- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
------------------------

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 2000

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

FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .

COMMISSION FILE NO. 001-11403

SEAGATE TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

DELAWARE 94-2612933
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

920 DISC DRIVE
SCOTTS VALLEY, CALIFORNIA 95067
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (831) 438-6550
------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------

COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of Common Stock on June 30, 2000 as
reported by the New York Stock Exchange, was approximately $11.633 billion.
Shares of Common Stock held by each officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrant's Common Stock on June
30, 2000 was 229,251,994.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its 2000 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference to Part III
of this form 10-K Report.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2

PART I

The information contained in this report includes forward-looking
statements, based on current expectations, that involve risks and uncertainties
which could cause actual results to differ materially from those expressed in
the forward-looking statements. Various important factors known to Seagate
Technology, Inc. that could cause such material differences are identified below
in Part I, Item 1 of this Report and in the "Management's Discussion and
Analysis of Results of Operations and Financial Condition" in Part II, Item 7 of
this Report.

ITEM 1. BUSINESS

GENERAL

Seagate Technology, Inc. (the "Company" or "Seagate") designs, manufactures
and markets products for storage, retrieval and management of data on computer
and data communications systems. These products include rigid disc drives, tape
drives and software. Businesses, other organizations and individuals use rigid
disc drives as the primary medium for storing electronic information in computer
systems ranging from desktop computers to data centers delivering information
over corporate networks and the Internet. Seagate also designs, manufactures and
markets tape drives and intelligent storage solutions and is a leading provider
of business intelligence software. Seagate's advanced research and development
capabilities, combined with its vertically integrated manufacturing facilities
enables it to bring high quality, next generation information storage products
to market.

Seagate's rigid disc drive products currently include rigid disc drive
models in the 3.5 inch form factor with capacities ranging from 4.3 gigabytes
("GB") to 73 GB. Seagate sells its products to original equipment manufacturers
("OEMs") for inclusion in their computer systems or subsystems, and to or
through distributors, resellers, dealers, system integrators and retailers.
Seagate has pursued a strategy of vertical integration and accordingly designs
and manufactures rigid disc drive components including recording heads, discs,
disc substrates and motors. It also assembles certain of the key subassemblies
for use in its products including printed circuit board and head stack
assemblies. Seagate's rigid disc drive products are currently manufactured
offshore with limited production in the United States.

Seagate believes that the growth of electronic data, driven by the Internet
and e-commerce, will create the need for higher volumes of information storage
products with greater capabilities. Intelligent storage solutions combine high
performance rigid disc drives with sophisticated software to address high growth
markets such as storage area networks, or SANs, and network attached storage, or
NAS. Seagate expects the demand for intelligent storage solutions such as NAS
and SAN to grow as the need for greater network storage capacity increases.

As an extension of our core rigid disc drive business and to address
Internet and e-commerce driven grown opportunities, we announced the formation
of our Intelligent Storage Platforms group in May 1999. The Intelligent Storage
Platforms group develops products for new network devices, the Internet, high
performance servers and other information-centric computing applications. These
solutions combine hardware, software and services to provide new products for
Seagate's existing OEM and strategic distributor customer base and address the
needs of emerging markets for storage and storage-related applications. In
fiscal year 2000, the Intelligent Storage Platforms group was renamed and
consolidated with some other business units of Seagate to form the Internet
Solutions Group. In January 2000, Seagate strengthened its capabilities in
intelligent storage solutions by acquiring XIOtech Corporation, a privately-held
provider of storage area network products.

1
3

activities and Thomson Multimedia's A/V technologies expertise and marketing
presence to develop cost-optimized, time-to-market integrated systems to be
incorporated into consumer electronic products such as televisions, set-top
boxes, personal video recorders and DVD players. The Company expects to sell
rigid disc drive products to CacheVision as an OEM customer. In July 2000
Seagate contributed certain of its optical technology for use in
telecommunication switching applications to Iolon, Inc., a private
venture-financed company, in exchange for a significant minority equity interest
in Iolon.

Additionally, to promote the development of next generation storage
applications, in April 1999 Seagate announced the formation of Seagate
Investments, Inc. This subsidiary, acting as a venture fund, provides seed
capital and early round financing to software, services and hardware companies
creating and developing complementary technologies in storage-intensive
applications. To date, Seagate Investments, Inc. has made total investments of
$36 million.

Seagate anticipates that its broadened strategy may include additional
acquisitions of, investments in and strategic alliances with complementary
businesses, products and technologies to enable lower cost per megabyte, faster
time to market, increased capacity, better performance characteristics and
increased demand for its products.

PENDING GOING PRIVATE TRANSACTION AND MERGER

On March 29, 2000, Seagate, Seagate Software Holdings, Inc. ("Seagate
Software"), a subsidiary of Seagate, and Suez Acquisition Company (Cayman)
Limited ("SAC"), an entity affiliated with, among others, Silver Lake Partners
and Texas Pacific Group, entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement"), and Seagate, VERITAS Software Corporation ("VERITAS") and
a wholly owned subsidiary of VERITAS entered into an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement").

Under the Stock Purchase Agreement, SAC has agreed to purchase for cash,
all of the operating assets of Seagate and its consolidated subsidiaries,
including Seagate's disc drive, tape drive and software businesses and
operations and certain cash reserves, but excluding the approximately 128
million shares of VERITAS common stock currently held by Seagate Software and
Seagate's equity investments in Gadzoox Networks, Inc., SanDisk Corporation,
Veeco Instruments, Inc. and Lernout & Hauspie Speech Products N.V., to the
extent held at the closing. In addition, under the Stock Purchase Agreement, SAC
has agreed to assume substantially all of the operating liabilities of Seagate
and its consolidated subsidiaries. This transaction is referred to herein as the
SAC transaction.

Under the Merger Agreement, immediately following and contingent upon the
consummation of the SAC transaction, a wholly-owned subsidiary of VERITAS will
merge with and into Seagate, with Seagate to survive the merger and to become a
wholly-owned subsidiary of VERITAS. This transaction is referred to herein as
the Merger. VERITAS is not acquiring Seagate's disc drive business or any other
Seagate operating business. In the Merger, the Seagate stockholders will receive
merger consideration consisting of VERITAS common stock and cash. The Merger is
intended to qualify as a tax-free reorganization.

On March 29, 2000, Seagate, VERITAS and SAC entered into an Indemnification
Agreement, pursuant to which these entities and certain other subsidiaries of
Seagate have agreed to certain indemnification provisions regarding tax and
other matters that may arise in connection with the SAC transaction and the
Merger. Also on March 29, 2000, VERITAS and SAC entered into a letter agreement,
pursuant to which VERITAS agreed to a no-shop provision and an alternative
termination fee provision.

All of the transactions contemplated by the SAC transaction and the Merger
are herein referred to as the VERITAS/Silver Lake transaction. The
VERITAS/Silver Lake transaction is expected to close in the second quarter of
fiscal year 2001, subject to the approval of the VERITAS stockholders and
Seagate stockholders, funding of the debt commitments and clearance by the
United States Securities and Exchange Commission, as well as other customary
closing conditions. Seagate expects that while the VERITAS/Silver Lake
transaction is pending, the value of Seagate common stock will depend primarily
on the value of VERITAS common stock.

2
4

MARKETS FOR INFORMATION STORAGE AND RETRIEVAL

The amount of data stored and accessed electronically has been growing due
to the increased amount of data created as a result of the growth of the
Internet, the increased volume of shared information made possible by the growth
of high speed broadband communications, the development of sophisticated
software applications to generate and manage increasing volumes of data, and the
development of new consumer applications incorporating high quality audio and
video, which require much greater storage capacity than text data. We believe
that rigid disc drives are used as the primary devices for storing electronic
data.

- The Internet. The Internet has had a substantial impact on businesses
worldwide. Its expansion has created access to information at accelerated
rates. Numerous companies have installed sophisticated web sites,
corporate intranets and e-mail systems as critical parts of their
information technology systems, all of which require substantial storage
capacity. In the emerging field of electronic commerce, the volume of
data packets distributed over the Internet among businesses' networked
computer systems is expected to grow rapidly to handle interactive,
simultaneous exchanges of information between and among businesses,
customers and suppliers.

- Broadband Communications. The proliferation of high-speed, worldwide
communications networks between businesses and consumers has
substantially increased the amount of electronic information delivered
and stored. New Internet-based businesses such as application service
providers and web hosting providers have emerged to deliver high
performance applications over the Internet using broadband
communications. Broadband connectivity will also facilitate the
proliferation of highly data intensive applications such as video
conferencing. High-speed communications enhances the need for high
performance information storage.

- High-end Software Applications. Businesses have implemented high-end
software such as enterprise resource planning, supply chain management
and groupware or electronic mail as mission-critical applications that
help run day-to-day operations. These applications generate voluminous
amounts of data, and storing and backing-up this mission-critical
information is becoming one of the largest components of corporate
information technology budgets.

- New Consumer Applications. New types of data such as graphic images and
high-fidelity audio and video are being converted into digital format and
create a need for greater storage capacity. Emerging consumer devices
such as MP3 players, digital video recorders, and next-generation
television set top boxes retrieve audio and video data through an
Internet connection and store the data locally on the device for
playback. These devices and other emerging applications, such as video
conferencing, voice recognition and natural language processing, are
highly data intensive. Storing, managing and protecting mission-critical
data has become increasingly important to the success of virtually all
businesses and large organizations. The market for information storage
devices is characterized by changing technology and evolving industry
standards, and is highly competitive with respect to timely innovation.

We compete in five major sectors of the information technology industry:
rigid disc drives, intelligent storage solutions, consumer information storage
devices, tape drives and business intelligence software.

RIGID DISC DRIVES

Rigid disc drives comprise the largest sector of the information storage
industry and are the leading medium for storing electronic data. Rigid disc
drives are integrated in various products in three main markets:

- Enterprise. The enterprise market includes high performance workstations,
servers, minicomputers, mainframes and redundant array of inexpensive
drives ("RAID") subsystems. Applications that run on enterprise systems
are characterized by compute-intensive and data-intensive solutions, such
as network management, large database management systems, scientific
applications and small to medium-sized business applications such as
materials requirement planning, payroll, general ledger systems and
related management reports. Enterprise systems typically require rigid
disc drive storage capacities of 9 GB and greater per drive, average seek
times of 8 milliseconds ("msec") or less and

3
5

rotation speeds of 7,200 rpm to 15,000 rpm. Due to the leading edge
characteristics required by end-users of enterprise systems,
manufacturers of these systems emphasize performance as well as price as
the key selling points. The enterprise market is characterized by higher
value-added products than those that prevail in the desktop market. Users
of these systems may also utilize a RAID. A RAID combines multiple small
drives into an array of disc drives which yield performance equal to or
exceeding a single high performance drive. The array of drives appears to
the computer as a single storage drive.

- Desktop. The desktop market includes all desktop or deskside personal
computers, which are used in a number of environments, ranging from homes
to small and large businesses. The personal computer is in the process of
evolving from a traditional computing device into a computing and
communications appliance. In addition to being the primary storage device
in virtually all desktop personal computers, desktop rigid disc drives
will increasingly be used in non-personal computer environments, such as
new consumer audio and video applications.

- Mobile. The mobile market includes portable notebook personal computers,
hand-held computers and personal digital assistants, which may use 1.0
inch, 1.8 inch or 2.5 inch rigid disc drives, and require rigid disc
drives with low power consumption and high durability. Although we do not
currently manufacture products for the mobile computing market, we will
continue our research and development in this area, and may reenter the
market at a future date.

The rigid disc drive industry is characterized by continuous technological
change and low-cost, high-volume manufacturing. While technological change is
frequent and product cycles in rigid disc drives have been as short as six
months, innovation in rigid disc drive technology is primarily incremental in
nature. Much of the fundamental innovation in rigid disc drives today centers
around increasing their storage capacity by increasing areal density through
refinements in certain key component technologies, such as those related to
read/write heads, recording media and motors.

In addition to requiring advanced technology, the rigid disc drive industry
is capital intensive, thereby forcing major suppliers to have the cost
advantages of large, global manufacturing facilities to be competitive. The
major customers in the rigid disc drive industry rely on rigid disc drives as
critical subsystems within computer and data communications equipment. Customers
are extremely cost-sensitive and require high production volumes, with high
quality and reliability standards. All of these factors present significant
competitive barriers for smaller suppliers and potential new entrants.

INTELLIGENT STORAGE SOLUTIONS

The growth of e-commerce, data and the need for complex storage solutions
have spurred the evolution of new storage and data management technologies.
These new solutions combine high performance storage products comprised
principally of rigid disc drives and tape drives with sophisticated software and
communications technologies. The markets for these solutions are expected to
grow rapidly. Intelligent storage solutions include:

- Storage Area Networks. Increasingly, businesses require large volumes of
information stored on networks to be transferred at extremely high speeds
either for use with high performance software applications or for back-up
purposes. To achieve this higher performance, businesses are offloading
some network traffic to dedicated storage area networks, or SANs. A SAN
is a networking architecture which allows data to move efficiently and
reliably between multiple storage devices and servers through a local
area network, or LAN. This technology connects a network of servers to a
network of storage servers, reducing bottlenecks and increasing users'
access to storage. SANs require new generations of data communications
equipment and data storage devices to service the high data availability
needs of enterprises.

- Network Attached Storage. An evolution has begun toward network attached
storage, or NAS, and away from server attached storage. In server
attached storage corporate network, information is primarily stored on
rigid disc drives attached to general purpose servers. NAS appliances are
intelligent

4
6

storage devices that combine an array of rigid disc drives with certain
basic server functions that are specialized for storing and serving data
files. NAS is a storage architecture featuring a device that allows users
to plug storage devices directly into a network without increasing
demands on the file server or requiring a separate file server. NAS
devices reduce demands on servers and are often a lower-cost alternative
to buying general purpose servers or adding rigid disc drives to existing
servers.

CONSUMER INFORMATION STORAGE DEVICES

High performance computing and communications functions and, increasingly,
rigid disc drives are being incorporated into consumer appliances such as video
games, digital video recorders and advanced television set-top boxes. In
addition, faster Internet connectivity has stimulated consumers to download
greater amounts of data, images, video and sound. These trends have expanded the
market for rigid disc drives from personal and laptop computers to new consumer
and entertainment appliances.

TAPE DRIVES

Tape drives use removable tape cartridges that store and protect large
volumes of data inexpensively and reliably. Less frequently used data is often
migrated from rigid disc drives to tape drives. Tape drives are used in both
enterprise and desktop computer systems needing dedicated backup storage that
combines high capacity, portability, low cost and reliability.

BUSINESS INTELLIGENCE SOFTWARE

Business intelligence software provides users with the ability to access
and analyze information, which is typically contained in a data warehouse, by
using technologies such as enterprise reporting, online analytical processing,
statistical analysis, forecasting and data searching. The business intelligence
software sector is one of the fastest growing in the software industry.

RIGID DISC DRIVE TECHNOLOGY OVERVIEW

Magnetic disc drives are used in computer systems to record, store and
retrieve digital information. Most computer applications require access to a
greater volume of data than can economically be stored in the random access
memory of the computer's central processing unit (commonly known as
"semiconductor" memory). This information can be stored on a variety of storage
devices, including rigid disc drives, both fixed and removable, flexible disc
drives, magnetic tape drives, optical disc drives and semiconductor memory.
Rigid disc drives provide access to large volumes of information faster than
optical disc drives, flexible disc drives or magnetic tape drives and at
substantially lower cost than high-speed semiconductor memory.

Although products vary, all rigid disc drives incorporate the same basic
technology. One or more rigid discs are attached to a spindle assembly that
rotates the discs at a high constant speed around a hub. The discs (also known
as recording media or disc media) are the components on which data is stored and
from which it is retrieved. Each disc typically consists of a substrate of
finely machined aluminum or glass with a magnetic layer of a "thin-film"
metallic material.

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

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

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

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

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

5
7

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

Read/write heads, mounted on an arm assembly similar in concept to that of
a record player, fly extremely close to each disc surface and record data on and
retrieve it from concentric tracks in the magnetic layers of the rotating discs.

Upon instructions from the drive's electronic circuitry, a head positioning
mechanism (an "actuator") guides the heads to the selected track of a disc where
the data will be recorded or retrieved. The disc drive communicates with the
host computer through an internal controller. Disc drive manufacturers may use
one or more of several industry standard interfaces, such as Small Computer
System Interface ("SCSI"), Advanced Technology Architecture ("ATA") and Fibre
Channel -- Arbitrated Loop ("FC-AL").

