resources to remediate. Defects in our products, third-party components or in the networks and systems of which they form a part, directly or indirectly, have resulted in and may in the future result in:
•increased costs and product delays until complex solution level interoperability issues are resolved;
•costs associated with the remediation of any problems attributable to our products;
•loss of or delays in revenues;
•loss of customers;
•failure to achieve market acceptance and loss of market share;
•increased service and warranty costs; and
•increased insurance costs.
Defects in our products could also result in legal actions by our customers for breach of warranty, property damage, injury or death. Such legal actions, including but not limited to product liability claims could exceed the level of insurance coverage that we have obtained. Any significant uninsured claims could significantly harm our financial condition.
RISKS RELATED TO HUMAN CAPITAL
The loss of or inability to attract, retain and motivate 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. We believe our future success will also depend in large part upon our ability to attract, retain and further motivate highly skilled management, marketing, sales and product development personnel. We have experienced intense competition for qualified and capable personnel, including in the U.S., Thailand, China, Singapore and Northern Ireland, 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. Additionally, because a portion of our key personnel’s compensation is contingent upon the performance of our business, including through cash bonuses and equity compensation, when the market price of our ordinary shares fluctuates or our results of operations or financial condition are negatively impacted, we may be at a competitive disadvantage for retaining and hiring employees. The reductions in workforce that result from our historical restructurings have also made and may continue to make it difficult for us to recruit and retain personnel. Increased difficulty in accessing, recruiting or retaining personnel may lead to increased manufacturing and employment compensation costs, which could adversely affect our results of operations. The loss of one or more of our key personnel or the inability to hire and retain key personnel could have a material adverse effect on our business, results of operations and financial condition.
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We are subject to risks related to corporate and social responsibility and reputation.
Many factors influence our reputation including the perception held by our customers, suppliers, partners, shareholders, other key stakeholders, and the communities in which we operate. We face increasing scrutiny related to environmental, social and governance activities. We risk damage to our reputation if we fail to act responsibly in a number of areas, such as diversity and inclusion, environmental stewardship, sustainability, supply chain management, climate change, workplace conduct, and human rights. Any harm to our reputation could impact employee engagement and retention, our corporate culture, and the willingness of customers, suppliers, and partners to do business with us, which could have a material adverse effect on our business, results of operations and cash flows. Further, despite our policies to the contrary, we may not be able to control the conduct of every individual actor, and our employees and personnel may violate environmental, social or governance standards or engage in other unethical conduct. These acts, or any accusation of such conduct, even if proven to be false, could adversely impact the reputation of our business.
RISKS RELATED TO FINANCIAL PERFORMANCE OR GENERAL ECONOMIC CONDITIONS
Changes in the macroeconomic environment have impacted and may in the future negatively impact our results of operations.
Changes, especially when there are rapid changes, in macroeconomic conditions may affect consumer and enterprise spending, and as a result, our customers may postpone or cancel spending in response to volatility in credit and equity markets, negative financial news and/or declines in income or asset values, all of which may have a material adverse effect on the demand for our products and/or result in significant decreases in our product prices. Other factors that could have a material adverse effect on demand for our products and on our financial condition and results of operations include inflation, slower growth or recession, conditions in the labor market, healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer and business spending behavior. These changes could happen rapidly and we may not be able to react quickly to prevent or limit our losses or exposures.
Macroeconomic developments such as slowing global economies, trade disputes, sanctions, increased tariffs between the U.S. and China, Mexico and other countries, the withdrawal of the United Kingdom (“U.K.”) from the EU, or adverse economic conditions worldwide resulting from the COVID-19 pandemic and efforts of governments and private industry to slow the pandemic or efforts of governments to stimulate or stabilize the economy may adversely impact our business. Significant inflation and related increases in interest rates, have negatively affected our business in the September 2022 quarter and could continue in the near future to negatively affect our business, operating results or financial condition or the markets in which we operate, which, in turn, could adversely affect the price of our ordinary shares. A general weakening of, and related declining corporate confidence in, the global economy or the curtailment in government or corporate spending could cause current or potential customers to reduce their information technology (“IT”) budgets or be unable to fund data storage products, which could cause customers to delay, decrease or cancel purchases of our products or cause customers to not pay us or to delay paying us for previously purchased products and services.
We may not be able to generate sufficient cash flows from operations and our investments to meet our liquidity requirements, including servicing our indebtedness.
Our business may not generate sufficient cash flows to enable us to meet our liquidity requirements, including working capital, capital expenditures, product development efforts, investments, servicing our indebtedness and other general corporate requirements. If we cannot fund our liquidity requirements, we may have to reduce or delay capital expenditures, product development efforts, investments and other general corporate expenditures. We cannot assure you that any of these remedies would, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit us to meet our obligations, which would affect our results of operations.
We are leveraged and require significant amounts of cash to service our debt. Our 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 and reduce our options for capital allocation. Our high level of debt presents the following risks:
•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 substantial leverage increases our vulnerability to economic downturns, decreased availability of capital, 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;
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•our level of debt may restrict us from raising, or make it more costly to raise, 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 to pay future dividends or make other restricted payments and investments.
In addition, in the event that we need to refinance all or a portion of our outstanding debt as it matures or incur additional debt to fund our operations, we may not be able to obtain terms as favorable as the terms of our existing debt or refinance our existing debt or incur additional debt to fund our operations at all. If prevailing interest rates or other factors result in higher interest rates upon refinancing, then the interest expense relating to the refinanced debt would increase. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be negatively affected, which could adversely affect our ability to refinance existing debt or raise additional capital.