Areal density is a measure of storage capacity per square inch on the
recording surface of a disc. It represents the number of bits of information on
a linear inch of the recording track (specified in bits per inch or bpi)
multiplied by the number of recording tracks on a radial inch of the disc.
Current areal densities are sufficient to meet the requirements of most
applications today. However, the long-term demand for increased drive capacities
is expected to increase at an accelerating rate, since sound and moving pictures
require many times the storage capacity of simple text. Seagate has and
continues to aggressively pursue a range of technologies to increase areal
densities across the entire range of its products not only to increase drive
capacities, but also to allow the elimination of components at a stated capacity
as areal density increases, thus reducing costs. As a result, Seagate drives
today use advanced signal processing techniques such as Partial Response Maximum
Likelihood ("PRML"), read/write channels, advanced servo systems, higher
precision mechanics and advanced head technologies. To attain greater areal
densities, Seagate incorporates giant magneto-resistive ("GMR") heads into its
disc drives. GMR heads have discrete read and write structures which take
advantage of special magnetic properties in certain metals to achieve
significantly higher storage capacities. There can be no assurance that
Seagate's GMR head development effort will continue to be successful. See
"Product Development."

PRODUCTS

RIGID DISC DRIVES

Seagate produces a broad line of rigid disc drives in the 3.5 inch form
factor with capacities ranging from 4.3 GB to 73 GB. Seagate provides more than
one product at some capacity points and differentiates products on a
price/performance basis. Seagate believes that its broad range of rigid disc
drives is particularly appealing to customers, such as large OEMs, which require
a wide variety of drive capacities, performance levels and interfaces. Producing
for several market sectors also broadens Seagate's customer base and reduces
Seagate's reliance on any one sector of the computer market. Seagate continues
to devote its resources to developing products with industry leading performance
characteristics and to being among the first to introduce such products to
market. Seagate continuously seeks to enhance its market presence in emerging
sectors of the rigid disc drive market by drawing on its established
capabilities in high-volume, low-cost production. Seagate believes it offers the
broadest range of rigid disc storage products available. In addition, Seagate
offers warranty and out-of-warranty repair service to users of its disc drives.

Enterprise

Users of Enterprise disc drives for use in server and multi-user systems
generally require capacities of 9 GB and greater per drive with average seek
times of 8 msec or less and rotation speeds of 7,200 rpm to 15,000 rpm.
Workstation systems typically require rigid disc drive storage capacities of 9
GB and greater per drive, average seek times of 8 msec or less and rotation
speeds of 7,200 rpm to 15,000 rpm. For the server, multi-user, workstation and
RAID applications, disc drive products are typically designed into these systems
by the OEM with emphasis on performance, reliability and capacity. Server,
multi-user and RAID applications incorporate data storage subsystems that
contain large numbers of disc drives. Because data integrity is paramount, high
device reliability and maintainability are key features. Internet, intranet,

6
8

mainframe and supercomputer systems also benefit from very high data transfer
rates (up to ten times that in small computer systems).

ENTERPRISE PRODUCTS

- -----------------------------------------------------------------------------------------------------
FISCAL QUARTER STORAGE
PRODUCT NAME INTRODUCED CAPACITY FEATURES
- -----------------------------------------------------------------------------------------------------

Barracuda 18LP 3rd Qtr. 1999 18 GB 7,200 rpm, Ultra SCSI/Fibre Channel
Barracuda 18XL 2nd Qtr. 2000 18 GB interface, read seek times ranging from 5.9
Barracuda 36 4th Qtr. 1999 36 GB to 7.4 msecs
Barracuda 50 4th Qtr. 1999 50 GB
- -----------------------------------------------------------------------------------------------------
Cheetah 18LP 4th Qtr. 1999 18 GB 10,000 rpm, Ulta SCSI/Fibre Channel
Cheetah 18XL 4th Qtr. 2000 18 GB interface, read seek times ranging from 5.2
Cheetah 36 1st Qtr. 2000 36 GB to 5.7 msecs
Cheetah 36LP 3rd Qtr. 2000 36 GB
Cheetah X15 4th Qtr. 2000 18 GB 15,000 rpm
- -----------------------------------------------------------------------------------------------------
Cheetah 73 3rd Qtr. 2000 73 GB 10,000 rpm, Ultra SCSI/Fibre Channel
interface, high-end file servers,
mainframe-attached storage and SAN systems
- -----------------------------------------------------------------------------------------------------

Desktop

Seagate believes the minimum storage requirements in the past year for
entry-level personal computers were generally 4.3 GB of formatted capacity with
seek times in the sub-11 msec range. The entry level capacities continue to
increase. In addition, users of personal computers have become increasingly
price sensitive. Seagate's objective for the personal computer market is to
design drives for high-volume, low-cost manufacturing. Seagate divides the
desktop market into three sectors: entry-level, mainstream and value
performance.

DESKTOP PRODUCTS

U4 Product Family 4th Qtr. 1999 8.4 GB 5,400 rpm, Ultra ATA/66 interface, low
(entry-class and 6.4 GB acoustics, and Seagate's soft SeaShield
mainstream desktop) 4.3 GB cover for additional handling protection
2.1 GB
- -----------------------------------------------------------------------------------------------------
Barracuda ATA products:
Barracuda ATA 28040 1st Qtr. 2000 28 GB 7,200 rpm, Ultra ATA/66 interface,
Barracuda ATA 20430 20.4 GB SeaShield, G-Force Protection for Desktop
Barracuda ATA 13620 13.6 GB enhancements to increase durability, and
Barracuda ATA 10220 10.2 GB Drive Self Test in the firmware
Barracuda ATA 6810 6.8 GB
- -----------------------------------------------------------------------------------------------------
U8 2nd Qtr. 2000 4.3 GB ATA 66 and the 3D Defense System that
8.4 GB offers disc, data and diagnostic protection
13 GB for all Desktop disc drives
17.2 GB
- -----------------------------------------------------------------------------------------------------
U10 3rd Qtr. 2000 10.1 GB ATA 66 and the 3D Defense System that
15.2 GB offers disc, data and diagnostic protection
20.3 GB for all Desktop disc drives
- -----------------------------------------------------------------------------------------------------
U5 1st Qtr. 2001 10 GB ATA/100 and the "sound barrier technology,"
15 GB SBT, that lowers acoustic emissions to
20 GB almost imperceptible levels
30 GB
40 GB
- -----------------------------------------------------------------------------------------------------

7
9

Intelligent Storage

Products in this area will combine hardware consisting of a boxed array of
high performance Enterprise disc drives with software and communications
interfaces. The Company's initial products derive from its recent acquisition of
XIOtech and a collaboration with Cobalt Networks, Inc.

INTELLIGENT STORAGE PRODUCTS

- -----------------------------------------------------------------------------------------
FISCAL QUARTER STORAGE
PRODUCT NAME INTRODUCED CAPACITY FEATURES
- -----------------------------------------------------------------------------------------

STORAGE AREA NETWORK
- -----------------------------------------------------------------------------------------
XIOtech -- MAGNITUDE 3rd Qtr. 1998 Up to 4.6TB Based on XIOtech's Real-Time Data
Intelligence (REDI) Storage
Architecture, which implements
storage virtualization
- -----------------------------------------------------------------------------------------
NETWORK ATTACHED
STORAGE
- -----------------------------------------------------------------------------------------
NasRaq:
ST5620NTS 4th Qtr. 2000 56 GB Rack mounted server appliance that
ST6020NTS 1st Qtr. 2001 60 GB provides entry level network
attached storage; OEM product with
Cobalt Networks, Inc.
- -----------------------------------------------------------------------------------------

TAPE DRIVES

Tape drives are peripheral hardware devices which enable low cost storage
and protection of large volumes of data through the use of small tape
cartridges. Computer systems of all types increasingly need dedicated backup
storage peripherals that combine high capacity, high performance, low cost and
reliability. Seagate markets a broad line of Travan, Digital Audio Tape ("DAT"),
and Linear Tape Open drives ("LTO") with capacities of up to 240 GB for a wide
range of backup and removable storage needs. Seagate currently produces backup
solutions for market segments from high performance workstations and midrange
servers to enterprise-class servers and complete tape library systems. Seagate
offers tape products through a variety of channels including OEMs, distributors,
value added resellers ("VARs"), resellers and system integrators. Seagate works
closely with OEMs to customize storage solutions that meet their customers'
needs. The Scorpion DAT drives are manufactured for Seagate by
Matsushita-Kotobuki Electronics Industries, Ltd. ("MKE") in Japan. In addition,
Seagate offers warranty and out-of warranty repair service to users of its tape
drives.

TAPE PRODUCTS

- --------------------------------------------------------------------------------------------
STORAGE
PRODUCT NAME CAPACITY FEATURES
- --------------------------------------------------------------------------------------------

TRAVAN DRIVES
- --------------------------------------------------------------------------------------------
Hornet(R) Travan up to 20 GB Drives for workstations and small
servers. SCSI or IDE interfaces
- --------------------------------------------------------------------------------------------
Hornet Travan Network Series (NS) up to 20 GB Drives for small servers;
read-while-write technology and
hardware data compression
- --------------------------------------------------------------------------------------------
DAT DRIVES
- --------------------------------------------------------------------------------------------
Scorpion(R) DAT up to 240 GB Drives and autoloaders for servers and
workstations; 40 GB per cartridge
- --------------------------------------------------------------------------------------------
LINEAR TAPE OPEN (LTO) DRIVES
- --------------------------------------------------------------------------------------------
Ultrium format: up to 2 TB Drives and autoloaders for midrange
Viper(R) and enterprise servers; ideal for tape
libraries; 200 GB per cartridge;
anticipate shipping in fiscal 2001
- --------------------------------------------------------------------------------------------

8
10

Linear Tape Open (LTO)

Seagate, Hewlett-Packard Company and International Business Machines
Corporation ("IBM"), created LTO technology, a powerful, scaleable, open tape
architecture that is expected to meet the growing storage demands of midrange to
enterprise-class servers with up to 200 GB of data per cartridge. Seagate
anticipates shipping the Ultrium format in fiscal 2001.

SOFTWARE

Seagate Software Information Management Group, Inc., a subsidiary of
Seagate ("IMG"), develops, markets and supports end user and enterprise
software, which enables business users, developers and information technology
professionals to access, analyze, report on and distribute enterprise
information. Headquartered in Scotts Valley, California, IMG has 28 offices and
operates in 14 countries worldwide.

IMG's product family is designed as one integrated platform that enables
access, analysis, interpretation and distribution of data in order to make
effective business decisions. The products are used for creating, implementing
and deploying enterprise information solutions in an application, on a desktop
or across an organization. IMG's products are designed to work in the most
current "e-Business" architectures and for flexible deployment using the Web.
They support most data sources, including operational or legacy data stores,
data marts, data warehouses, e-commerce systems, enterprise resource planning
("ERP") systems, customer relationship management ("CRM") systems, business
intelligence ("BI") systems and many other computer software applications. IMG's
product family includes:

Enterprise Products

- Seagate Info(R) -- Seagate Info is delivered as a complete suite of
reporting and analysis tools built upon a scalable and extensible
infrastructure that allows Internet, intranet, extranet and traditional
client-server deployment. Seagate Info integrates all of IMG's software
products and delivers the appropriate information across the enterprise.
Seagate Info provides decision-makers with shared access on demand,
ad-hoc or managed reporting and analysis capabilities. As a result users
have fast and easy access to information.

- Partner Solution Kits -- A series of toolkits and packages that enable
closer integration with IMG's partners' products. Most kits include data
access drivers, sample reports and data structures, and may include
special documentation, support and services. Current packages are
available for Microsoft BackOffice, SAP R/3 and Baan ERP.

Desktop Products

- Seagate Crystal Reports(R) -- Crystal Reports provides query, report
design, application development and web report publishing functions.
Provided in a range of versions for both developers and end-users,
Crystal Reports allows users to access most types of structured data,
format, design, and process a variety of reports, integrate these reports
into web, windows and enterprise applications and distribute reports to
end users.

- Seagate Crystal Analysis(TM) -- Based on Crystal Reports, Crystal
Analysis combines end user ad hoc query, analytic reporting and on-line
analytical processing ("OLAP") analysis, as well as Microsoft Excel
integration, all in one simple end user focused interface. Crystal
Analysis is a family of client tools that can be used as an extension to
any other piece of the IMG product family.

Analytic Applications Products

- Seagate Holos(R) -- Seagate Hs is an advanced analytic application
development and deployment environment, designed to handle very large
amounts of relational and multi-dimensional data. Seagate Holos enables
the modeling of large amounts of data with complex business logic and
then provides multiple views of the data to enable analysis, expose
trends, and accelerate the process of decision-making. Seagate Holos
integrates with and extends the Enterprise product family.
9
11

- Analytic Application Templates -- A collection of templates built for the
Enterprise product family that accelerate customer adoption and success
with IMG products. Designed to address common enterprise needs and
current market demand, the current templates include applications for
customer profiling, balanced scorecard, budgeting, and telecommunications
billing analysis. These packages include reports, OLAP data structures
and a framework of business logic to begin a successful implementation.

MARKETING AND CUSTOMERS

Seagate sells its products primarily to OEMs and distributors. OEM
customers incorporate Seagate drives into computer systems for resale. OEMs
either manufacture and assemble computer system components into computer
systems, purchase components to build their systems, or purchase complete
computer systems and integrate the drives and other hardware and software.
Distributors typically sell Seagate disc drives to small OEMs, dealers, system
integrators and other resellers. Certain resellers to which Seagate directly
sells its products also resell Seagate drives as part of enhanced packages
(e.g., an add-on kit for a computer or as part of their own computers).
Shipments to OEMs were 67% of disc drive revenue in the fiscal year ending June
30, 2000 ("fiscal 2000") and 65% of disc drive revenue in each of the fiscal
years ending July 2, 1999 ("fiscal 1999") and July 3, 1998 ("fiscal 1998").
Sales to Compaq Computer Corporation accounted for approximately 17%, 17% and
13% of Seagate's consolidated revenue in fiscal 2000, 1999 and 1998,
respectively. No other customer accounted for 10% or more of consolidated
revenue in fiscal 2000, 1999 or 1998.

OEMS

OEM customers typically enter into purchase agreements with Seagate. These
agreements provide for pricing, volume discounts, order lead times, product
support obligations and other terms and conditions, usually for periods of 12 to
24 months, although product support obligations generally extend substantially
beyond this period. These master agreements typically do not commit the customer
to buy any minimum quantity of products. Deliveries are scheduled only after
receipt of purchase orders. In addition, with limited lead time, customers may
cancel or defer most purchase orders without significant penalty. Anticipated
orders from many of Seagate's customers have in the past failed to materialize
or OEM delivery schedules have been deferred or altered as a result of changes
in their business needs, such as extensive use of just-in-time warehouse
locations. Such order fluctuations and deferrals have had a material adverse
effect on Seagate's operations in the past, and there can be no assurance that
Seagate will not experience such adverse effects in the future.

DISTRIBUTORS

In fiscal 1999, Seagate launched its Distribution Partnership Program.
Under this program, Seagate has selected a limited number of key distributors,
predominately in North America with which it jointly develops marketing programs
targeted at VAR, resellers and systems integrators. Shipments to these key
distributors are on a consignment basis whereby Seagate's inventory held by
these distributors is still owned by Seagate and Seagate's revenue recognition
is delayed until the product is utilized by the distributor to fill an end-user
order.

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

10
12

SERVICE AND WARRANTY

Seagate warrants its products against defects in design, materials and
workmanship by Seagate generally for one to five years depending upon the
capacity category of the drive, with the higher capacity products being
warranted for the longer periods. Seagate's products are refurbished or repaired
at its facilities located in Oklahoma City, Singapore, Malaysia and Mexico.

SALES OFFICES

Seagate maintains sales offices throughout the United States and in
Australia, China, England, France, Germany, Ireland, Japan, Singapore, Spain,
Sweden, and Taiwan. Foreign sales are subject to certain controls and
restrictions, including, in the case of certain countries, approval by the
office of Export Administration of the United States Department of Commerce and
other United States governmental agencies.

BACKLOG

In view of customers' rights to cancel or defer orders with little or no
penalty, Seagate believes backlog in the disc drive industry may be misleading.
Seagate's backlog includes only those orders for which a delivery schedule has
been specified by the customer. Because many customers place large orders for
delivery throughout the year, and because of the possibility of customer
cancellation of orders or changes in delivery schedules, Seagate's backlog as of
any particular date is not indicative of Seagate's potential sales for any
succeeding fiscal period. Seagate's order backlog at June 30, 2000 was
approximately $1.210 billion compared with approximately $862 million at July 2,
1999.

MANUFACTURING

Seagate's business objectives require it to establish manufacturing
capacity in anticipation of market demand. The key elements of Seagate's
manufacturing strategy are: high-volume, low-cost assembly and test; vertical
integration in the manufacture of selected components; and establishment and
maintenance of key vendor relationships. The highly competitive disc drive
industry requires that Seagate manufacture significant volumes of high-quality
drives at low per unit cost. To do this, Seagate must rapidly achieve high
manufacturing yields and obtain uninterrupted access to high-quality components
in required volumes at competitive prices.