We are subject to counterparty default risks.
We have numerous arrangements with financial institutions that subject us to counterparty default risks, including cash and investment deposits, and foreign currency forward exchange contracts and other derivative instruments. As a result, we are subject to the risk that the counterparty to one or more of these arrangements will, voluntarily or involuntarily, default on its performance obligations. In times of market distress in particular, a counterparty may not comply with its contractual commitments that could then lead to it defaulting on its obligations with little or no notice to us, thereby limiting our ability to take action to lessen or cover our exposure. Additionally, our ability to mitigate our counterparty exposures could be limited by the terms of the relevant agreements or because market conditions prevent us from taking effective action. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to recover any losses suffered as a result of that counterparty's default may be limited by the liquidity of the counterparty or the applicable laws governing the bankruptcy proceedings. In the event of any such counterparty default, we could incur significant losses, which could have a material adverse effect on our business, results of operations, or financial condition.
Further, our customers could have reduced access to working capital due to global economic conditions, higher interest rates, reduced bank lending resulting from contractions in the money supply or the deterioration in the customer’s, or their bank’s financial condition or the inability to access other financing, which would increase our credit and non-payment risk, and could result in an increase in our operating costs or a reduction in our revenue. Also, our customers outside of the United States are sometimes 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. In addition, some of our OEM customers have adopted a subcontractor model that requires us to contract directly with companies, such as original design manufacturers, that provide manufacturing and fulfillment services to our OEM customers. Because these subcontractors are generally not as well capitalized as our direct OEM customers, this subcontractor model exposes us to increased credit risks. Our agreements with our OEM customers may not permit us to increase our product prices to alleviate this increased credit risk.
Our quarterly results of operations fluctuate, sometimes significantly, from period to period, and may cause our share price to decline.
Our quarterly revenue and results of operations fluctuate, sometimes significantly, from period to period. These fluctuations, which we expect to continue, have been and may continue to be precipitated by a variety of factors, including:
•uncertainty in global economic and political conditions, and instability or war (such as the military action against Ukraine launched by Russia) or adverse changes in the level of economic activity in the major regions in which we do business;
•pandemics, such as COVID-19, or other global health issues that impact our operations as well as those of our customers and suppliers;
•competitive pressures resulting in lower prices by our competitors which may shift demand away from our products;
•announcements of new products, services or technological innovations by us or our competitors, and delays or problems in our introduction of new, more cost-effective products, the inability to achieve high production yields or delays in customer qualification or initial product quality issues;
•changes in customer demand or the purchasing patterns or behavior of our customers;
•application of new or revised industry standards;
•disruptions in our supply chain, including increased costs or adverse changes in availability of supplies of raw materials or components;
•increased costs of electricity and/or other energy sources, freight and logistics costs or other materials or services necessary for the operation of our business;
•the impact of corporate restructuring activities that we have and may continue to engage in;
•changes in the demand for the computer systems and data storage products that contain our products;
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•unfavorable supply and demand imbalances;
•our high proportion of fixed costs, including manufacturing and research and development expenses;
•any impairments in goodwill or other long-lived assets;
•changes in tax laws, such as global tax developments applicable to multinational businesses; the impact of trade barriers, such as import/export duties and restrictions, sanctions, tariffs and quotas, imposed by the U.S. or other countries in which the Company conducts business;
•the evolving legal and regulatory, economic, environmental and administrative climate in the international markets where the Company operates; and
•adverse changes in the performance of our products.
As a result, we believe that quarter-to-quarter and year-over-year comparisons of our revenue and results of operations may not be meaningful, and that these comparisons may not be an accurate indicator of our future performance. Our results of operations in one or more future quarters may fail to meet the expectations of investment research analysts or investors, which could cause an immediate and significant decline in our market value.
Any cost reduction initiatives that we undertake may not deliver the results we expect, and these actions may adversely affect our business.
From time to time, we engage in restructuring plans that have resulted and may continue to result in workforce reduction and consolidation of our real estate facilities and our manufacturing footprint. In addition, management will continue to evaluate our global footprint and cost structure, and additional restructuring plans are expected to be formalized. As a result of our restructurings, we have experienced and may in the future experience a loss of continuity, loss of accumulated knowledge, disruptions to our operations and inefficiency during transitional periods. Additionally, global footprint consolidation and reduction in excess capacity may result in us being unable to respond to increases in forecasted volume of customer demand and loss of revenue opportunity if our competitors have underutilized factories. Any cost-cutting measures could impact employee retention. In addition, we cannot be sure that any future cost reductions or global footprint consolidations will deliver the results we expect, be successful in reducing our overall expenses as we expect or that additional costs will not offset any such reductions or global footprint consolidation. If our operating costs are higher than we expect or if we do not maintain adequate control of our costs and expenses, our results of operations may be adversely affected.
The effect of geopolitical uncertainties, war, terrorism, natural disasters, public health issues and other circumstances, on national and/or international commerce and on the global economy, could materially adversely affect our results of operations and financial condition.
Geopolitical uncertainty, terrorism, instability or war, such as the military action against Ukraine launched by Russia, natural disasters, public health issues and other business interruptions have caused and could cause damage or disruption to international commerce and the global economy, and thus could have a strong negative effect on our business, our direct and indirect suppliers, logistics providers, manufacturing vendors and customers. Our business operations are subject to interruption by natural disasters such as floods and earthquakes, fires, power or water shortages, terrorist attacks, other hostile acts, labor disputes, public health issues (such as the COVID-19 pandemic) and related mitigation actions, and other events beyond our control. Such events may decrease demand for our products, make it difficult or impossible for us to make and deliver products to our customers or to receive components from our direct and indirect suppliers, and create delays and inefficiencies in our supply chain.
A significant natural disaster, such as an earthquake, fire, flood, or significant power outage could have an adverse impact on our business, results of operations, and financial condition. The impact of climate change may increase these risks due to changes in weather patterns, such as increases in storm intensity, sea-level rise, melting of permafrost and temperature extremes in areas where we or our suppliers and customers conduct business. We have a number of our employees and executive officers located in the San Francisco Bay Area, a region known for seismic activity, wildfires and drought conditions, and in Asia, near major earthquake faults known for seismic activity. To mitigate wildfire risk, electric utilities are deploying public safety power shutoffs, which affects electricity reliability to our facilities and our communities. Many of our suppliers and customers are also located in areas with risks of natural disasters. For example, many of our component suppliers are geographically concentrated in Thailand, which suffered severe flooding in October 2011 resulting in a material impact on the production and availability of many components, which caused significant increases in the cost of components. In the event of a natural disaster, losses and significant recovery time could be required to resume operations and our financial condition and results of operations could be materially adversely affected. Further, governmental regulations related to the environment such as Singapore’s recent adoption of a law restricting data center development may also adversely affect our customers or our introduction of new products or services resulting in adverse effects on our financial condition and results of operations.
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Should major public health issues, including pandemics, arise, we could be negatively affected by stringent employee travel restrictions, additional limitations or cost increases in freight and other logistical services, governmental actions limiting the movement of products or employees between regions, increases in or changes to data collection and reporting obligations, delays in production ramps of new products, and disruptions in our operations and those of some of our key direct and indirect suppliers and customers. For example, the recent COVID-19 pandemic resulted in government-imposed travel restrictions, border closures, stay-at-home orders, facility closures or operating constraints in a number of our global locations, disruptions in our operations and those of our suppliers, partners, and customers, increases in air freight rates, limited numbers of employees available to staff manufacturing operations, and shortages of supplies of personal protective equipment required for our manufacturing operations. If any of these circumstances continue for an extended period of time, our manufacturing ability and capacity, or those of our key direct and indirect suppliers or customers, could be impacted, and our results of operations and financial condition could be adversely affected.
LEGAL, REGULATORY AND COMPLIANCE RISKS
Our business is subject to various laws, regulations, governmental policies, litigation, governmental investigations or governmental proceedings that may cause us to incur significant expense or adversely impact our results or operations and financial condition.
Our business is subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and policies. There can be no assurance that laws, regulations and policies will not be changed in ways that will require us to modify our business model and objectives or affect our returns on investments by restricting existing activities and products, subjecting them to escalating costs or prohibiting them outright. In particular, governmental focus on antitrust and competition law, improper payments, the environment, data privacy, protection, security and sovereignty, currency exchange controls, conflict minerals, import and export controls, complex economic sanctions, and potential further changes to global tax laws and tax laws in any jurisdiction in which we operate have had and may continue to have an effect on our business, corporate structure, operations, sales, liquidity, capital requirements, effective tax rate, results of operations, and financial performance. China, Malaysia, Northern Ireland, Singapore and Thailand, in which we have significant operating assets, and the European Union each have exercised and continue to exercise significant influence over many aspects of their domestic economies including, but not limited to, fair competition, tax practices, anti-corruption, anti-trust, data privacy, protection, security and sovereignty, price controls and international trade.
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Our business is subject to state, federal, and international laws and regulations, relating to data privacy, data protection and data security involving matters including data use, data localization, data transfer, data storage, data retention and deletion, data access, and the protection of data and systems. Compliance with these laws and regulations can be onerous and have increased and may continue to increase our cost of doing business globally or otherwise adversely impact financial results. Our introduction of new products or services, changes to our existing products or services, or the manner in which our customers utilize our products or services may result in new or enhanced costly compliance requirements or governmental or regulatory scrutiny that could adversely affect our business and financial results. Data privacy and data protection regulations also continue to change and may be inconsistent from jurisdiction to jurisdiction and may adversely affect our business by requiring changes to our business practices, limiting our ability to offer a product or service, or making our products or services less attractive to customers. Laws and regulations related to data transfers, including, data localization, data access, and data storage, also continue to develop and have been subject to regulatory and judicial scrutiny. In many cases, these laws apply to transfers of information between us and our subsidiaries, and among us, our subsidiaries and our customers or other parties with which we have commercial relations. If we are restricted in our sharing of data among countries and regions in which we operate, among our subsidiaries, or with third parties with which we have a commercial relationship, it may increase our compliance costs and adversely impact our operations, the ability to provide our products or services, or the manner in which we provide our product or services. Our business is subject to state, federal, and international laws and regulations that subject us to requirements to notify vendors, customers, or employees of a data security breach. Any actual or perceived data security breach or incident or actual or perceived non-compliance with laws relating to privacy, data protection or data security could result in damage to our brand and reputation including decreased customer demand for our products or services, significant financial penalties and liability, governmental investigations and proceedings, ongoing audit requirements, private