OVERVIEW OF DISC DRIVE MANUFACTURING

Manufacturing of Seagate's rigid disc drives is a complex process,
requiring a "clean room" environment, the assembly of precision components
within narrow tolerances and extensive testing to ensure reliability. The first
step in the manufacturing of a rigid disc drive is the assembly of the actuator
mechanism, heads, discs, and spindle motor in a housing to form the head-disc
assembly (the "HDA").

Seagate believes that it must continue to develop automated manufacturing
processes in order to remain competitive. Seagate has undertaken an extensive
process to centralize and rationalize its manufacturing operations over the past
three years, which has included, among other things, closure of some
manufacturing facilities and reductions in force. Seagate intends to continue to
evaluate those steps in the manufacturing process that would benefit from
automation. There can be no assurance that Seagate's efforts to develop and
improve its automated manufacturing processes will be successful. Any failure of
Seagate to continue to develop and improve its automated manufacturing processes
could have a material adverse effect on Seagate's business.

The cost, quality and availability of certain components including
recording heads, media, application specific integrated circuits ("ASICs"),
spindle motors, actuator motors, printed circuit boards and custom
semiconductors are critical to the successful production of disc drives.
Seagate's design and vertical integration have allowed it to internally
manufacture substantial percentages of its critical components other than ASICs
and motors. Seagate's objectives of vertical integration are to maintain control
over component technology, quality and availability, and to reduce costs.
Seagate believes that its strategy of vertical integration gives it an

11
13

advantage over other disc drive manufacturers. However, this strategy entails a
high level of fixed costs and requires a high volume of production to be
successful. During periods of decreased production, these high fixed costs in
the past have had and in the future could have a material adverse effect on
Seagate's results of operations.

Seagate evaluates the need for second sources for all of its components on
a case-by-case basis and, where it is deemed desirable and feasible to do so,
secures multiple sources. Seagate has experienced production delays when unable
to obtain sufficient quantities of certain components or assembly capacity. For
example, Seagate has recently experienced difficulty in obtaining a sufficient
supply of ASICs to meet production demands. Seagate attempts to maintain
component inventory levels adequate for its short-term needs. However, an
inability to obtain essential components, if prolonged, would adversely affect
Seagate's business.

HEADS

Assembly of the HDA involves a combination of manual and semiautomated
processes. After the HDA is assembled, a servo pattern is magnetically recorded
on the disc surfaces. Upon completion, circuit boards are mated to the HDA and
the completed unit is thoroughly tested prior to packaging and shipment. Final
assembly and test operations of Seagate's disc drives take place primarily at
facilities located in Singapore, Malaysia, China, Minnesota and Oklahoma.
Subassembly and component operations are performed at Seagate's facilities in
Singapore, Malaysia, Thailand, Minnesota, California, Northern Ireland, and
Mexico. In addition, independent entities manufacture or assemble components for
Seagate in the United States, Europe and various Asian countries including
Japan, Korea, China, the Philippines, Singapore, Malaysia, Taiwan and Thailand.

All three primary stages of manufacturing for GMR recording heads are
carried out at Seagate's facilities. These three stages are wafer production,
slider fabrication and head gimbal assembly. While the majority of its
requirements for magnetic recording heads are produced internally, Seagate may
purchase up to 20% of its heads from third party suppliers to afford it access
to the widest possible head technology available. However, Seagate plans to
continue to manufacture the majority of its head requirements internally.

DISCS

For disc, or media, production Seagate purchases aluminum substrate blanks
from third parties mainly in Japan. These blanks are machined, plated and
polished to produce finished substrates at Seagate's plants in Mexico and
Northern Ireland. Seagate's media manufacturing plants in California and
Singapore put these substrates through the manufacturing processes necessary to
deposit the magnetic storage layer, the protective carbon overcoat and the
lubricant as well as to achieve the proper degree of final surface smoothness
and also carry out the quality assurance activities necessary to deliver
finished media to Seagate's disc drive manufacturing plants. Seagate's internal
media manufacturing operations supply the majority of its needs for media but
media is also purchased from third party suppliers located in the United States
and Asia.

MOTORS, ASICs AND PCBs

Spindle motors are sourced principally from outside vendors in Asia.
Seagate participates in the design of all of its ASICs for motor and actuator
control. It designs all or part of many of the other ASICs in the drive such as
interface controllers, read/write channels and pre-amplifiers, and procures
these from third parties. The vast majority of the high-volume surface-mount
printed circuit assemblies are assembled internally.

PRODUCTION OUTSIDE OF THE UNITED STATES

Because of the significant fixed costs associated with the manufacture of
its products and components and the industry's history of declining prices,
Seagate must continue to produce and sell its disc drives in significant volume,
continue to lower manufacturing costs and carefully monitor inventory levels.
Toward these ends, Seagate continually evaluates its components and
manufacturing processes as well as the desirability of transferring volume
production of disc drives and related components between facilities,
12
14

including transfer overseas to countries where labor costs and other
manufacturing costs are significantly lower than in the United States,
principally Singapore, Thailand, Malaysia and China. Frequently, transfer of
production of a product to a different facility requires qualification of such
new facility by certain of Seagate's OEM customers. There can be no certainty
that such changes and transfers will be implemented on a cost-effective basis
without delays or disruption in Seagate's production and without adversely
affecting Seagate's results of operations.

Offshore operations are subject to certain inherent risks, including delays
in transportation, changes in governmental policies, tariffs, import/export
regulations, and fluctuations in currency exchange rates in addition to
geographic limitations on management controls and reporting. There can be no
assurance that the inherent risks of offshore operations will not adversely
affect Seagate's future operating results. During fiscal 1998, several Asian
currencies significantly declined in value relative to the United States dollar.
As a result during fiscal 1998, Seagate was required to mark-to-market a portion
of its foreign currency forward exchange contracts that it had taken out as a
hedge of these currencies and recorded a $76 million charge against income. As
of June 30, 2000, Seagate had no outstanding foreign currency forward exchange
or purchased currency option contracts. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Disclosures about
Market Risk." Certain of Asian countries, as well as Mexico and Northern
Ireland, in which Seagate operates have experienced political unrest and
Seagate's operations have been adversely affected for short periods of time.

PRODUCT DEVELOPMENT

Seagate's strategy for new products emphasizes developing and introducing
on a timely and cost effective basis products that offer functionality and
performance equal to or better than competitive product offerings. The rigid
disc drive industry is characterized by ongoing, rapid technological change,
relatively short product life cycles and rapidly changing user needs. Seagate
believes that its future success will depend upon its ability to develop,
manufacture and market products which meet changing user needs, and to
successfully anticipate or respond to changes in technology and standards on a
cost-effective and timely basis. Accordingly, Seagate is committed to the
development of new component technologies, new products, and the continuing
evaluation of alternative technologies.

No assurance can be given that Seagate will be able to successfully
complete the design or introduction of new products in a timely manner, that
Seagate will be able to manufacture new products in volume with acceptable
manufacturing yields, or successfully market these products, or that these
products will perform to specifications on a long-term basis. Failure to meet
any of the above objectives in a timely manner has in the past and may in the
future have a material adverse effect on Seagate's business and results of
operations.

During the fiscal years ended June 30, 2000, July 2, 1999 and July 3, 1998,
Seagate's product development expenses were $587 million, $581 million and $585
million, respectively.

DISC DRIVES

Seagate develops new disc drive products and the processes to produce them
at four locations: Longmont, Colorado; Oklahoma City; Shakopee, Minnesota and
Singapore. Generally speaking, Longmont and Singapore are responsible for
development of 3.5 inch form factor drives intended for desktop personal
computer systems; Oklahoma City is responsible for development of 3.5 inch disc
drives with capacities and interfaces intended for use in minicomputers,
supermicrocomputers, workstations and file servers; and Shakopee is responsible
for 3.5 inch products principally intended for use in systems ranging from
workstations and superminicomputers to mainframe and supercomputers.

Seagate is increasing its focus on research and development and has
realigned its disc drive development process. This structured new product
development process is designed to speed new products to market through
predictable and repeatable methodologies.

Seagate believes that vertical integration in strategic technologies is a
key competitive advantage to maintaining a leadership position in today's
rapidly changing markets. Seagate has focused its component

13
15

research and development efforts in four main areas: heads, media, motors and
ASICs. The major emphasis of this research and development effort is higher
capacity, reduced size and power consumption, improved performance and
reliability, and reduced cost.

Seagate Research. In 1998 Seagate established a research facility based in
Pittsburgh, Pennsylvania. The vision of Seagate Research is dedicated to
extending the limits of magnetic and optical recording and exploring alternative
data storage technologies.

Advanced Concepts Group. Seagate also has an Advanced Concepts program
which focuses Seagate's disc drive and component research efforts into three
areas that specialize in developing and staging advanced technologies for future
data storage products. The three areas are recording subsystems including heads
and media, market specific product technology, and technology focused towards
new business opportunities. The primary charter of Advanced Concepts is to
ensure timely availability of mature component and subsystem technologies to
Seagate's product development teams and allow Seagate to leverage and coordinate
those technologies across products.

Advanced Manufacturing Group. Seagate has embarked on a significant change
in its approach to process development. Consistent with the formation of the
Advanced Concepts group in Development Engineering, Seagate has formed an
Advanced Manufacturing group in Manufacturing Engineering. The primary focus is
best-in-class operational performance. This group focuses the efforts of the
process development groups within Seagate on one process capable of building all
of Seagate's drives on any of Seagate's disc drive assembly lines. In addition,
the group focuses on benchmarking best-in-class performance, evaluation of new
materials and state of the art process control systems. Seagate believes that
its future success is linked to its ability to reduce supply lines, respond to
demand changes, and ultimately provide the highest quality products to its
customers.

Recording Heads

Seagate's head research and development efforts are focused on increasing
recording densities, reducing the size and mass of the slider, developing
microactuator suspensions and assembly technology for reduced head size,
reducing cost and increasing reliability. This research and development includes
substantial effort to develop and manufacture GMR heads and advanced air bearing
sliders for high areal density and small form factor products. There can be no
assurance that Seagate's head development efforts will be successful and a
failure of Seagate to successfully manufacture and market products incorporating
its advanced head technology in a timely manner could have a material adverse
effect on Seagate's business and results of operations.

Disc Drive Media

Media research and development is primarily related to achieving higher
areal densities consistent with the efforts undertaken in the head operations of
Seagate as well as developing the capability to produce media of reduced
dimensions from those of current main-stream products. These media research and
development efforts are subdivided into several main approaches to achieving
these goals: developing smoother, flatter substrates that permit lower head
flying heights; developing thinner, smaller-diameter substrates to support
development of physically smaller disc drives; developing improved magnetic
storage alloys, overcoat materials and surface lubricants that permit higher
coercivities and improved electromagnetic performance while providing enhanced
wear and reliability performance; and, finally, developing enhanced substrate
and media manufacturing processes that allow Seagate to implement the results of
its other developments while increasing the consistency and reducing the cost of
producing high performance magnetic storage media. As a consequence of these
efforts, Seagate reviews, on an on-going basis, not only new versions and
smaller size versions of the industry-standard aluminum and glass substrates but
also substrates of alternative materials. Seagate experiments with the elemental
content of the storage alloys and overcoat materials and the sputtering
processes used to deposit them. Seagate evaluates different lubricants and
pursues variations in the techniques used to obtain the proper degree of surface
smoothness including both mechanical and other processes. There can be no
assurance that Seagate's media development efforts will be successful.

14
16

Motor and Controllers

The disc drive spindle motor is becoming an increasingly critical component
as disc drive technology continues to increase track density at an accelerating
rate and spindle speeds approach the reliability limits of ball bearings.
Seagate's research and development investment in motor technology has made it a
leader in the design of fluid dynamic bearing motors for disc drives. Seagate
believes that it remains the only disc drive company shipping significant
volumes of these advanced spindle motors. The principal areas of research and
development relating to spindle motors are lower power requirements, reduced
noise level, improved reliability and reduced cost. The motor design and
development center is located in Scotts Valley, California.

ASIC development has been and will continue to be focused on optimizing the
product architecture for system performance, cost and reliability. Some specific
areas of focus are reducing the number of parts, reducing power consumption and
increasing areal densities by use of advanced signal processing techniques.

INTERNET SOLUTIONS

The Internet Solutions group leverages Seagate's expertise in network and
server storage to develop products for new network devices, the Internet, high
performance servers and other information-centric computing applications. These
solutions combine hardware, software and services to provide new products for
Seagate's existing OEM and strategic distributor customer base and address the
needs of emerging markets for storage and storage-related applications.

Seagate's XIOtech Corporation subsidiary is part of its Internet Solutions
group and operates a 30 person product development center in Minneapolis,
Minnesota. This development center is focused on designing solutions for
information appliances, application-based servers and storage services to
benefit users by delivering a greater range of online services, higher
networked-computing performance and a reduced information technology cost
structure.

PATENTS AND LICENSES

Seagate has approximately 1,272 United States patents and 703 foreign
patents and has approximately 1,091 United States and 902 foreign patent
applications pending. Due to the rapid technological change that characterizes
the rigid disc drive industry, Seagate believes that the improvement of existing
products, reliance upon trade secrets and unpatented proprietary know-how and
development of new products are generally more important than patent protection
in establishing and maintaining a competitive advantage. Nevertheless, Seagate
believes that patents are of value to its business and intends to continue its
efforts to obtain patents, when available, in connection with its research and
development program. There can be no assurance that any patents obtained will
provide substantial protection or be of commercial benefit to Seagate, or that
their validity will not be challenged.

Because of rapid technological development in the disc drive industry,
certain of Seagate's products have been and it is possible other products could
be accused of infringement of existing patents. The rigid disc drive industry
has been characterized by significant litigation relating to patent and other
intellectual property rights. From time to time, Seagate receives claims that
certain of its products infringe patents of third parties. Although Seagate has
been able to resolve some such claims or potential claims by obtaining licenses
or rights under the patents in question without a material adverse affect on
Seagate, other such claims have resulted in adverse decisions or settlements.
See Note 13, Litigation, of notes to the consolidated financial statements. In
addition, other claims are pending which if resolved unfavorably to Seagate
could have a material adverse effect on Seagate's business. For a description of
current disputes see Part I, Item 3 of this Report. In addition, the costs of
engaging in intellectual property litigation may be substantial regardless of
outcome. Seagate has patent cross licenses with a number of companies in the
computer industry. Additionally, Seagate has agreements in principle with other
major disc drive companies.

15
17

COMPETITION

The rigid disc drive industry is intensely competitive, with manufacturers
competing for a limited number of major customers. The principal competitive
factors in the rigid disc drive market include product quality and reliability,
form factor, storage capacity, price per unit, price per megabyte, product
performance, production volume capability and responsiveness to customers. The
relative importance of these factors varies with different customers and for
different products. Seagate believes that it is generally competitive as to
these factors.

Seagate has experienced and expects to continue to experience intense
competition from a number of domestic and foreign companies, some of which have
far greater resources than Seagate. Seagate competes with other independent disc
drive manufacturers in the market for disc drive products. In addition to
independent rigid disc drive manufacturers, Seagate also faces competition from
present and potential customers, including IBM, Toshiba Corporation, NEC
Corporation, Fujitsu Limited and Samsung Electronics Co. Ltd., which continually
evaluate whether to manufacture their own drives or purchase them from outside
sources. These manufacturers also sell drives to third parties, which results in
direct competition with Seagate.

Product life cycles are relatively short in the disc drive industry.
Seagate expects its competitors to offer new and existing products at prices
necessary to gain or retain market share and customers. To remain competitive,
Seagate believes it will be necessary to continue to reduce its prices and
aggressively enhance its product offerings. In addition to the foregoing, the
ability of Seagate to compete successfully will also depend on its ability to
provide timely product introductions and to continue to reduce production costs.
Seagate's establishment of production facilities in Singapore, Thailand,
Malaysia and China and its development of automated manufacturing processes are
directed toward such cost reductions. Seagate believes that its future success
will depend upon its ability to develop, manufacture and market products of high
quality and reliability which meet changing user needs, and which successfully
anticipate or respond to changes in technology and standards on a cost-effective
and timely basis, of which there can be no assurance.

The introduction of products using alternative technologies could be a
significant source of competition. For example, high-speed semiconductor memory
could compete with Seagate's products in the future. Semiconductor memory (SRAM
and DRAM) is much faster than magnetic disc drives, but currently is volatile
(i.e., subject to loss of data in the event of power failure) and much more
costly. Flash EE prom, a nonvolatile semiconductor memory, is currently much
more costly and, while it has higher read performance than disc drives, it has
lower write performance. Flash EE prom could become competitive in the near
future for applications requiring less storage capacity (i.e., less than 200 MB)
than is required in Seagate's more traditional computer related market place.

EMPLOYEES

At June 30, 2000, the number of persons employed worldwide by Seagate was
approximately 60,000 of which approximately 44,000 were located in Seagate's
Asia Pacific operations. In addition, Seagate makes use of supplemental
employees, principally in manufacturing, who are hired on an as-needed basis.
Management believes that the future success of Seagate will depend in part on
its ability to attract and retain qualified employees at all levels, of which
there can be no assurance. Seagate believes that its employee relations are
good.

16
18

EXECUTIVE OFFICERS OF THE COMPANY

The present executive officers of the Company are as follows:

EXECUTIVE
OFFICER
NAME AGE POSITION SINCE
---- --- -------- ---------

Stephen J. Luczo................ 43 Chief Executive Officer, Director of the Company 1993
and Chairman of the Board of Directors, Seagate
Software, Inc.
William D. Watkins.............. 47 President and Chief Operating Officer 1996
Charles C. Pope................. 45 Executive Vice President, Finance and Chief 1998
Financial Officer
Townsend H. Porter, Jr. ........ 54 Executive Vice President, Product Technology 1997
Development and Chief Technical Officer
Donald L. Waite................. 67 Executive Vice President, Chief Administrative 1983
Officer and Assistant Secretary
Brian S. Dexheimer.............. 37 Executive Vice President, Worldwide Sale, 2000
Marketing, Product Line Management and Customer
Service Operations
David A. Wickersham............. 44 Executive Vice President, Global Disc Storage 2000
Operations
William L. Hudson............... 48 Senior Vice President, General Counsel, and 2000
Corporate Secretary
Thomas F. Mulvaney.............. 51 Senior Vice President, Internet Solutions Group 1996

Officers are elected annually by the Board of Directors and serve at the
discretion of the Board.

Mr. Luczo joined the Company in October 1993 as Senior Vice President,
Corporate Development. In March 1995, he was appointed Executive Vice President,
Corporate Development and Chief Operating Officer of the Software Group. In July
1997, he was appointed Chairman of the Board of the Software Group. Mr. Luczo
held the position of President of the Company from September 1997 to May 2000.
He held the position of Chief Operating Officer of the Company from September
1997 to August 1998. Mr. Luczo was promoted to Chief Executive Officer and
appointed to the Board of Directors in July 1998. Prior to joining the Company
he was Senior Managing Director of the Global Technology Group of Bear, Stearns
& Co. Inc., an investment banking firm, from February 1992 to October 1993. He
serves as a Director of VERITAS Software Corporation, Cobalt Networks and
Gadzoox Networks, Inc.

Mr. Watkins joined the Company in February 1996 with the Company's merger
with Conner Peripherals as Executive Vice President, Recording Media Group. In
October 1997, Mr. Watkins took on additional responsibility as Executive Vice
President of the Disc Drive Operations, and in August 1998 was appointed to the
position of Chief Operating Officer, with responsibility for the Company's disc
drive manufacturing, recording media, and recording head operations. Mr. Watkins
was promoted to President of the Company in May 2000 with additional
responsibility of product research and development. Prior to joining the Company
he was President and General manager of the Conner Peripherals Disk Division
from January 1990 until December 1992. In January 1993, Mr. Watkins was promoted
to Senior Vice President, Manufacturing Operations.

Mr. Pope was promoted to Executive Vice President in April 1999 and Chief
Financial Officer in February 1998. Mr. Pope held the position of Senior Vice
President, Finance from January 1997 to April 1999. Mr. Pope joined Seagate as
director of Budgets and Analysis with the Company's acquisition of Grenex in
1985. He has held a variety of positions in his 14 year executive experience
with Seagate including Director of Finance for Thailand operations; Vice
President, Finance, Asia Pacific operations; Vice President, Finance and
Treasurer; Vice President and General Manager, Seagate Magnetics; and most
recently, Senior Vice President Finance, Storage Products.

Mr. Porter joined the Company on June 2, 1997 as Chief Technology Officer,
Storage Products Group. In September 1997 he was promoted to Executive Vice
President. Mr. Porter was Vice President of Research

17
19

and Development, Enterprise Storage Group at Western Digital from November 1994
to May 1997. From 1968 to 1994, Mr. Porter held engineering, program management,
and executive positions at IBM.

Mr. Waite was Chief Financial Officer of the Company from October 1983
until February 1998. Mr. Waite was Secretary of the Company from October 1983
until July 1998. Mr. Waite joined the Company in 1983 as Vice President of
Finance and Chief Financial Officer, and was promoted to Senior Vice President,
Finance in 1984. In March 1995 he was promoted to Executive Vice President,
Chief Administrative Officer and Chief Financial Officer. He serves as a
Director of California Micro Devices and Seagate Software, Inc., a subsidiary of
the Company.

Mr. Dexheimer came to Seagate with the Company's acquisition of Imprimis in
1989. His career includes more than 15 years of experience in data storage,
holding various sales, sales management and marketing positions with the
Company. Mr. Dexheimer held the position of Vice President, Marketing and
Product Line Management in the Removable Storage Solutions group from 1996 to
July 1997. In July 1997, he was promoted to Vice President and General Manager
of Removable Storage Solutions until August 1998 when he was promoted to Senior
Vice President, Product Marketing and Product Line Management for Desktop disc
drives. In August 1999, he was promoted to Senior Vice President, Worldwide
Sales and Marketing. He was promoted to Executive Vice President Worldwide
Sales, Marketing and Product Line Management and Customer Service Operations in
May 2000.

Mr. Wickersham joined the Company on May 18, 1998 as Senior Vice President,
Worldwide Materials. He assumed responsibilities for Worldwide Product Line
Management in August 1999. In May 2000, he was promoted to Executive Vice
President. Mr. Wickersham was Vice President, Worldwide Materials at Maxtor
Corporation from 1996 to May 1998. From 1993 to 1996, Mr. Wickersham was
Director of Corporate Materials at Exabyte Corporation. From 1978 to 1993, he
held various management positions at IBM Corporation.

Mr. Hudson joined the Company on January 3, 2000 as Senior Vice President,
General Counsel and Corporate Secretary. From 1984 until August 1997, Mr. Hudson
was a partner with Brobeck, Phleger & Harrison LLP, where he was a member of the
Business & Technology Practice Group. Mr. Hudson was a partner at Gibson, Dunn &
Crutcher LLP from August 1997 to December 1999. Mr. Hudson has 21 years
experience in general corporate and securities matters.

Mr. Mulvaney joined the Company in February 1996 with the Company's merger
with Conner Peripherals as Senior Vice President, General Counsel, and Assistant
Secretary. In September 1999, Mr. Mulvaney was promoted to Senior Vice
President, Internet Solutions Group. In July 1998, Mr. Mulvaney was appointed
Corporate Secretary. Mr. Mulvaney was Vice President, General Counsel and
Secretary at Conner Peripherals from May 1995 until February 1996. Prior to
joining Conner Peripherals, Mr. Mulvaney was with VLSI Technology, Inc. from May
1990 to May 1995 where he served as Vice President, General Counsel and
Secretary, and held departmental responsibility for legal, human resources,
corporate communications and facilities.

18
20

ITEM 2. PROPERTIES

Seagate's executive offices are located in Scotts Valley, California.
Principal manufacturing facilities are located in Singapore, Thailand, Malaysia,
Minnesota, California, Oklahoma, China and Northern Ireland. A portion of the
Company's facilities are occupied under leases which expire at various times
through 2015. The following is a summary of square footage owned or leased by
the Company as of June 30, 2000:

FACILITIES (SQUARE FEET)

PRODUCT MANUFACTURING &
LOCATION ADMINISTRATIVE DEVELOPMENT WAREHOUSE TOTAL
-------- -------------- ----------- --------------- ---------

NORTH AMERICA
California
Central California...................... 12,800 1,030 16,768 30,598
Northern California..................... 387,319 284,521 228,136 899,976
Southern California..................... 33,700 -- 347,890 381,590
Colorado................................... 11,608 333,774 -- 345,382
Minnesota.................................. 142,340 414,644 773,675 1,330,659
Oklahoma................................... 87,082 110,097 240,841 438,020
Northeast USA.............................. 8,881 226 -- 9,107
Southeast USA.............................. 26,773 -- -- 26,773
Other USA.................................. 13,797 65,584 11,427 90,808
Canada/Mexico.............................. 114,963 59,879 417,126 591,968
--------- --------- --------- ---------
TOTAL NORTH AMERICA.......................... 839,263 1,269,755 2,035,863 4,144,881
--------- --------- --------- ---------
EUROPE
England.................................... 28,602 18,444 3,972 51,018
Ireland.................................... 1,200 -- -- 1,200
Northern Ireland........................... 68,200 4,900 494,900 568,000
Netherlands................................ 28,955 -- 92,234 121,189
Scotland................................... -- -- 42,824 42,824
Other...................................... 44,578 -- -- 44,578
--------- --------- --------- ---------
TOTAL EUROPE................................. 171,535 23,344 633,930 828,809
--------- --------- --------- ---------
ASIA
China...................................... 25,972 -- 197,476 223,448
Malaysia................................... 183,486 -- 1,257,796 1,441,282
Singapore.................................. 273,317 35,519 1,126,769 1,435,605
Thailand................................... 145,888 -- 1,059,174 1,205,062
Other...................................... 47,495 -- 48,047 95,542
--------- --------- --------- ---------
TOTAL ASIA................................... 676,158 35,519 3,689,262 4,400,939
--------- --------- --------- ---------
TOTAL.............................. 1,686,956 1,328,618 6,359,055 9,374,629(1)
========= ========= ========= =========

- ---------------
(1) Includes 7,273,780 square feet owned by the Company and 5,037,364 square
feet leased by the Company. Excludes space that is unoccupied, subleased or
under construction.

19
21

ITEM 3. LEGAL PROCEEDINGS

The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements relate to the Company's legal
proceedings described below. 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 the Company's results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements.

CLASS ACTIONS

VERITAS/Silver Lake -- Following the Company's announcement of the
VERITAS/Silver Lake transaction, a number of stockholders filed lawsuits in both
Delaware and California against the Company, the individual members of the Board
of Directors and certain executive officers, VERITAS and Silver Lake. Following
the announcement, 17 complaints were filed in the Chancery Court of Delaware. On
April 18, 2000, those 17 lawsuits were consolidated into one action by the
Delaware Chancery Court. On April 19, 2000, plaintiffs filed an amended
consolidated complaint. On May 22, 2000, the Delaware Chancery Court certified
the Delaware action as a class action. In California, three complaints were
filed in Santa Clara County Superior Court and two complaints were filed in
Santa Cruz County Superior Court. On June 8, 2000, the defendants filed a
Petition for Coordination seeking coordination of the five California actions in
a single forum. The complaints in both jurisdictions all essentially allege that
the members of the Company's Board of Directors breached their fiduciary duties
to the Company's shareholders by entering into the transaction with
VERITAS/Silver Lake. The complaints also allege that the directors and executive
officers have conflicting financial interests and did not secure the highest
possible price for the Company's shares. All the complaints are styled as class
actions, and seek to enjoin the transaction with VERITAS/Silver Lake and secure
damages from all defendants. None of the defendants has yet responded to the
complaints. The Delaware plaintiffs have initiated discovery in preparation for
filing a motion for a preliminary injunction. The Company and the individual
defendants believe that none of the lawsuits has any merit and intend to defend
all these claims vigorously.

INTELLECTUAL PROPERTY LITIGATION

Papst Licensing, GmbH -- Papst has given the Company notice that it
believes certain former Conner Peripherals, Inc. disc drives infringe several of
its patents covering the use of spindle motors in disc drives. Papst further
claims that, post merger, Seagate disc drives designed at the Longmont design
center infringe Papst patents. It is the opinion of the Company's patent counsel
that the former Conner disc drives do not infringe any valid claims of the
patents. The Company also believes that subsequent to the merger with Conner,
the Company's earlier paid-up license under Papst's patents extinguishes any
ongoing liability. The Company also believes it enjoys the benefit of a license
under Papst's patents since Papst Licensing had granted a license to motor
vendors of Conner. Papst is currently involved in litigation with other disc
drive and disc drive motor manufacturers. The Company believes this matter is
without merit and intends to defend it vigorously.

20
22

Company has asserted cross-claims against TeraStor for trade secret
misappropriation, fraud, negligent misrepresentation, breach of contract,
declaratory relief, rescission, violation of Business & Professions Code Section
17200, common law unfair competition, intentional interference with contractual
relations, negligent interference with contractual relations, and inducing
breach of fiduciary duty. The Company also filed claims against Rick Wilmer and
Amyl Ahola, two former Seagate employees employed by TeraStor, for breach of
contract and breach of fiduciary duty. Trial is currently set to begin on
September 18, 2000. On June 28, 2000, the parties reached agreements during
settlement mediation that would resolve the litigation. Related settlement costs
were recorded as of June 30, 2000.

Convolve, Inc. -- On July 13, 2000, Convolve, Inc. ("Convolve"), and
Massachusetts Institute of Technology filed suit against Compaq Computer
Corporation and the Company in federal court in New York, alleging patent
infringement, misappropriation of trade secrets, breach of contract, tortious
interference with contract and fraud, relating to Convolve's Input Shaping(R)
and Quick and Quiet(TM) technology. Plaintiffs claim their technology is
incorporated in the Company's sound barrier technology, which was announced on
June 7, 2000. The complaint seeks injunctive relief and $800 million in damages.
Plaintiffs moved for expedited discovery, which was denied by the court. The
court ordered plaintiffs to identify their trade secrets to defendants before
discovery can begin. The Company answered the complaint on August 2, 2000 and
filed cross-claims for declaratory judgment that two Convolve patents are
invalid and not infringed and that the Company owns any intellectual property
based upon any information the Company disclosed to Convolve. Convolve served a
trade secrets disclosure on August 4, 2000. The Company believes this matter is
without merit and intends to defend it vigorously.

OTHER MATTERS

The Company is involved in a number of other judicial and administrative
proceedings incidental to its business. 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 the Company's financial
position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

21
23

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company's common stock trades on the New York Stock Exchange under the
symbol "SEG." The price range per share, included in Part II, Item 6 of this
Report, is the highest and lowest sale prices for the Company's common stock as
reported by the New York Stock Exchange during each quarter. The Company's
present policy is to retain its earnings to finance future growth. The Company
has never paid cash dividends and has no present intention to pay cash
dividends. At June 30, 2000, there were approximately 5,700 stockholders of
record of the Company's common stock. As of August 14, 2000, the closing price
of the Company's common stock as reported on the New York Stock Exchange was
$49 13/16 per share.

ITEM 6. SELECTED FINANCIAL DATA

FISCAL YEAR ENDED
--------------------------------------------------
JUNE 30, JULY 2, JULY 3, JUNE 27, JUNE 28,
2000 1999 1998 1997 1996
-------- ------- ------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)

Revenue............................................... $6,448 $6,802 $6,819 $8,940 $8,588
Gross margin.......................................... 1,254 1,552 989 2,022 1,581
Income (loss) from operations......................... (561) 258 (686) 858 287
Gain on contribution of NSMG to VERITAS, net.......... -- 1,670 -- -- --
Gain on sale of VERITAS common stock.................. 537 -- -- -- --
Gain on sale of SanDisk common stock.................. 679 -- -- -- --
Gain on exchange of certain investments in equity
securities.......................................... 231 -- -- -- --
Net income (loss)..................................... 310 1,176 (530) 658 213
Net income (loss) per share:*
Basic............................................... 1.41 4.99 (2.20) 2.84 1.07
Diluted............................................. 1.35 4.54 (2.20) 2.62 .96
Total assets.......................................... 7,167 7,072 5,645 6,723 5,240
Long-term debt, less current portion.................. 703 703 704 702 798
Stockholders' equity.................................. $3,847 $3,563 $2,937 $3,476 $2,466
Number of shares used in per share computations:*
Basic............................................... 219.4 235.8 241.3 231.5 198.7
Diluted............................................. 229.5 242.5 241.3 257.3 237.4

* See (1) in Note 2, Net Income Per Share, of notes to consolidated financial
statements.

Year Ended in 2000

Includes a $207 million net restructuring charge, a $326 million charge
related to the Company's equity interest in VERITAS, a $105 million write-off of
in-process research and development incurred primarily in connection with the
acquisition of XIOtech Corporation ("XIOtech"), a $64 million charge for various
legal settlements, a $286 million compensation charge for the reorganization of
Seagate Software, and a $28 million charge related to employee separations.

Year Ended in 1999

Includes a $119 million charge related to the Company's equity investment
in VERITAS, a $78 million charge for an amendment to the purchase agreement for
the August 1997 acquisition of Quinta Corporation ("Quinta"), and a $60 million
net restructuring charge.

Year Ended in 1998

Includes a $347 million restructuring charge, a $223 million write-off of
in-process research and development costs, a $76 million charge for
mark-to-market adjustments on certain of the Company's foreign

22
24

currency forward exchange contracts and a $22 million reduction in the charge
recorded in 1997 as a result of the adverse judgment in the Amstrad PLC.

Year Ended in 1997

Includes a $153 million charge as a result of the adverse judgment in the
Amstrad PLC litigation.

Year Ended in 1996

Includes a $242 million restructuring charge and a $99 million write-off of
in-process research and development costs.