or class actions, and unanticipated changes to our data handling or processing practices. We cannot be certain that our insurance coverage is adequate for data-handling or data-security liabilities incurred, or that insurance will continue to be available to us on economically reasonable terms or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more claims against us that exceed our insurance coverage, or changes in our insurance policies, could have a material adverse effect on our business, including our financial condition, operating results and reputation. For example, the European General Data Protection Regulation (“GDPR”) took effect in May 2018, and applies to our operations, and our products and services used by individuals in Europe. The U.K. has implemented legislation that substantially implements the GDPR, with penalties for noncompliance. Various states, such as California, Colorado, Utah and Connecticut, have implemented similar privacy laws and regulations that impose restrictive requirements regulating the use and disclosure of personal information.The California Consumer Privacy Act (“CCPA”), which took effect in January 2020, imposed compliance requirements and new rights for California consumers. The U.S. federal government also is contemplating privacy legislation.
Further, the sale and manufacturing of products in certain states and countries has and may continue to subject us and our suppliers to state, federal and international laws and regulations governing protection of the environment, including those governing climate change, discharges of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites, restrictions on the presence of certain substances in electronic products and the responsibility for environmentally safe disposal or recycling. We endeavor to ensure that we and our suppliers comply with all applicable environmental laws and regulations, however, compliance has increased and may continue to increase our operating costs and may otherwise impact future financial results. If additional or more stringent requirements are imposed on us in the future, we could incur additional operating costs and capital expenditures. If we fail to comply with applicable environmental laws, regulations, initiatives, or standards of conduct, our customers may refuse to purchase our products and we could be subject to fines, penalties and possible prohibition of sales of our products into one or more states or countries, liability to our customers and damage to our reputation, which could result in a material adverse effect on our financial condition or results of operations.
SEC rules require certain disclosures regarding the use of specified minerals, often referred to as conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. These rules could affect our ability to source, directly or indirectly, certain materials used in our products at competitive prices and could impact the availability of certain minerals used in the manufacture of our products, including gold, tantalum, tin and tungsten. As there may be only a limited number of suppliers of “conflict free” minerals, we cannot be sure that we will be able to obtain necessary conflict free minerals in sufficient quantities or at competitive prices. Our customers, including our OEM customers, may require that our products be free of conflict minerals, and our revenues and margins may be harmed if we are unable to procure conflict free minerals at a reasonable price, or at all, or are unable to pass through any increased costs associated with meeting these demands. We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. Furthermore, our customers and manufacturing stakeholders may place increased demands on our compliance framework which may in turn negatively impact our relationships with our suppliers. If we are unable to comply with requirements regarding the use of conflict and other minerals, our business, financial condition or results of operations may be materially adversely affected.
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From time to time, we have been and may continue to be involved in various legal, regulatory or administrative investigations, inquiries, negotiations or proceedings arising in the normal course of business. In the event of litigation, government investigations or governmental proceedings, we are subject to the inherent risks and uncertainties that may result if outcomes differ from our expectations. In the event of adverse outcomes in any litigation, investigation or government proceeding, we could be required to pay substantial damages, fines or penalties and cease certain practices or activities, which could materially harm our business. The costs associated with litigation and government investigations can also be unpredictable depending on the complexity and length of time devoted to such litigation or investigation. Litigation, investigations or government proceedings may also divert the efforts and attention of our key personnel, which could also harm our business.
In addition, regulation or government scrutiny may impact the requirements for marketing our products and slow our ability to introduce new products, resulting in an adverse impact on our business. Although we have implemented policies and procedures designed to ensure compliance, there can be no assurance that our employees, contractors or agents will not violate these or other applicable laws, rules and regulations to which we are and may be subject. Violations of these laws and regulations could lead to significant penalties, restraints on our export or import privileges, monetary fines, government investigations, disruption of our operating activities, damage to our reputation and corporate brand, criminal proceedings and regulatory or other actions that could materially adversely affect our results of operations. The political and media scrutiny surrounding a governmental investigation for the violation of such laws, even if an investigation does not result in a finding of violation, could cause us significant expense and collateral consequences, including reputational harm, that could have an adverse impact on our business, results of operations and financial condition.
Some of our products and services are subject to export control laws and other laws affecting the countries in which our products and services may be sold, distributed, or delivered, and any changes to or violation of these laws could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Due to the global nature of our business, we are subject to import and export restrictions and regulations, including the Export Administration Regulations administered by the BIS and the trade and economic sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). We incorporate encryption technology into certain of our products and solutions. These encryption products and the underlying technology may be exported outside of the United States only with export authorizations, including by license, a license exception or other appropriate government authorizations, including the filing of an encryption registration. The U.S., through the BIS and OFAC, places restrictions on the sale or export of certain products and services to certain countries, persons and entities, as well as for certain end-uses, such as military, military-intelligence and weapons of mass destruction end-uses. The U.S. government also imposes sanctions through executive orders restricting U.S. companies from conducting business activities with specified individuals and companies. Although we have controls and procedures to ensure compliance with all applicable regulations and orders, we cannot predict whether changes in laws or regulations by the U.S., China or another country will affect our ability to sell our products and services to existing or new customers. Additionally, we cannot ensure that our interpretation of relevant restrictions and regulations will be accepted in all cases by relevant regulatory and enforcement authorities. For example, on August 29, 2022, we received a PCL from the BIS, alleging violations of the EAR. The PCL alleges Seagate acted in violation of the EAR by providing Seagate’s HDDs to a customer and its affiliates listed on the BIS Entity List between August 2020 and September 2021. Seagate has responded to the PCL, setting forth Seagate’s position that it did not engage in prohibited conduct as alleged by BIS, because, among other reasons, Seagate’s HDDs are not subject to the EAR. The matters raised by the PCL remain unresolved at this time, and there can be no assurance as to the timing or terms of any final outcome. Seagate is unable at this time to estimate the range of loss and/or penalty, although it is possible that the outcome could have a material impact on our business, results of operations, financial condition, and cash flows.