Prior periods have been restated to reflect the adoption of Statement of
Financial Accounting Standards No. 128 "Earnings Per Share," adopted in the
second quarter of fiscal 1998.

QUARTERLY/FISCAL 2000
--------------------------------------
1ST 2ND 3RD 4TH
------ ------- ------- ------
(UNAUDITED)
(IN MILLIONS EXCEPT PER SHARE DATA)

Revenue............................................... $1,682 $ 1,645 $ 1,573 $1,548
Gross margin.......................................... 278 311 328 337
Loss from operations.................................. (101) (316) (108) (36)
Net income (loss)..................................... 2 (58) 136 230
Net income (loss) per share:
Basic............................................... 0.01 (0.27) 0.61 1.02
Diluted............................................. 0.01 (0.27) 0.58 0.96
Price range per share:
Low................................................. $25 1/8 $26 9/16 $38 7/8 $35 3/4
High................................................ $36 7/8 $48 13/16 $ 76 $66 1/2

The results for the first quarter include a $193 million net gain on the
sale of VERITAS common stock, a $112 million restructuring charge, and a $99
million charge related to the Company's equity interest in VERITAS.

The results for the second quarter include a $344 million net gain on the
sale of VERITAS common stock, a $62 million net gain on the sale of SanDisk
Corporation ("SanDisk") common stock, a $286 million compensation charge related
to the reorganization of Seagate Software, a $39 million charge related to legal
settlements, a $23 million restructuring charge, and a $84 million charge
related to the Company's equity interest in VERITAS.

The results for the third quarter include a $453 million net gain on the
sale of SanDisk common stock, a $49 million restructuring charge, a $105 million
write-off of in-process research and development in connection with the
acquisition of XIOtech, and a $74 million charge related to the Company's equity
interest in VERITAS.

The results for the fourth quarter include a $164 million net gain on the
sale of SanDisk common stock, $231 million in gains on the exchange of certain
investments in equity securities, a $23 million restructuring

23
25

charge, a $26 million charge related to employee separations, a $25 million
charge related to legal settlements, and a $69 million charge related to the
Company's equity interest in VERITAS.

QUARTERLY/FISCAL 1999
-------------------------------------
1ST 2ND 3RD 4TH
------ ------- ------ ------
(UNAUDITED)
(IN MILLIONS EXCEPT PER SHARE DATA)

Revenue................................................ $1,553 $ 1,801 $1,805 $1,643
Gross margin........................................... 321 428 434 369
Income (loss) from operations.......................... (37) 126 87 84
Net income (loss)...................................... (30) 104 82 1,020
Net income (loss) per share:*
Basic................................................ (.12) .43 .35 4.57
Diluted.............................................. (.12) .42 .34 4.11
Price range per share:
Low.................................................. $ 16 1/8 $ 19 13/16 $25 5/8 $25 5/8
High................................................. $ 27 3/8 $ 34 1/2 $44 1/4 $33 1/2

* See (1) in Note 2, Net Income Per Share, of notes to consolidated financial
statements.

The results for the first quarter include a $78 million charge in
connection with an amendment to the purchase agreement for the August 1997
acquisition of Quinta Corporation and a $7 million charge in connection with the
separation agreement with the Company's former Chief Executive Officer.

The results for the third quarter include a $72 million restructuring
charge and the reversal of fiscal 1998 restructuring charges of $12 million.

The results for the fourth quarter include a $1.670 billion net gain on the
contribution of NSMG to VERITAS, and a $119 million charge related to the
Company's equity investment in VERITAS.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the five-year
summary of selected financial data in Item 6 of this Report and the Company's
consolidated financial statements and the notes thereto in Item 8 of this
Report. All references to years represent fiscal years unless otherwise noted.

CERTAIN FORWARD-LOOKING INFORMATION

Certain statements in this Management's Discussion and Analysis ("MD&A"),
and elsewhere in this Annual Report on Form 10-K for the fiscal year ended June
30, 2000 are forward-looking statements based on current expectations, and
entail various risks and uncertainties that could cause actual results to differ
materially from those projected in such forward-looking statements. Certain of
these risks and uncertainties are set forth below under "Factors Affecting
Future Operating Results," elsewhere in this MD&A and elsewhere in this Annual
Report on Form 10-K. These forward-looking statements include the statements
relating to users' increasing reliance upon client/server network computing
environments and their demands for software that more efficiently stores and
manages data in the third paragraph under "Overview", the statements regarding
the release dates of next generation products of XIOtech in the seventh
paragraph under "Overview", the statements relating to the Stock Purchase
Agreement and the Merger Agreement under "Overview", the statements regarding
the timing of the closing of the VERITAS/Silver Lake transaction and the
dependence of the future value of Seagate common stock on the value of VERITAS
common stock in the final paragraph of "Overview", the statements relating to
continued price erosion in the first paragraph under "Results of
Operations -- 2000 vs 1999," the statements relating to amortization charges for
goodwill and other intangibles associated with the acquisition of XIOtech in the
sixth paragraph under "Results of Operations -- 2000 vs 1999," the statements
relating to restructuring activities in the seventh paragraph under "Results of
Operations -- 2000 vs 1999," the statements regarding capital expenditures in
the third paragraph under "Liquidity and Capital Resources," the statements
regarding the sufficiency of the Company's resources

24
26

in the fifth paragraph under "Liquidity and Capital Resources," and the
statements under "Factors Affecting Future Operating Results," among others.

OVERVIEW

Seagate designs, manufactures and markets products for storage, retrieval
and management of data on computer and data communications systems. These
products include disc drives, tape drives and software. Seagate designs,
manufactures and markets a broad line of rigid magnetic disc drives for use in
computer systems ranging from desktop personal computers to workstations and
supercomputers, as well as in multimedia applications. The Company sells its
products to original equipment manufacturers for inclusion in their computer
systems or subsystems, and to distributors who typically sell to small OEMs,
dealers, system integrators and other resellers. In addition, the Company
markets a broad line of Travan and Digital Audio Tape ("DAT") products. These
products are dedicated back-up storage peripherals designed to meet the needs of
market sectors ranging from desktop PCs to midrange servers.

The Company has pursued a strategy of vertical integration and accordingly
designs and manufactures rigid disc drive components including recording heads,
discs, disc substrates and motors. It also assembles certain of the key
subassemblies for use in its products including printed circuit board and head
stack assemblies.

The Company has also identified an opportunity for use of its products in
consumer applications and in fiscal 2000 began developing products for storage
intensive consumer applications by combining Seagate's expertise in storage
technology with the development of core competencies in audio/visual ("A/V")
recording, home networking, satellite and cable communications. Seagate has
shipped more than 200,000 rigid disc drives for personal video recorder
products. In July 2000, Seagate and Thomson Multimedia formed an independent
company called CacheVision. CacheVision brings together the Company's product
development activities and Thomson Multimedia's A/V technologies expertise and
marketing presence to develop cost-optimized, time-to-market integrated systems
to be incorporated into consumer electronic products such as televisions,
set-top boxes, personal video recorders and DVD players. The Company expects to
sell rigid disc drive products to CacheVision as an OEM customer.

The Company has also invested in, and intends to continue investigating
opportunities to invest in software activities. The Company anticipates that
users of computer systems will increasingly rely upon client/server network
computing environments and believes that as this reliance increases, users will
demand software that more efficiently and securely stores, manages, and accesses
data and transforms it into usable information. As such, the Company has
broadened its core competencies to include software products and technologies to
meet these requirements.

On May 28, 1999, the Company completed the contribution of its Network and
Storage Management Group ("NSMG") software business to VERITAS. As part of the
NSMG contribution to VERITAS, the Company received an equity position in
VERITAS. The Company retained ownership of its Seagate Software Information
Management Group, Inc. ("IMG") subsidiary. IMG includes Crystal Services, Inc.,
and Holistic Systems, Ltd. and offers business intelligence software solutions.
IMG's products include features such as query and reporting, automated report
scheduling and distribution, information delivery across the World Wide Web,
OLAP, forecasting, statistical analysis, discovery and data mining. IMG's
primary products are Seagate Crystal Reports, Seagate Crystal Info and Seagate
Holos.
25
27

BUSINESS COMBINATIONS

The Company has a history of business combinations and during the three
most recent fiscal years these included the acquisition of XIOtech in fiscal
2000, the contribution of NSMG to VERITAS in fiscal 1999 and the acquisitions of
Quinta Corporation and Eastman Storage Software Management Group in fiscal 1998.
In connection with certain business combinations, the Company has recognized
significant write-offs of in-process research and development. The completion of
the underlying in-process projects acquired within each business combination was
the most significant and uncertain assumption utilized in the valuation analysis
of the in-process research and development. Such uncertainties could give rise
to unforeseen budget over runs and/or revenue shortfalls in the event that the
Company is unable to successfully complete a certain R&D project. The Company is
primarily responsible for estimating the fair value of the purchased R&D in all
business combinations accounted for under the purchase method. The nature of
research and development projects acquired, the estimated time and costs to
complete the projects and significant risks associated with the projects are
described below.

XIOtech Corporation

XIOtech was acquired in January 2000. XIOtech designs, manufactures and
markets a centralized data storage system. This system is based on an exclusive
set of sophisticated data management and data movement tools. It offers storage
virtualization, multi-node server clustering, and zero backup window solutions.
The main component of the system is MAGNITUDE, a fully implemented SAN.
MAGNITUDE is sold in a cabinet containing software-based architecture that
allows the incorporation of all of the components of a SAN in one centralized
configuration. XIOtech also designs, develops and produces software, namely the
REDI suite of software, which runs MAGNITUDE's software based architecture. The
REDI software suite is application specific and gives customers the capability
of better managing their data. XIOtech is currently developing the next
generation technologies for both products, named Thunderbolt and REDI 7.0,
respectively.

At the time of completing the XIOtech acquisition, the Company estimated
the cost to complete both Thunderbolt and REDI 7.0 at approximately $1 million.
The anticipated release date for the Thunderbolt is the first half of fiscal
2001 and the third quarter of fiscal 2001 for the REDI 7.0.

Contribution of NSMG to VERITAS

On May 28, 1999, Seagate and Seagate Software Holdings, Inc. ("Seagate
Software") closed and consummated an Agreement and Plan of Reorganization dated
as of October 5, 1998 with VERITAS and VERITAS Operating Corporation. The
transaction provided for the contribution by Seagate, Seagate Software, and
certain of their respective subsidiaries to VERITAS of (a) the outstanding stock
of NSMG and certain other subsidiaries of Seagate Software and (b) those assets
used primarily in the NSMG business of Seagate Software, in consideration for
the issuance of shares of common stock of VERITAS to Seagate Software and the
offer by VERITAS to grant options to purchase common stock of VERITAS to certain
of Seagate Software's employees who become employees of VERITAS or its
subsidiaries. As part of the transaction, VERITAS assumed certain liabilities of
the NSMG business. The transaction was structured to qualify as a tax-free
exchange.

Subsequent to the transaction, all outstanding securities of VERITAS
Operating Corporation were assumed and converted into common stock of VERITAS
with identical rights, preferences and privileges, on a share for share basis.
As a result of the contribution of the NSMG business to VERITAS, Seagate
Software received a total of 155,583,468 shares of VERITAS common stock and
former employees of the NSMG business received options to purchase an aggregate
of 15,626,358 shares of VERITAS common stock. Share and option amounts for
VERITAS have been adjusted to reflect the two-for-one stock split effective July
9, 1999 by VERITAS, and the subsequent three-for-two stock splits on November
22, 1999 and March 6, 2000.

26
28

portion of the NSMG business through its ownership of VERITAS, Seagate did not
recognize 100% of the gain on the exchange. The gain recorded is equal to the
difference between 58.37% of the fair value of the VERITAS common stock received
and 58.37% of Seagate's basis in the NSMG assets and liabilities exchanged.
Seagate is accounting for its ongoing investment in VERITAS using the equity
method. The difference between the recorded amount of Seagate's investment in
VERITAS and the amount of its underlying equity in the net assets of VERITAS was
allocated based upon the fair value of the underlying tangible and intangible
assets and liabilities of VERITAS. The intangible assets included amounts
allocated to in-process research and development and resulted in a $85 million
write-off in 1999 included in activity related to equity interest in VERITAS in
the accompanying statement of operations. Intangible assets including goodwill
are being amortized over four years.

Seagate includes in its financial results its share of the net income or
loss of VERITAS, excluding certain NSMG purchase accounting related amounts
recorded by VERITAS, but including Seagate's amortization of the difference
between its recorded investment and the underlying assets and liabilities of
VERITAS. Because of practicality considerations, the net income or loss of
VERITAS is included in the results of Seagate on a one quarter lag basis. Thus,
the results of VERITAS for the period from May 29, 1999 to June 30, 1999, the
period subsequent to the contribution of NSMG to VERITAS, and for the period
from July 1, 1999 through March 31, 2000 were included in the Company's results
for the fiscal year ended June 30, 2000. The Company eliminates from VERITAS'
income (loss) the effect of VERITAS' accounting for the NSMG business
contribution, including VERITAS' amortization expenses related to intangible
assets. Excluding amortization of intangibles, the total equity income recorded
by Seagate related to VERITAS in fiscal 2000 was $30 million.

In a separate but related transaction to the NSMG contribution to VERITAS,
on June 9, 1999, the Company exchanged 5,275,772 shares of its common stock for
3,267,255 of the outstanding shares of Seagate Software common stock owned by
employees, directors and consultants of Seagate Software. The exchange ratio was
determined based on the estimated value of Seagate Software common stock divided
by the fair market value of Seagate common stock.

The estimated value of Seagate Software common stock exchanged into Seagate
common stock was determined based upon the sum of the fair value of the NSMG
business, as measured by the fair value of the shares received from VERITAS,
plus the estimated fair value of the Information Management Group of Seagate
Software as determined by the Seagate Board of Directors, plus the assumed
proceeds from the exercise of all outstanding Seagate Software stock options,
divided by the number of fully converted shares of Seagate Software. The Board
of Directors of Seagate considered a number of factors in determining the
estimated fair value of the IMG business, including historical and projected
revenues, earnings and cash flows, as well as other factors and consultations
with financial advisors.

The fair value of the Seagate Software shares acquired less the original
purchase price paid by the employees was recorded as compensation expense for
those shares outstanding and vested less than six months. The purchase of
Seagate Software shares outstanding and vested more than six months was
accounted for as the purchase of a minority interest and, accordingly, the fair
value of the shares exchanged has been allocated to all of the identifiable
tangible and intangible assets and liabilities of Seagate Software. In
connection with the acquisition, Seagate Software recorded the acquisition of
the minority interest, Seagate recorded compensation expense amounting to
approximately $124 million and wrote off purchased research and development
amounting to $2 million in the fourth quarter of fiscal 1999. Associated
intangible assets and goodwill are being amortized to operations over three to
four years.

The value allocated to projects identified as in-process technology at
VERITAS and Seagate Software, for the minority interest acquired, were charged
to expense in the fourth quarter of fiscal 1999. These write-offs were necessary
because the acquired technologies had not reached technological feasibility at
the date of purchase and have no future alternative uses. Seagate Software
expects that the acquired in-process research and development will be
successfully developed, but there can be no assurance that commercial viability
of these products will be achieved.

27
29

The nature of the efforts required to develop the purchased in-process
technology into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements. The value of the purchased in-process technology for
VERITAS was estimated as the projected net cash flows related to such products,
including costs to complete the development of the technology and the future
revenues to be earned upon commercialization of the products, excluding revenues
attributable to future development efforts. These cash flows were then
discounted back to their net present value. The projected net cash flows from
such projects were based on management's estimates of revenues and operating
profits related to such projects.

As of the date of the contribution of NSMG to VERITAS, Seagate Software's
management and VERITAS' management anticipated the costs to complete the
in-process technologies at approximately $5.8 million and $44.2 million,
respectively.

Quinta

Quinta's research and development efforts revolve around Optically Assisted
Winchester ("OAW") technology. OAW refers to Quinta's newly designed recording
technology that, upon completion, would be implemented into Winchester hard disc
drives. OAW combines traditional magnetic recording technology with Winchester
hard disc drives and optical recording capabilities; optical recording
technology enables greater data storage capacity. By integrating advanced
optical features along with a highly fine and sophisticated tracking and
delivery system within the head design, OAW would multiply the areal density of
disc drives.

Through August 8, 1997, the acquisition date, Quinta had demonstrated
significant achievements in developing its technology. However, further
technological milestones were required before technological feasibility could be
achieved. Quinta's development process consists of the following development
milestones: (i) route light (optical fiber), (ii) flying head use, (iii)
recording media, (iv) mirror creation and demonstration (two stage servo), (v)
complete assembly, (vi) form factor containment, (vii) design verification test,
(viii) customer qualification, and (ix) delivery. Future products were expected
to include fixed and removable drives and cartridges. Seagate expected to
introduce products incorporating Quinta's OAW technology within 12 months of the
acquisition date.