Violators of any U.S. export control and sanctions laws may be subject to significant penalties, which may include monetary fines, criminal proceedings against them and their officers and employees, a denial of export privileges, and suspension or debarment from selling products to the U.S. government. Moreover, the sanctions imposed by the U.S. government could be expanded in the future. Our products could be shipped to those targets or for restricted end-uses by third parties, including potentially our channel partners, despite our precautions. In addition, if our partners fail to obtain appropriate import, export or re-export licenses or permits, we may also be adversely affected, through reputational harm as well as other negative consequences including government investigations and penalties. A significant portion of our sales are to customers in Asia Pacific and in other geographies that have been the recent focus of changes in U.S. policies. Any further limitation that impedes our ability to export or sell our products and services could materially adversely affect our business, results of operations, financial condition and cash flows.
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Other countries also regulate the import and export of certain encryption and other technology, including import and export licensing requirements, and have enacted laws that could limit our ability to sell or distribute our products and services or could limit our partners’ or customers’ ability to sell or use our products and services in those countries, which could materially adversely affect our business, results of operations, financial condition and cash flows. Violations of these regulations may result in significant penalties and fines. Changes in our products and services or future changes in export and import regulations may create delays in the introduction of our products and services in those countries, prevent our customers from deploying our products and services globally or, in some cases, prevent the export or import or sale of our products and services to certain countries, governments or persons altogether. From time to time, various governmental agencies have proposed additional regulation of encryption technology, including the escrow and government recovery of private encryption keys. Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls, or change in the countries, governments, persons or technologies targeted by such regulations, in the countries where we operate could result in decreased use of our products and services by, or in our decreased ability to export or sell our products and services to, new or existing customers, which could materially adversely affect our business, results of operations, financial condition and cash flows.
If we were ever found to have violated applicable export control laws, we may be subject to penalties which could have a material and adverse impact on our business, results of operations, financial condition and cash flows. Even if we were not found to have violated such laws, the political and media scrutiny surrounding any governmental investigation of us could cause us significant expense and reputational harm. Such collateral consequences could have a material adverse impact on our business, results of operations, financial condition and cash flows.
Changes in U.S. trade policy, including the imposition of sanctions or tariffs and the resulting consequences, may have a material adverse impact on our business and results of operations.
We face uncertainty with regard to U.S. government trade policy. Current U.S. government trade policy includes tariffs on certain non-U.S. goods, including information and communication technology products. These measures may materially increase costs for goods imported into the United States. This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we are unable to increase prices to adequately address any tariffs, quotas or duties, could lower our margin on products sold and negatively impact our financial performance. Changes in U.S. trade policy have resulted in, and could result in more, U.S. trading partners adopting responsive trade policies, including imposition of increased tariffs, quotas or duties. Such policies could make it more difficult or costly for us to export our products to those countries, therefore negatively impacting our financial performance.
We may be unable to protect our intellectual property rights, which could adversely affect our business, financial condition and results of operations.
We rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements, security measures and licensing arrangements to protect our intellectual property rights. In the past, we have been involved in significant and expensive disputes regarding our intellectual property rights and those of others, including claims that we may be infringing patents, trademarks and other intellectual property rights of third parties. We expect that we will be involved in similar disputes in the future.
There can be no assurance that:
•any of our existing patents will continue to be held valid, if challenged;
•patents will be issued for any of our pending applications;
•any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;
•our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential commercial advantage;
•we will be able to protect our trade secrets and other proprietary information through confidentiality agreements with our customers, suppliers and employees and through other security measures; and
•others will not gain access to our trade secrets.
In addition, our competitors may be able to design their products around our patents and other proprietary rights. Enforcement of our rights often requires litigation. If we bring a patent infringement action and are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable.
Furthermore, we have significant operations and sales in countries where intellectual property laws and enforcement policies are often less developed, less stringent or more difficult to enforce than in the United States. Therefore, we cannot be certain that we will be able to protect our intellectual property rights in jurisdictions outside the United States.
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We are at times subject to intellectual property proceedings and claims which could cause us to incur significant additional costs or prevent us from selling our products, and which could adversely affect our results of operations and financial condition.
We are subject from time-to-time 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 customers, in connection with the use of our products. Intellectual property litigation can be expensive and time-consuming, regardless of the merits of any claim, and could divert our management’s attention from operating results.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