At the time of completing the Quinta acquisition, the Company estimated
that additional R&D spending of $9.4 million and $3.9 million in fiscal 1998 and
1999, respectively, would be required to complete the project. Since that time,
Seagate has redirected its efforts so that the Company is focused less on the
development of a specific product and more on the advancement of optical
technology in general. As such, the spending elements associated with the
development of optical technology are embedded in the R&D budgets of the
Company's product design centers and component technology organizations.

At the present time the Company has no immediate plans to release a storage
device which makes specific use of Quinta's OAW technology. Delay in releasing
such a storage device is not expected to materially affect the Company's future
earnings.

SEAGATE SOFTWARE REORGANIZATION

On October 20, 1999, the stockholders of Seagate Software, then a
majority-owned subsidiary of the Company, approved the merger of Seagate
Daylight Merger Corp., a wholly-owned subsidiary of the Company, with and into
Seagate Software. Seagate Software's assets consisted of the assets of IMG and
its investment in the common stock of VERITAS. The merger was effected on
October 20, 1999. As a result of the merger, Seagate Software became a
wholly-owned subsidiary of the Company. In connection with the merger, Seagate
Software's stockholders and optionees received payment in the form of 3.23
shares of the Company's common stock per share of Seagate Software common stock
less any amounts due for the payment of the exercise price for such options. All
outstanding Seagate Software stock options were accelerated immediately prior to
the merger. Seagate issued 9,124,046 shares of its common stock from treasury
shares to optionees and minority stockholders of Seagate Software.

28
30

In connection with the reorganization, Seagate Software also formed IMG, a
wholly-owned subsidiary. Seagate Software transferred the IMG assets into IMG.
This new company, IMG, is now the operating entity for the IMG business. IMG has
established stock option plans. Total shares available for issuance under these
plans are 22,700,000. As of June 30, 2000, IMG had granted 9,501,899 options to
purchase common stock to employees of IMG at an average exercise price of $4 per
share, and 1,050 shares had been exercised.

Seagate Software accounted for the exchange of shares of its common stock
as the acquisition of a minority interest for Seagate Software common stock
outstanding and vested more than six months held by employees and all stock held
by former employees and consultants. The fair value of the shares of Seagate
issued was $19 million and was recorded as purchase price and allocated to the
assets and liabilities received. The Company accounted for the exchange of
shares of its common stock for stock options in Seagate Software held by
employees and stock held and vested by employees less than six months as the
settlement of an earlier stock award. During the quarter ended December 31,
1999, the Company recorded compensation expense of $284 million, plus $2 million
in payroll taxes, related to the purchase of minority interest in Seagate
Software.

PENDING GOING PRIVATE TRANSACTION AND MERGER

On March 29, 2000, Seagate, Seagate Software, a subsidiary of Seagate, and
Suez Acquisition Company (Cayman) Limited ("SAC"), an entity affiliated with,
among others, Silver Lake Partners and Texas Pacific Group, entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement"), and Seagate, VERITAS
Software Corporation ("VERITAS") and a wholly owned subsidiary of VERITAS
entered into an Agreement and Plan of Merger and Reorganization (the "Merger
Agreement").

All of the transactions contemplated by the SAC transaction and the Merger
are herein referred to as the VERITAS/Silver Lake transaction. The
VERITAS/Silver Lake transaction is expected to close in the second quarter of
fiscal 2001, subject to the approval of the VERITAS stockholders and Seagate
stockholders, funding of the debt commitments and clearance by the United States
Securities and Exchange Commission, as well as other customary closing
conditions. Seagate expects that while the VERITAS/Silver Lake transaction is
pending, the value of Seagate common stock will depend primarily on the value of
VERITAS common stock.

29
31

RESULTS OF OPERATIONS

The following table sets forth certain items in the Company's Consolidated
Statements of Operations as a percentage of revenue for each of the three years
in the period ended June 30, 2000.

PERCENTAGE OF REVENUE
-----------------------
2000 1999 1998
----- ----- -----

Revenue..................................................... 100% 100% 100%
Cost of sales............................................... 81 77 85
--- --- ---
Gross margin................................................ 19 23 15
Product development......................................... 9 9 9
Marketing and administrative................................ 8 8 7
Amortization of goodwill and other intangibles.............. 1 -- 1
In-process research and development......................... 2 -- 3
Restructuring............................................... 3 1 5
Unusual items............................................... 5 1 --
--- --- ---
Income (loss) from operations............................... (9) 4 (10)
Other income, net........................................... 18 23 --
--- --- ---
Income (loss) before income taxes........................... 9 27 (10)
Benefit (provision) for income taxes........................ (4) (10) 2
--- --- ---
Net income (loss)........................................... 5% 17% (8)%
=== === ===

2000 vs 1999 -- Revenue in fiscal 2000 was $6.448 billion, 5% lower than
revenue in fiscal 1999. The decrease in revenue from the prior year was due
primarily to a continuing decline in the average unit sales prices of the
Company's products as a result of intensely competitive market conditions and a
shift in mix away from the Company's higher priced products. The decrease in
average unit sales price and effect of mix on revenue was partially offset by a
higher level of unit shipments, an increase of 28% as compared to fiscal 1999.
The Company's overall average unit sales price on its disc drive products was
$160, $148, $140, and $140 for the four quarters of fiscal 2000, respectively.
Average price erosion from fiscal 1999 to fiscal 2000 was approximately 23%. The
Company expects that price erosion in the data storage industry will continue
for the foreseeable future. This competition and continuing price erosion may
adversely affect the Company's results of operations in any given quarter and
such an adverse effect often cannot be anticipated until late in any given
quarter.

The decrease in gross margin as a percentage of revenue from the prior year
was primarily due to the Company's contribution of NSMG to VERITAS on May 28,
1999. Excluding NSMG, the Company's gross margin would have been 21% for fiscal
1999. In addition, the decrease in gross margin as a percentage of revenue from
the prior year was a result of price erosion due to intense price competition,
as discussed in the paragraph above. This decrease was partially offset by cost
savings as a result of the Company's restructuring activities and its program to
implement operational efficiencies. These efficiencies include implementation of
advanced manufacturing processes resulting in lower average unit costs per disc
drive produced.

Product development expenses increased by $6 million (1%) compared with
fiscal 1999, primarily due to increases of $22 million in salaries and related
costs, $12 million in depreciation and $11 million in occupancy costs. These
expenses were substantially offset by decreases of $33 million in product
development expenses related to the NSMG business, $4 million in equipment
expense and $3 million in recruitment and relocation costs.

Marketing and administrative expenses decreased by $19 million (4%)
compared with fiscal 1999, primarily due to decreases of $96 million in
marketing and administrative expenses related to the NSMG business and $23
million in advertising and promotion expenses. These decreases were partially
offset by increases of $36 million in salaries and related costs, $30 million in
outside services, $23 million in the provision for bad debts, and $11 million in
marketing and administrative expenses related to the Company's IMG business
software products and services.

30
32

Amortization of goodwill and other intangibles increased by $12 million
(31%) compared with fiscal 1999, primarily due to additional amortization of $15
million related to goodwill and intangibles arising from the acquisition of
XIOtech partially offset by $3 million in write-offs, in fiscal 1999, of certain
intangible assets, related to past acquisitions of companies, whose value had
become permanently impaired.

On January 28, 2000, the Company acquired XIOtech, a provider of virtual
storage and SAN solutions, for 8,031,804 shares of Seagate common stock, issued
from treasury shares, and options, with a combined fair value of $359 million.
This acquisition was accounted for as a purchase and, accordingly, the results
of operations of XIOtech have been included in the consolidated financial
statements from the date of acquisition. The purchase price has been allocated
based on the estimated fair value of net tangible and intangible assets acquired
as well as in-process research and development costs. As a result of the
acquisition, the Company incurred a one-time write-off of in-process research
and development of $105 million. Goodwill and other intangibles arising from the
acquisition are being amortized on a straight-line basis over periods ranging
from four months to seven years. Amortization of goodwill and other intangibles
was $20 million in fiscal 2000 (including $4 million for developed technology
included in cost of sales) and is expected to be approximately $40 million per
year in subsequent years (including $8 million for developed technology included
in cost of sales). XIOtech's revenue and expenses are immaterial to the
Company's consolidated revenue and expenses.

In fiscal 2000, the Company recorded restructuring charges of $218 million,
net of $2 million of reversals of amounts recorded in the same period, $5
million of restructuring accruals recorded in fiscal 1999 and $4 million of
restructuring accruals recorded in fiscal 1998, resulting in a net restructuring
charge of $207 million. The $218 million restructuring charge was a result of a
restructuring plan established to align the Company's global workforce and
manufacturing capacity with existing and anticipated future market requirements
and necessitated by the Company's improved productivity and operating
efficiencies (the "fiscal 2000 restructuring plan"). These actions include
workforce reductions, capacity reductions including closure of facilities or
portions of facilities, write-off of excess equipment and consolidation of
operations in the Company's recording media operations, disc drive assembly and
test facilities, printed circuit board assembly manufacturing, recording head
operations, software operations, customer service operations, sales and
marketing activities, and research and development activities. In connection
with the fiscal 2000 restructuring plan, the Company plans to reduce its
workforce by approximately 23,000 employees primarily in manufacturing.
Approximately 18,300 of the 23,000 employees had been terminated as of June 30,
2000. As a result of employee terminations and the write-off of equipment and
facilities in connection with the restructuring charges recorded during the year
ended June 30, 2000 related to the fiscal 2000 restructuring plan, the Company
estimates that after the completion of these restructuring activities, annual
salary and depreciation expense will be reduced by approximately $151 million
and $88 million, respectively. The Company anticipates that the implementation
of the fiscal 2000 restructuring plan will be substantially complete by December
29, 2000. In connection with the restructuring plan implemented in fiscal 1999,
the Company's planned workforce reduction had been completed as of March 31,
2000 and the other restructuring activities were substantially complete as of
March 31, 2000.

The $350 million charge to unusual items in fiscal 2000 consisted of the
$286 million compensation charge related to the reorganization of Seagate
Software and the $64 million charge related to various legal settlements. See
Note 6, Seagate Software Reorganization and Note 13, Litigation, of notes to the
consolidated financial statements.

Net other income in fiscal 2000 decreased by $445 million compared with
fiscal 1999. The decrease in net other income was primarily due to a gain of
$1.670 billion in fiscal 1999 on the contribution of the Company's NSMG business
to VERITAS and an increase of $207 million in activity related to the Company's
equity interest in VERITAS. These decreases were partially offset by gains on
the sale of portions of the Company's investments in VERITAS and SanDisk of $537
million and $679 million, respectively, in fiscal 2000. Additionally, the
Company realized gains on the exchange of certain investments in equity
securities totaling $231 million in the fourth quarter of fiscal 2000.

31
33

The Company recorded a $299 million provision for income taxes at an
effective rate of 49% in fiscal 2000 compared with a $697 million provision for
income taxes at an effective rate of 37% in fiscal 1999. The reduction in the
provision for income taxes was primarily due to the loss from operations in
fiscal 2000 and a reduction in 2000 in the level of recorded net gains
attributable to SanDisk, VERITAS and other equity securities. Excluding the tax
effects of net non-deductible charges associated with the acquisition of the
minority interest in Seagate Software, the acquisition of XIOtech, the net gain
from the sales of SanDisk and VERITAS common stock and activity related to the
Company's equity investment in VERITAS, certain non-recurring restructuring
costs, and the effects of the Company's settlement of litigation with Rodime PLC
(the "Rodime Settlement"), the pro forma effective tax rate used to record the
provision for income taxes for the year ended June 30, 2000 was 28%.

The Company provided income taxes at the U.S. statutory rate of 35% on
substantially all of its current year foreign earnings in fiscal 2000 compared
with approximately 55% of such earnings in fiscal 1999 due to dividends received
by the Company from its foreign subsidiaries. A substantial portion of the
Company's Asia Pacific manufacturing operations at plant locations in Singapore,
Thailand, Malaysia and China operate under various tax holidays which expire in
whole or in part during fiscal 2001 through 2010. The tax holidays had no impact
on net income in fiscal 2000. The net impact of these tax holidays was to
increase net income by approximately $35 million ($.14 per share, diluted) in
fiscal 1999.

During fiscal 2000, the Company settled a number of the disputed tax
matters reflected in the statutory notices of deficiencies dated June 27, 1997
and June 12, 1998 that were received from the Internal Revenue Service relative
to Seagate Technology, Inc.'s taxable years 1991 through 1993 and Conner
Peripherals, Inc.'s taxable years 1991 and 1992, respectively. The Company
believes that it has meritorious defenses against the remaining asserted
deficiencies and that the likely outcome of a re-determination of these asserted
deficiencies by the United States Tax Court will not result in an additional
provision for income taxes.

1999 vs 1998 -- Revenue in fiscal 1999 was flat when compared to fiscal
1998. A higher level of unit shipments, an increase of 9% as compared to fiscal
1998, combined with a shift in mix to the Company's higher priced products was
offset by a continuing decline in the average unit sales prices of the Company's
products as a result of intensely competitive market conditions. Revenue
decreased to $1.643 billion in the fourth quarter of fiscal 1999 from $1.805
billion in the third quarter of fiscal 1999 as a result of price erosion. The
Company's overall average unit sales price on its disc drive products was $194,
$194, $196 and $177 for the four quarters of fiscal 1999, respectively. Average
price erosion from fiscal 1998 to fiscal 1999 was 9%.

The increase in gross margin as a percentage of revenue from the prior year
was primarily due to cost savings as a result of the Company's restructuring
activities and an intensive program of cost reduction resulting in lower average
unit costs per disc produced. Excluding the gross margin of Seagate Software
which subsidiary's products generally have higher gross margins, the Company's
gross margins would have been 19% and 11% in fiscal 1999 and fiscal 1998,
respectively.

Product development expenses decreased by $4 million (1%) compared with
fiscal 1998, primarily due to a decrease of $23 million in occupancy costs, and
a $19 million accrual in fiscal year 1998 for payments to former shareholders of
Quinta for achievement of certain product development milestones. These
decreases were substantially offset by increases of $12 million in salaries and
related costs, $12 million in profit sharing accruals and $11 million in
depreciation. The decrease of $23 million in occupancy costs from the comparable
year-ago period was primarily due to the closure of certain of the Company's
product design centers pursuant to its January 1998 restructuring plan.

Marketing and administrative expenses increased by $32 million (6%)
compared with fiscal 1998, primarily due to increases of $28 million related to
the Company's software products and services, particularly those of IMG, $17
million in salaries and related costs, $8 million in legal settlement expenses,
$7 million in profit sharing accruals and $6 million in depreciation. These
expenses were partially offset by decreases of $27 million in occupancy costs
and $13 million in advertising and promotion expenses. The decrease of $27
million in occupancy costs from the comparable year-ago period was primarily due
to the closure of certain of the Company's facilities pursuant to its January
1998 restructuring plan.

32
34

Of the $223 million charge for the write-off of in-process research and
development in fiscal 1998, $214 million was a result of the August 1997
acquisition of Quinta and $7 million was a result of the June 1998 acquisition
of Eastman Storage Software Management Group. See Note 5, Business Combinations,
of notes to the consolidated financial statements.

In fiscal 1999, the Company recorded restructuring charges of $72 million
and reversed $12 million of restructuring accruals recorded in fiscal 1998,
resulting in a net restructuring charge of $60 million. The $12 million reversal
was a result of the Company abandoning its plan to seek an agreement with an
external vendor to supply parts currently manufactured at a facility in
Thailand. The $72 million restructuring charge was a result of steps the Company
is taking to further improve the efficiency of its operations. These actions
included closure of the Company's microchip manufacturing facility in Scotland;
discontinuance of the Company's recording head suspension business located in
Malaysia and Minnesota; consolidation of global customer service operations by
relocating such operations in Singapore, Scotland and Costa Mesa, California to
Mexico; and closure of the Company's recording media substrate facility in
Mexico. In connection with this restructuring, the Company's workforce was
reduced by approximately 1,250 employees. The Company's implementation of the
restructuring plan was substantially complete as of March 31, 2000.

The $78 million charge to unusual items in fiscal 1999 was in connection
with an amendment to the purchase agreement for the August 1997 acquisition of
Quinta. See Note 5, Business Combinations, of notes to the consolidated
financial statements. The $22 million in income in unusual items in 1998
represents a $22 million reduction of the $153 million charge recorded in 1997
to settle a lawsuit against the Company by Amstrad PLC.

Net other income in fiscal 1999 increased by $1.633 billion compared with
fiscal 1998. The increase in net other income was primarily due to the net gain
of $1.670 billion on the contribution of the Company's NSMG business to VERITAS
partially offset by the charge related to the Company's equity investment in
VERITAS of $119 million in the fourth quarter of fiscal 1999. The net gain of
$1.670 billion consisted of a gain of $1.806 billion net of compensation expense
of $124 million and merger-related expenses of $12 million. In addition, the
increase in net other income was due to $76 million of expenses related to
mark-to-market adjustments in fiscal 1998 on certain of the Company's foreign
currency forward exchange contracts for the Thai baht and the Malaysian ringgit.

The Company recorded a $697 million provision for income taxes at an
effective rate of 37% in fiscal 1999 compared with a $174 million benefit for
income taxes at an effective rate of 25% in fiscal 1998. The increase in the
provision for income taxes was primarily due to income from operations in fiscal
1999 and to income taxes provided on the pre-tax gain of $1.670 billion recorded
on the contribution of the Company's NSMG business to VERITAS. Excluding the
effects of the NSMG contribution, the non-deductible charges from the Quinta
acquisition and certain non-recurring restructuring costs, the pro forma
effective tax rate used to record the provision for income taxes was
approximately 28% in fiscal 1999.

The Company provided income taxes at the U.S. statutory rate on
approximately 55% of its fiscal 1999 foreign earnings compared with
approximately all of such earnings in fiscal 1998. A substantial portion of the
Company's Asia Pacific manufacturing operations at plant locations in Singapore,
Thailand, Malaysia and China operate under various tax holidays which expire in
whole or in part during fiscal 2001 through 2010. The net impact of these tax
holidays was to increase net income by approximately $35 million ($.14 per
share, diluted) in fiscal 1999. The tax holidays had no impact on the net loss
in fiscal 1998.

OTHER

For fiscal 2000, the net gain resulting from the remeasurement of foreign
financial statements into U.S. dollars was $4 million. Such net gains (losses)
did not have a significant effect on the results of operations for fiscal 1999
or fiscal 1998. The effect of inflation on operating results for fiscal 2000,
1999 and 1998 has been insignificant. The Company believes this is due to the
absence of any significant inflation factors in the industry in which the
Company participates.

33
35

Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" is effective for all fiscal
quarters beginning after June 15, 2000. This statement establishes accounting
and reporting standards for derivative instruments and for hedging activities.
It requires that derivatives be recognized in the balance sheet at fair value
and specifies the accounting for changes in fair value. The Company is in the
process of assessing the impact of this pronouncement on its financial
statements.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. All registrants are expected to apply the
accounting and disclosures described in SAB 101. The Company is still assessing
the impact of SAB 101 on its consolidated results of operations, financial
position and cash flows. The Company is required to adopt SAB 101 in the fourth
quarter of fiscal 2001.

In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation -- an Interpretation of APB Opinion No. 25." FIN 44 clarifies
the application of APB Opinion No. 25 and, among other issues, clarifies the
following: the definition of an employee for purposes of applying APB Opinion
No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to the
terms of the previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000. The Company is still assessing the impact of FIN 44 on
its consolidated results of operations, financial position, and cash flows.

The Company records unrealized gains and losses on the mark-to-market of
its investments as a component of accumulated other comprehensive income. As of
June 30, 2000 and July 2, 1999, total accumulated other comprehensive income
(loss) was $86 million and $(7) million, respectively. During fiscal 2000,
several marketable equity securities held by the Company including SanDisk
Corporation, Gadzoox Networks, Inc., Veeco Instruments, Inc., and Lernout &
Hauspie Speech Products N.V. were included in this mark-to-market calculation
resulting in a $95 million unrealized gain, net of taxes. No such similar
amounts were recorded in fiscal 1999. Such investments are subject to changes in
valuation based upon the market price of their common stock. Between June 30,
2000 and August 9, 2000, these investments, excluding the investment in SanDisk
which was sold during the same period, had temporarily decreased in fair value
by $56 million, net of taxes. In July 2000, the Company sold its remaining
investment in SanDisk for net proceeds of approximately $105 million.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2000, the Company's cash, cash equivalents and short-term
investments totaled $2.015 billion, an increase of $392 million from the prior
year-end balances. This increase was primarily a result of proceeds from sales
of VERITAS and SanDisk common stock of $834 million and $680 million,
respectively, $192 million from sales of the Company's common stock, and net
cash provided by operating activities. However, this increase was partially
offset by expenditures of $580 million for property, equipment and leasehold
improvements and the repurchase of approximately 25 million shares of the
Company's common stock for $776 million. The Company's cash and cash equivalents
are maintained in highly liquid investments with remaining maturities of 90 days
or less at the time of purchase, while its short-term investments primarily
consist of readily marketable debt securities with remaining maturities of more
than 90 days at the time of purchase.

As of June 30, 2000, the Company had committed lines of credit of $86
million that can be used for standby letters of credit or bankers' guarantees.
At June 30, 2000, $57 million of these lines of credit were utilized. In
addition, the Company has a $300 million credit facility that can be used for
borrowings. As of June 30, 2000 this facility was unutilized.

The Company made investments in property and equipment in fiscal 2000
totaling $623 million. This amount comprised $241 million for manufacturing
facilities and equipment for the recording head operations in the United States,
Northern Ireland, Thailand and Malaysia; $289 million for manufacturing
facilities and

34
36

equipment related to the Company's subassembly and disc drive final assembly and
test facilities in the United States, Asia Pacific and the United Kingdom; $86
million for expansion of the Company's thin-film media operations in the United
States, Singapore, Northern Ireland and Mexico; and $7 million for other
purposes. The Company presently anticipates investments of approximately $632
million in property and equipment in 2001. The Company plans to finance these
investments from existing cash balances and future cash flows from operations.

During the year ended June 30, 2000, the Company acquired approximately 25
million shares of its common stock for approximately $776 million. The
repurchase of a portion of these shares completed the June 1997 stock repurchase
program as amended in February 1999. The remainder of the shares were
repurchased under an April 1999 amendment to the program in which up to an
additional 25 million shares of the Company's common stock was authorized to be
acquired in the open market. In November 1999, the Company's Board of Directors
authorized an increase to its existing stock repurchase program pursuant to
which up to an additional 50 million shares of the Company's common stock may be
acquired in the open market. The Company effected no repurchases in the quarters
ended March 31, 2000 or June 30, 2000, and has no present intention to
repurchase additional shares.

The Company believes that its cash balances together with cash flows from
operations and its borrowing capacity will be sufficient to meet its working
capital needs for the foreseeable future.

FACTORS AFFECTING FUTURE OPERATING RESULTS

WE FACE RISKS FROM THE VERITAS/SILVER LAKE TRANSACTION

Holders of Seagate common stock face a number of risks in connection with
their investment in Seagate common stock as a result of the pending
VERITAS/Silver Lake transaction, including the following:

- the transaction may not close for many reasons including but not limited
to: the fact that our stockholders or VERITAS' stockholders may not
approve it, SAC may not be able to obtain the funding necessary to
finance the transaction, we may fail to obtain regulatory approval for
the transaction, the transaction may not close due to pending litigation,
or other reasons;

- the price of VERITAS' common stock may decline and we may be unable to
exert meaningful control over the management of VERITAS, although
currently we have two representatives on its board of directors;

- our management personnel may be distracted from our day to day operations
by the time demands associated with closing the transactions, and
therefore may be unable to timely identify and address business issues as
they arise;

- our customers and vendors may discontinue their relationship with us, or
delay or cancel orders as a result of uncertainty about our business
after the transaction; and

- our employees may be distracted by concerns about the VERITAS/Silver Lake
transaction, and therefore may not meet critical deadlines in their
assigned tasks or otherwise perform effectively.

If we do not close the VERITAS/Silver Lake transaction, we face a number of
additional risks resulting from the announcement and pendency of the
VERITAS/Silver Lake transaction which could negatively affect our business,
financial condition, results of operations, and ultimately, the market price of
our common stock including:

- our earnings will be impacted because our income statement will reflect
the fees, costs and expenses we incurred in connection with the
transaction, such as legal, accounting and financial advisor fees, costs
and expenses, even if the transaction is not completed;

- we may be required to pay a substantial termination fee if the
VERITAS/Silver Lake transaction is terminated for certain reasons;

35
37

- our stockholders may be unable to realize the value of the VERITAS common
stock we hold and the price of our common stock may not reflect the full
value of the VERITAS shares; and

- the market price of our common stock may decline to the extent that the
current market price of our common stock reflects a market assumption
that the transaction will be completed.

IF THE MARKET PRICE OF VERITAS COMMON STOCK DECLINES, SEAGATE AND VERITAS MAY
BE UNABLE TO TERMINATE THE MERGER AGREEMENT AND SEAGATE STOCKHOLDERS WILL
RECEIVE SHARES WITH A LOWER MARKET VALUE IN CONNECTION WITH THE MERGER

A significant portion of the consideration to be issued to Seagate's
stockholders in connection with the merger will consist of a fixed number of
shares of VERITAS common stock. There will be no adjustment to the fixed number
of shares of VERITAS common stock issued to Seagate's stockholders in connection
with the merger based upon changes in the market price of VERITAS common stock.
In addition, neither Seagate nor VERITAS may terminate the merger agreement or
"walk away" from the merger solely due to changes in the market price of VERITAS
common stock. Accordingly, the specific dollar value of the consideration that
Seagate's stockholders will receive in connection with the merger will depend,
in part, on the market value of VERITAS common stock, and may decrease from the
date Seagate's stockholders submit their proxies. The market price of VERITAS
common stock is subject to fluctuations in the market for publicly traded equity
securities generally and has experienced significant volatility.

VERITAS cannot predict or give any assurances as to the market price of its
common stock at any time before or after the completion of the merger. Seagate
stockholders should obtain recent market quotations for VERITAS common stock in
making a determination on how to vote on the merger agreement and the merger. In
addition, you should call the toll free telephone number that Seagate and
VERITAS have established in order to find out the most recent estimate as to the
amount of cash payable and the number of shares of VERITAS common stock issuable
in exchange for each share of Seagate common stock in connection with the
merger.

SEAGATE WILL REMAIN LIABLE TO THIRD PARTIES AFTER THE LEVERAGED BUYOUT AND THE
MERGER

In the leveraged buyout, Seagate will sell all of its operating assets to
SAC, and SAC has agreed to assume and indemnify VERITAS and Seagate for
substantially all liabilities arising in connection with Seagate's operating
assets. However, third parties may nevertheless try to seek recourse against
Seagate for these liabilities. Seagate currently is a large, multinational
enterprise that owns or leases facilities and offices in numerous states and
foreign countries and employs over 59,000 persons worldwide. As a result,
Seagate could continue to face a wide range of possible liabilities after the
leveraged buyout and the merger are completed, both for actions, events or
circumstances arising or occurring before the leveraged buyout and the merger as
well as after. Some areas of potential liability include:

- environmental cleanup costs and liabilities for claims made under
federal, state or foreign environmental laws;

- tax liabilities;

- obligations under federal, state and foreign pension and retirement
benefit laws;

- existing and future litigation arising from the restructuring that
Seagate commenced last year, including litigation initiated by terminated
employees; and

- existing and future patent litigation.

If SAC fails to indemnify VERITAS or Seagate under the indemnification
agreement for any of these liabilities, VERITAS could experience a material
adverse effect on its business and financial performance.

36
38

THE LEVERAGED BUYOUT AND THE MERGER MAY BE DELAYED IF SEAGATE AND VERITAS ARE
UNABLE TO TIMELY OBTAIN ALL NECESSARY CONSENTS FROM GOVERNMENT

In order to complete the leveraged buyout and the merger, Seagate and
VERITAS have each filed notifications under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and Seagate has made various filings with
state and foreign governmental authorities with jurisdiction over applicable
antitrust laws. In addition, Mr. Stephen Luczo, a director and executive officer
of Seagate and a member of Seagate's senior management team who will participate
in the ownership of SAC, is required to file a notification under the
Hart-Scott-Rodino Antitrust Improvements Act. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act for Seagate's and VERITAS' filings
was terminated early by the Federal Trade Commission in July 2000. Although
Seagate, VERITAS and SAC do not currently anticipate any challenges to the
leveraged buyout or the merger based upon antitrust grounds, any state or
foreign governmental authorities could still take action under various antitrust
laws against the leveraged buyout or the merger as they deem necessary in the
public interest. Private parties may also seek to take action under various
antitrust laws against the leveraged buyout and/or the merger. If any of these
events occur, the leveraged buyout and the merger may be delayed. Based upon
available information, Seagate, VERITAS and SAC believe that the leveraged
buyout and the merger comply with all significant federal, state and foreign
antitrust laws. We cannot assure you, however, that there will not be a
challenge to the leveraged buyout and/or the merger based on antitrust grounds,
or that if so challenged, Seagate, VERITAS and SAC will prevail.

WE FACE RISKS FROM OUR ONGOING OPERATIONS

In addition to the risks related to the VERITAS/Silver Lake transaction, we
face other risks related to our ongoing business operations. We compete in the
data storage industry, and there are a number of factors that, in the past, have
affected all of the companies in our industry, including Seagate. Many of these
factors may also impact our business in the future. These risks include the
following:

SLOWDOWN IN DEMAND FOR COMPUTER SYSTEMS MAY CAUSE A DECLINE IN DEMAND FOR OUR
PRODUCTS

Our products are components in computer systems. The demand for computer
systems has been volatile in the past and often has had an exaggerated effect on
the demand for our disc drive and tape drive products, in any given period. In
the past, unexpected slowdowns in demand for computer systems have generally
caused sharp declines in demand for disc drives and tape drive products. We
expect that this situation will occur again in the future and that at such time
demand for our disc drive and tape drive products may be reduced.

In the data storage industry, the supply of drives periodically exceeds
demand. When this happens, the over supply of available products causes the
Company to have higher than anticipated inventory levels and it experiences
intense price competition from other disc drive and/or tape drive manufacturers.

OUR FINANCIAL RESULTS WILL VARY

We often experience a high volume of sales at the end of a quarter, so we
may be unable to determine whether our fixed costs are too high relative to
sales until late in any given quarter. As a result, we often do not have enough
time to reduce these fixed costs. Consequently, our net income would be reduced
or we may even incur a loss. In addition, our operating results have been and
may in the future be subject to significant quarterly fluctuations as a result
of a number of other factors including:

- the timing of orders from and shipment of products to major customers;

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

- accelerated reduction in the price of our disc drive products due to an
oversupply of disc drives in the world market;

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

- acceptance by customers of competing technologies in lieu of our
products;

37
39

- variations in the cost of components used in manufacturing our products;

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

- our inability to reduce our fixed costs to match revenue in any quarter
because of our vertical manufacturing strategy;

- our ability to develop, introduce and market new products and product
enhancements in a timely fashion;

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

- competition and consolidation in the data storage industry.

In addition, our future operating results may also be adversely affected if
we receive an adverse judgment or settlement in any of the legal proceedings to
which we are a party. For example, in fiscal 2000 we recorded $64 million in
litigation settlement costs.

WE FACE INTENSE COMPETITION AND MAY NOT BE ABLE TO COMPETE EFFECTIVELY

Even during periods when demand is stable, the data storage industry is
intensely competitive and vendors experience price erosion over the life of a
product. Historically our competitors have offered new or existing products at
lower prices as part of a strategy to gain or retain market share and customers.
We expect these practices to continue in the future. We also expect that price
erosion in our industry will continue for the foreseeable future. Because we may
need to reduce our prices to retain our market share, the competition could
adversely affect our results of operations in any given quarter. We have
experienced and expect to continue to experience intense competition from a
number of domestic and foreign companies including other independent disc drive
manufacturers, and large integrated multinational manufacturers such as:

INTEGRATED INDEPENDENT
---------- -----------

Fujitsu Limited Maxtor Corporation
International Business Machines Corporation Quantum Corporation
NEC Corporation Western Digital Corporation
Samsung Electronics Co. Ltd.
Toshiba Corporation

Integrated multinational manufacturers are formidable competitors because
they possess greater resources and are able to access their customers without
having to consider the profitability of the disc drive business in pricing their
components.

We also face indirect competition from present and potential customers,
including several of the computer manufacturers listed above, who are
continuously evaluating whether to manufacture their own drives or whether to
purchase their drives from outside sources. If our customers manufacture their
own drives, it could have a material adverse effect on our business, results of
operations and financial condition.

We also compete with manufacturers of products that use alternative data
storage and retrieval technologies. Products based upon such alternative
technologies, including optical recording technology and semiconductor memory
(flash memory, SRAM and DRAM), may become competition for our products.

We may not be able to compete successfully against current or future
competitors. If we fail to compete successfully, our business, operating results
and financial condition may be materially adversely affected.

WE HAVE EXPERIENCED DELAYS IN THE INTRODUCTION OF PRODUCTS DUE TO SUPPLY OF
COMPONENTS

38
40

production demands. Seagate attempts to maintain component inventory levels
adequate for its short-term needs. However, an inability to obtain essential
components, if prolonged, would adversely affect Seagate's business.