our business. In addition, intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, which may cause actual results to differ materially from our expectations. Some of the actions that we face from time-to-time seek injunctions against the sale of our products and/or substantial monetary damages, which, if granted or awarded, could materially harm our business, financial condition and operating results.

We cannot be certain that our products do not and will not infringe issued patents or other intellectual property rights of others. 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. If our products were found to infringe the intellectual property rights of others, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products in one or more geographic locations, expend significant resources to develop non-infringing technology, discontinue the use of specific processes or obtain licenses to the technology infringed. We might not be able to obtain the necessary licenses on acceptable terms, or at all, or be able to reengineer our products successfully to avoid infringement. Any of the foregoing could cause us to incur significant costs and prevent us from selling our products, which could adversely affect our results of operations and financial condition. See “Item 1. Financial Statements—Note 12.Legal, Environmental and Other Contingencies” contained in this report for a description of pending intellectual property proceedings.
Our business and certain products and services depend in part on IP and technology licensed from third parties, as well as data centers and infrastructure operated by third parties.
Some of our business and some of our products rely on or include software licensed from third parties, including open source licenses. We may not be able to obtain or continue to obtain licenses from these third parties at all or on reasonable terms, or such third parties may demand cross-licenses to our intellectual property. Third-party components and technology may become obsolete, defective or incompatible with future versions of our products or services, or our relationship with the third party may deteriorate, or our agreements may expire or be terminated. We may face legal or business disputes with licensors that may threaten or lead to the disruption of inbound licensing relationships. In order to remain in compliance with the terms of our licenses, we monitor and manage our use of third-party software, including both proprietary and open source license terms to avoid subjecting our products and services to conditions we do not intend, such as the licensing or public disclosure of our intellectual property without compensation or on undesirable terms. The terms of many open source licenses have not been interpreted by U.S. courts, and these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products or services. Additionally, some of these licenses may not be available to us in the future on terms that are acceptable or that allow our product offerings to remain competitive. Our inability to obtain licenses or rights on favorable terms could have a material effect on our business, financial condition, results of operations and cash flow, including if we are required to take remedial action that may divert resources away from our development efforts.
In addition, we also rely upon third-party hosted infrastructure partners globally to serve customers and operate certain aspects of our business or services. Any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.
RISKS RELATED TO INFORMATION TECHNOLOGY, DATA AND INFORMATION SECURITY
We could suffer a loss of revenue and increased costs, exposure to significant liability including legal and regulatory consequences, reputational harm and other serious negative consequences in the event of cyber-attacks, ransomware or other cyber security breaches or incidents that disrupt our operations or result in unauthorized access to, or the loss, corruption, unavailability or dissemination of proprietary or confidential information of our customers or about us or other third parties.
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Our operations are dependent upon our ability to protect our digital infrastructure and data. We manage and store various proprietary information and sensitive or confidential data relating to our operations, as well as to our customers, suppliers, employees and other third parties, and we will store subscribers’ data on our edge-to-cloud mass storage platform. As our operations become more automated and increasingly interdependent and our edge-to-cloud mass storage platform service grows, our exposure to the risks posed by storage, transfer, and maintenance of data, such as corruption, loss or unavailability of, or damage to, and other security risks to, data, will continue to increase. We use third-party vendors to store and otherwise process data for us and they face similar risks. The measures we and our vendors have implemented to secure our computer equipment and data belonging to us, our customers, suppliers, employees or other third parties have been and may continue to be vulnerable to phishing, employee error, hacking, ransomware and other cyberattacks, malfeasance, system error or other irregularities or incidents, including from breaches and incidents or attacks at third party vendors we utilize, and may not be sufficient for all eventualities. We cannot ensure that any limitation-of-liability provisions in our customer and user agreements, contracts with third-party vendors and service providers or other contracts are enforceable or adequate or would protect us from any liabilities or damages with respect to claims relating to a security breach or other security-related matter. Threat actors may be able to penetrate our network security, misappropriate or compromise confidential information and other data, create system disruptions or cause shutdowns. Threat actors also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products and services or otherwise exploit any security vulnerabilities of our products and services. Such attempts are increasing in technical sophistication, number and the ability to evade detection or to obscure such activities. We anticipate that these threats will continue to grow in scope and complexity over time. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Although we take steps to protect against and detect such attempts, our efforts may not be sufficient for all eventualities, including sustained maintenance of remote working requirements. In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system or our services. We have been, and will likely continue to be, subject to computer viruses or other malicious code, cyber-attacks or other computer-related attempts to breach the IT systems we use for these purposes. We have been and may also continue to be subject to IT system failures and network disruptions due to these factors. To date, these attacks have not had a material impact on our operations, but we cannot provide assurance that they will not have a material impact in the future. The insurance coverage we maintain that is intended to address certain data security risks may be insufficient to cover all types of claims or losses that may arise, and such insurance has been increasing in price over time. We cannot be certain that insurance coverage will continue to be available to us on economically reasonable terms, or at all.
The costs to us to eliminate or address the foregoing security problems and security vulnerabilities before or after a security breach or incident could be significant. System redundancy may be ineffective or inadequate, certain legacy IT systems may not be easily remediated, and our disaster recovery planning may not be sufficient for all eventualities. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or potential customers that may impede our sales, manufacturing, distribution or other critical functions. We could lose existing or potential customers for cloud and outsourcing services or other IT solutions in connection with any actual or perceived security vulnerabilities in our products and services. Some of our products and services contain encryption and other measures implemented in an effort to protect third-party content stored on our products. Such measures may be compromised, breached or circumvented or otherwise fail and losses or unauthorized access to or releases of our, our customers’ or third parties’ confidential information may occur. Security breaches or incidents and unauthorized access to, or loss, corruption, unavailability, or the unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers or other third parties, has exposed us and could expose us, our vendors and customers or other third parties affected to a risk of loss or misuse of this information, and result in litigation or governmental investigations, fines, penalties, indemnity obligations and other potential liability and costs for us, materially damage our brand or otherwise materially harm our business. In addition, we rely in certain capacities on third-party data management providers whose possible security problems and security vulnerabilities may have similar effects on us. Our business, brand and reputation could also be materially adversely affected by media or other reports of perceived security vulnerabilities in our products, services, network or processes, even if unsubstantiated.
We must successfully maintain and upgrade our IT systems, and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.
From time to time, we expand and improve our IT systems to support our business going forward. Consequently, we are in the process of implementing, and will continue to invest in and implement, modifications and upgrades to our IT systems and procedures, including making changes to legacy systems or acquiring new systems with new functionality, and building new policies, procedures, training programs and monitoring tools.
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We are engaged in a multi-year implementation of a new global enterprise resource planning system (“ERP”) which requires significant investment of human and financial resources. The ERP is designed to efficiently maintain our financial records and provide information important to the operation of our business to our management team. In implementing the ERP, we may experience significant increases to inherent costs and risks associated with changing and acquiring these systems, policies, procedures and monitoring tools, including capital expenditures, additional operating expenses, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems policies, procedures or monitoring tools into our current systems. Any significant disruption or deficiency in the design and implementation of the ERP may adversely affect our ability to process orders, ship product, send invoices and track payments, fulfill contractual obligations, maintain effective disclosure controls and internal control over financial reporting or otherwise operate our business. These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, difficulties with implementing new technology systems, such as ERP, delays in our timeline for planned improvements, significant system failures or our inability to successfully modify our IT systems, policies, procedures or monitoring tools to respond to changes in our business needs in the past have caused and in the future may cause disruptions in our business operations, increase data security risks, and may have a material adverse effect on our business, financial condition and results of operations.
RISKS RELATED TO OWNING OUR ORDINARY SHARES
The price of our ordinary shares may be volatile and could decline significantly.
The market price of our ordinary shares has fluctuated and may continue to fluctuate or decline significantly in response to various factorssome of which are beyond our control, including:
•general stock market conditions, or general uncertainty in stock market conditions due to global economic conditions and negative financial news unrelated to our business or industry, including the impact of the COVID-19 pandemic;
•the timing and amount of or the discontinuance of our share repurchases;
•actual or anticipated variations in our results of operations;
•announcements of innovations, new products, significant contracts, acquisitions, or significant price reductions by us or our competitors, including those competitors who offer alternative storage technology solutions;
•our failure to meet our guidance or the performance estimates of investment research analysts, or changes in financial estimates by investment research analysts;
•significant announcements by or changes in financial condition of a large customer;
•the ability of our customers to procure necessary components which may impact their demand or timing of their demand for our products, especially during a period of persistent supply chain shortages;
•reduction in demand from our key customers due to macroeconomic conditions that reduce cloud, enterprise or consumer spending;
•actual or perceived security breaches or security vulnerabilities;
•the occurrence of major catastrophic events, including natural disasters, acts of war or climate change;
•actual or anticipated changes in the credit ratings of our indebtedness by rating agencies; and
•the sale of our ordinary shares held by certain equity investors or members of management.
In addition, in the past, following periods of decline in the market price of a company’s securities, class action lawsuits have often been pursued against that company. If similar litigation were pursued against us, it could result in substantial costs and a diversion of management’s attention and resources, which could materially adversely affect our results of operations, financial condition and liquidity.
Any decision to reduce or discontinue the payment of cash dividends to our shareholders or the repurchase of our ordinary shares pursuant to our previously announced share repurchase program could cause the market price of our ordinary shares to decline significantly.
Although historically we have announced regular cash dividend payments and a share repurchase program, we are under no obligation to pay cash dividends to our shareholders in the future at historical levels or at all or to repurchase our ordinary shares at any particular price or at all. The declaration and payment of any future dividends is at the discretion of our Board of Directors. Our previously announced share repurchase program may be suspended or discontinued at any time. Our payment of quarterly cash dividends and the repurchase of our ordinary shares pursuant to our share repurchase program are subject to, among other things, our financial position and results of operations, distributable reserves, available cash and cash flow, capital and regulatory requirements, market and economic conditions, our ordinary share price and other factors. Any reduction or discontinuance by us of the payment of quarterly cash dividends or the repurchase of our ordinary shares pursuant to our share repurchase program could cause the market price of our ordinary shares to decline significantly. Moreover, in the event our payment of quarterly cash dividends or repurchases of our ordinary shares are reduced or discontinued, our failure to resume such activities at historical levels could result in a persistent lower market valuation of our ordinary shares.
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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchase of Equity Securities

All repurchases of our outstanding ordinary shares are effected as redemptions in accordance with the Company’s Articles of Association.

On April 22, 2015, the Board of Directors authorized the Company to repurchase $2.5 billion of its outstanding ordinary shares.

our Constitution.

As of December 29, 2017, $0.9September 30, 2022, $1.9 billion remained available for repurchaserepurchases under the existing repurchase authorization limit.authorization. There is no expiration date on this authorization.

The timing of purchases will depend upon prevailing market conditions, alternative uses of capital and other factors. We may limit or terminate the repurchase program at any time.

The following table sets forth information with respect to all repurchases of our ordinary shares made during the fiscal quarter ended December 29, 2017,September 30, 2022, including statutory tax withholdings related to vesting of employee equity awards:awards (in millions, except average price paid per share):
Period
Total Number of Shares Repurchased(1)
Average Price Paid Per Share(1)
Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)
July 2, 2022 through July 29, 20222 $77.29 2 $2,256 
July 30, 2022 through August 26, 20222 79.49 2 2,086 
August 27, 2022 through September 30, 20222 68.58 2 1,927 
Total6 6 

                                                                                                

(In millions, except average price paid per share)

    Total
Number of
Shares
Repurchased		   Average
Price
Paid
per
Share		   Total Number
of Shares
Repurchased as
Part of Publicly
Announced
Plans or
Programs		   Approximate
Dollar Value of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs		 

September 30, 2017 through October 27, 2017

     —     $34.02    —     $1,084 

October 28, 2017 through November 24, 2017

     —      39.59    —      1,084 

November 25, 2017 through December 29, 2017

     5.0    39.21    5.0    888 
    

 

 

     

 

 

   

Total

     5.0   $39.17    5.0   $888 
    

 

 

     

 

 

   

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

(1) Repurchase of shares pursuant to the repurchase program described above, as well as tax withholdings.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.MINE SAFETY DISCLOSURES

ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5.OTHER INFORMATION

ITEM 5.OTHER INFORMATION
Not applicable

ITEM 6.EXHIBITS

Seeapplicable.

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ITEM 6.EXHIBITS
Incorporated by Reference
Exhibit No. Description of ExhibitFormFile No.ExhibitFiling DateFiled Herewith
3.110-K001-315603.18/6/2021
3.2S-8001-315604.110/20/2021
10.1+X
10.2+X
10.3+X
10.4X
31.1 X
31.2 X
32.1† X
101.INSInline XBRL Instance Document.
101.SCHInline XBRL Taxonomy Extension Schema.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase.
104Inline XBRL Cover page and contained in Exhibit 101.
+ Management contract or compensatory plan or arrangement.
† The certifications attached as Exhibit Index on the page to32.1 that accompany this Quarterly Report for a liston Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of exhibits toSeagate Technology Holdings plc under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report, which Exhibit Index is incorporated herein by reference.

EXHIBIT INDEX

Exhibit Number

Description of Exhibit

    3.1Constitution of Seagate Technology Public Limited Company, as amended and restated by Special Resolution dated October  19, 2016, filed as Exhibit 3.1 to the Company’s current report on Form8-K filed on October 24, 2016 and incorporated herein by reference.
    3.2Certificate of Incorporation of the Company, filed as Exhibit 3.2 to the Company’s annual report on Form10-K filed on August 20, 2010 and incorporated herein by reference.
  10.1*Seagate Technology Public Limited Company Second Amended and Restated Employee Stock Purchase Plan filed as Exhibit 10.1 to the Company’s current report on Form8-K filed on October 18, 2017 and incorporated herein by reference.
  10.2*Amended and Restated Seagate Technology Public Limited Company 2012 Equity Incentive Plan as amended and restated on October  19, 2016 filed as Exhibit 10.4 to the Company’s quarterly report on Form10-Q filed on October 27, 2017 and incorporated herein by reference.
  31.1+Certification of William D. Mosley, Chief Executive Officer and Director of the Company, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2+Certification of David H. Morton, Jr., Executive Vice President, Finance and Chief Financial Officer of the Company, as required by Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1†Certification of William D. Mosley, Chief Executive Officer and Director of the Company and David H. Morton, Jr., Executive Vice President, Finance and Chief Financial Officer of the Company, as required by Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+XBRL Instance Document.
101.SCH+XBRL Taxonomy Extension Schema Document.
101.CAL+XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF+XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB+XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+XBRL Taxonomy Extension Presentation Linkbase Document.

+Filed herewith.
†The certifications attached as Exhibit 32.1 that accompany thisForm 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Seagate Technology plc under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of thisForm 10-Q, irrespective of any general incorporation language contained in such filing.
*Management contract or compensatory plan or arrangement.

Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SEAGATE TECHNOLOGY HOLDINGS PUBLIC LIMITED COMPANY

DATE: January 29, 2018October 27, 2022BY:      BY:

/s/ WILLIAM D. MOSLEY

Gianluca Romano

William D. Mosley

Gianluca Romano

Chief Executive Officer and Director

(Principal Executive Officer)

SEAGATE TECHNOLOGY PUBLIC LIMITED COMPANY

DATE: January 29, 2018      BY:/s/ DAVID H. MORTON, JR.
David H. Morton, Jr.

Executive Vice President Finance and Chief Financial Officer


(Principal Financial and Accounting Officer)

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