WE MAY NOT DEVELOP PRODUCTS IN TIME TO MEET CHANGING TECHNOLOGIES

Our customers have demanded new generations of drive products as advances
in other hardware components and software have created the need for improved
storage products with features such as increased storage capacity or improved
performance and reliability. As a result, the life cycles of our products have
been shortened, and we have been required to constantly develop and introduce
new cost-effective drive products quickly in order to meet market windows that
become progressively shorter. We had product development expenses of $587
million, $581 million and $585 million in fiscal 2000, fiscal 1999, and fiscal
1998, respectively.

When we develop new disc and tape drive products with higher capacity and
more advanced technology, our operating results may decline because the
increased difficulty and complexity associated with producing such disc drives
increases the likelihood of reliability, quality or operability problems. If our
products suffer increased failure rates, are of low quality or are not reliable,
customers may reduce their purchases of our products. Our manufacturing rework
and scrap costs and our service and warranty costs may also increase. In
addition, a decline in the reliability of our products may reduce our
competitiveness in the data storage industry.

Our products are used in combination with other hardware, such as
microprocessors, and other software. The Company's future success will also
require strong demand by consumers and businesses for computer systems, storage
upgrades to computer systems and multimedia applications. If delivery of our
products is delayed, our OEM customers may use our competitors' products in
order to meet their production requirements. In addition, if delivery of those
OEMs' computer systems into which our products are integrated is delayed,
consumers and businesses may purchase comparable products from the OEMs'
competitors. If customers elect to wait to make their purchases in anticipation
of a new product, or buy from a competitor instead, our operating results may be
significantly adversely impacted.

Consumers have shown that they want to purchase personal computers costing
less than $1,000. We are producing and selling low cost disc drives to meet the
demand for disc drives that are components of low cost personal computers.
However, we may not be able to produce disc drives that meet our quality and
performance standards at a cost low enough to yield gross margins at acceptable
levels to sustain the development efforts for our future products.

The Company discontinued production of disc drives that use media that is
2.5 inches or smaller in January 1998. We are continuing research and
development of smaller drives, because we believe that to successfully compete
in the supply of components for mobile, laptop, notebook and ultraportable
computers, we must produce a smaller product. We intend to re-enter this market
with a durable, low power application in the future, although there can be no
assurance that we will be able to do so successfully.

OUR VERTICAL INTEGRATION STRATEGY ENTAILS A HIGH LEVEL OF FIXED COSTS

The cost, quality and availability of certain components, including heads,
media, application specific integrated circuits, motors, printed circuit boards
and custom semiconductors are critical to the successful production of disc
drives. Our strategy of vertical integration has allowed us to internally
manufacture many of the critical components used in our products. We have
pursued a strategy of vertical integration of our manufacturing processes in
order to reduce costs, control quality and assure availability and quality of
certain components.

The Company's vertical integration strategy entails a high level of fixed
costs and requires a high volume of production and sales to be successful.
During periods of decreased production, these high fixed costs have had, and
could in the future have, a material adverse effect on our operating results and
our financial condition. In addition, a strategy of vertical integration has
delayed in the past and could continue to delay in

39
41

the future our ability to introduce products containing market-leading
technology. Such delays may be due to the fact that we may not have developed
the technology in-house or because we do not have access to inexpensive external
sources of supply. For example, over the past two years we have experienced
delays in product launches due to delays in production of certain components as
a result of slower than anticipated internal development and manufacturing
scale-up of new designs.

IF OUR CUSTOMERS DELAY OR CANCEL ORDERS, OUR REVENUE WILL BE ADVERSELY
AFFECTED

The data storage industry has been characterized by large volume OEM
purchase agreements and large distributor orders. Typically, our OEM purchase
agreements permit the OEMs to cancel orders and reschedule delivery dates
without significant penalties. In the past, orders from many of our OEMs were
cancelled or delivery schedules were delayed as a result of changes in the
requirements of the OEMs' customers. These order cancellations and delays in
delivery schedules have had a material adverse effect on our results of
operations in the past, and may again in the future. Our OEMs and foreign
distributors typically furnish us with non-binding indications of their
near-term requirements, with their product deliveries based on weekly
confirmations. To the extent actual orders from foreign distributors and OEMs
are reduced from their non-binding forecasts, the Company's business, results of
operations and financial condition could be adversely effected.

WE FACE RISKS FROM OUR INTERNATIONAL OPERATIONS

The Company has significant offshore operations including manufacturing
facilities, sales personnel and customer support operations. We have
manufacturing facilities in Singapore, Thailand, China, Northern Ireland,
Malaysia, and Mexico, in addition to those in the United States. Our offshore
operations are subject to certain inherent risks including:

- fluctuations in currency exchange rates;

- longer payment cycles for sales in foreign countries;

- difficulties in staffing and managing international manufacturing
operations;

- seasonal reductions in business activity in the summer months in Europe
and certain other countries;

- increases in tariffs and duties, price controls, restrictions on foreign
currencies and trade barriers imposed by foreign countries; and

- political unrest, particularly in areas in which we have manufacturing
facilities.

These factors could have a material adverse effect on our business,
operating results and financial condition in the future.

IN ADDITION TO THE RISKS WE FACE FROM THE VERITAS/SILVER LAKE TRANSACTION, WE
FACE RISKS FROM OUR INVESTMENT IN VERITAS

We contributed our NSMG business to VERITAS on May 28, 1999 and received a
42% interest in VERITAS. As of June 30, 2000, the Company held approximately 32%
of the outstanding common stock of VERITAS.

In addition to the risks we face from the VERITAS/Silver Lake transaction,
we face a number of risks from our investment in VERITAS including the fact
that:

- we do not have significant control over the management of VERITAS,
although currently we have two representatives on its board of directors;
and

- our financial statements and results of operations reflect our ownership
of approximately 32% of VERITAS which impacts our stock price.

40
42

ACQUISITION RELATED ACCOUNTING CHARGES WILL REDUCE OUR PROFITS

We intend to continue our expansion into complementary data technology
businesses through internal growth as well as acquisitions. Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations and
products of the acquired businesses and the potential loss of key employees or
customers of the acquired businesses. We expect that we will continue to incur
substantial expenses as we acquire other businesses including charges for the
write-off of in-process research and development. Our operating results have
fluctuated in the past and may fluctuate in the future because of the timing of
such write-offs. For example, we incurred a charge to operations in the third
quarter of fiscal 2000 of $105 million for the write-off of in-process research
and development related to our acquisition of XIOtech and we will experience
ongoing charges related to that acquisition for amortization of purchased
intangibles currently amounting to approximately $10 million per quarter. We
also incurred a charge to operations in the fourth quarter of fiscal 1999
related to the contribution of NSMG to VERITAS of approximately $85 million for
the write-off of in-process research and development, and we will experience
ongoing charges related to that contribution for amortization of purchased
intangibles currently amounting to approximately $80 million per quarter. In
addition, in the second quarter of fiscal 2000, we incurred a charge to
operations of $284 million plus $2 million in payroll taxes, related to the
purchase of the minority interest in Seagate Software.

SYSTEMS FAILURES COULD ADVERSELY AFFECT OUR BUSINESS

The Company's operations are dependent on our ability to protect our
computer equipment and the information stored in our databases from damage by
fire, natural disaster, power loss, telecommunications failures, unauthorized
intrusion and other catastrophic events. We believe that we have taken prudent
measures to reduce the risk of interruption in our operations. However, we
cannot be sure that these measures are sufficient. Any damage or failure that
causes interruptions in our operations could have a material adverse effect on
our business, results of operations and financial condition.

OUR DEPENDENCE ON KEY PERSONNEL

Our future performance depends to a significant degree upon the continued
service of our key members of management as well as marketing, sales, and
product development personnel. The loss of one or more of our key personnel
would have a material adverse effect on our business, operating results, and
financial condition. We believe our future success will also depend in large
part upon our ability to attract and retain highly skilled management,
marketing, sales, and product development personnel. We have experienced intense
competition for such personnel and there can be no assurance that we will be
able to retain our key employees or that we will be successful in attracting,
assimilating and retaining them in the future.

OUR STOCK PRICE WILL FLUCTUATE

Our stock price has varied greatly as has the volume of shares of our
common stock that are traded. We expect that while the VERITAS/Silver Lake
transaction is pending, the value of our common stock will depend primarily on
the value of VERITAS' common stock. In the event that the VERITAS/Silver Lake
transaction does not occur, we expect these fluctuations to continue due to
factors such as:

- changes in the price of VERITAS' common stock and the resulting impact on
investors and analysts perceptions of the change in our valuation as a
result of our holdings of approximately 32% of VERITAS' outstanding
common stock;

- announcements of new products, services or technological innovations by
the Company or its competitors;

- announcements of major restructurings by the Company or its competitors;

- quarterly variations in our results of operations as a result of our
fixed short-term cost structure and volatility in the demand for our
products;

41
43

- changes in revenue or earnings estimates by the investment community and
speculation in the press or investment community stemming from our past
performance, concerns about demand for our products, or announcements by
our competitors;

- general conditions in the data storage industry or the personal computer
industry such as the substantial decline in demand for disc drive
products that occurred during fiscal 1998;

- changes in our revenue growth rates or the growth rates of our
competitors;

- sales of large blocks of our stock that may lead to investors' concerns
that our performance will falter and leading those investors to liquidate
their holdings of our shares;

- adverse impacts on our operating results if we receive an adverse
judgment or settlement in any of the legal proceedings to which we are a
party; and

- price erosion.

The stock market may from time to time experience extreme price and volume
fluctuations. Many technology companies have experienced such fluctuations. In
addition, our stock price may be affected by general market conditions and
domestic and international macroeconomic factors unrelated to our performance.
Often such fluctuations have been unrelated to the operating performance of the
specific companies. The market price of our common stock may experience
significant fluctuations in the future. For example, our stock price fluctuated
from a high of $76 to a low of $25 1/8 during fiscal 2000.

ITEM 7a. DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk -- The Company's exposure to market risk for changes in
interest rates relates primarily to the Company's investment portfolio and
long-term debt obligations. The Company does not use derivative financial
instruments in its investment portfolio. The Company places its investments with
high credit quality issuers and, by policy, limits the amount of credit exposure
to any one issuer. As stated in its policy, the Company is averse to principal
loss and ensures the safety and preservation of its invested funds by limiting
default risk, market risk and reinvestment risk.

The Company mitigates default risk by investing in only the safest and
highest credit quality securities and by constantly positioning its portfolio to
respond appropriately to a significant reduction in a credit rating of any
investment issuer, guarantor or depository. The portfolio includes only
marketable securities with active secondary or resale markets to ensure
portfolio liquidity.

The Company has no cash flow exposure due to rate changes for long-term
debt obligations. The Company primarily enters into debt obligations to support
general corporate purposes including capital expenditures and working capital
needs.

42
44

The tables below present principal (or notional) amounts and related
weighted average interest rates by year of maturity for the Company's investment
portfolio and debt obligations as of June 30, 2000 and July 2, 1999.

All investments mature, by policy, in three years or less, except for
certain types of investments that may mature in more than three years but whose
weighted average maturity is three years or less.

FAIR VALUE
2001 2002 2003 2004 2005 THEREAFTER TOTAL JUNE 30, 2000
------ ----- ----- ----- ----- ---------- ------ -------------
(DOLLARS IN MILLIONS)

ASSETS
Cash equivalents
Fixed rate................... $ 795 $ -- $ -- $ -- $ -- $ -- $ 795 $ 791
Average interest rate...... 5.73% -- -- -- -- -- 5.73%
Short-term investments
Fixed rate................... 281 310 184 -- -- -- 775 745
Average interest rate...... 6.21% 5.72% 6.80% -- -- 6.15%
Variable rate................ 395 -- -- -- -- -- 395 395
Average interest rate...... 6.61% -- -- -- -- -- 6.61%
Total investment securities.... 1,471 310 184 -- -- -- 1,965 1,931
Average interest rate...... 6.06% 5.72% 6.80% -- -- 6.07%

LONG-TERM DEBT
Fixed rate................... -- -- -- 200 -- 500 700 630
Average interest rate...... -- -- -- 7.13% -- 7.50% 7.40%

FAIR VALUE
2000 2001 2002 2003 2004 THEREAFTER TOTAL JULY 2, 1999
----- ----- ----- ------ ----- ---------- ------ ------------
(DOLLARS IN MILLIONS)

ASSETS
Cash equivalents
Fixed rate..................... $ 350 $ -- $ -- $ -- $ -- $ -- $ 350 $ 350
Average interest rate........ 5.29% -- -- -- -- -- 5.29%
Short-term investments
Fixed rate..................... 202 364 432 -- -- -- 998 994
Average interest rate........ 5.48% 6.02% 6.61% -- -- -- 6.17%
Variable rate.................. 233 -- -- -- -- -- 233 233
Average interest rate........ 5.03% -- -- -- -- -- 5.03%
Total investment securities...... 785 364 432 -- -- -- 1,581* 1,577
Average interest rate........ 5.26% 6.02% 6.61% -- -- -- 5.80%

LONG-TERM DEBT
Fixed rate..................... -- -- -- -- 200 500 700 663
Average interest rate........ -- -- -- -- 7.03% 7.45% 7.33% --

- ---------------
* Includes $4 million of accreted interest to be received at maturity.

Foreign Currency Risk -- The Company transacts business in various foreign
countries. Its primary foreign currency cash flows are in emerging market
countries in Asia and in certain European countries. During fiscal 1998, the
Company employed a foreign currency hedging program utilizing foreign currency
forward exchange contracts and purchased currency options to hedge local
currency cash flows from payroll, inventory, other operating expenditures and
fixed asset purchases in Singapore, Thailand, Malaysia, and Ireland. Under this
program, increases or decreases in the Company's local currency operating
expenses and other cash outflows, as measured in U.S. dollars, partially offset
realized gains and losses on the hedging instruments. The goal of this hedging
program was to economically guarantee or lock in the exchange rates on the
Company's foreign currency cash outflows rather than to eliminate the
possibility of short-term earnings volatility. Based on uncertainty in the
Southeast Asian foreign currency markets, the Company has

43
45

temporarily suspended purchasing foreign currency forward exchange and option
contracts for the Thai baht, Malaysian ringgit and Singapore dollar. The Company
does not use foreign currency forward exchange contracts or purchased currency
options for trading purposes. As of July 3, 1998, the Company had effectively
closed out all of its foreign currency forward exchange contracts by purchasing
offsetting contracts. As of June 30, 2000, the Company had no outstanding
foreign currency forward exchange or purchased currency option contracts.

Under the Company's foreign currency hedging program, gains and losses
related to qualified hedges of firm commitments and anticipated transactions
were deferred and recognized in income or as adjustments of carrying amounts
when the hedged transaction occurred. All other foreign currency hedge contracts
were marked-to-market and unrealized gains and losses were included in current
period net income. Because not all economic hedges qualified as accounting
hedges, certain unrealized gains and losses were recognized in income in advance
of the actual foreign currency cash flows. This mismatch of accounting gains and
losses and foreign currency cash flows was especially pronounced during the
first and second quarters of fiscal 1998 as a result of the declines in value of
the Thai baht and Malaysian ringgit, relative to the U.S. dollar. This mismatch
resulted in a pre-tax charge of $76 million for the year ended July 3, 1998.

44
46

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SEAGATE TECHNOLOGY

CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE DATA)

ASSETS

JUNE 30, JULY 2,
2000 1999
-------- -------

Cash and cash equivalents................................... $ 875 $ 396
Short-term investments...................................... 1,140 1,227
Accounts receivable, net.................................... 678 872
Inventories................................................. 430 451
Deferred income taxes....................................... 219 252
Other current assets........................................ 167 114
------ ------
Total Current Assets.............................. 3,509 3,312
------ ------
Property, equipment and leasehold improvements, net......... 1,608 1,687
Investment in VERITAS Software, net......................... 1,122 1,745
Goodwill and other intangibles, net......................... 353 144
Other assets................................................ 575 184
------ ------
Total Assets...................................... $7,167 $7,072
====== ======
LIABILITIES
Accounts payable............................................ $ 707 $ 714
Accrued employee compensation............................... 195 205
Accrued expenses............................................ 365 414
Accrued warranty............................................ 129 163
Accrued income taxes........................................ 81 43
Current portion of long-term debt........................... 1 1
------ ------
Total Current Liabilities......................... 1,478 1,540
------ ------
Deferred income taxes....................................... 1,020 1,103
Accrued warranty............................................ 109 126
Other liabilities........................................... 10 37
Long-term debt, less current portion........................ 703 703
------ ------
Total Liabilities................................. 3,320 3,509
------ ------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value -- 1,000,000 shares
authorized; none issued or outstanding.................... -- --
Common stock, $.01 par value -- 600,000,000 shares
authorized; shares issued -- 251,890,019 in 2000 and
1999...................................................... 3 3
Additional paid-in capital.................................. 1,960 1,991
Retained earnings........................................... 2,539 2,355
Accumulated other comprehensive income (loss)............... 86 (7)
Deferred compensation....................................... (33) (43)
Treasury common stock at cost; 22,638,025 shares in 2000 and
23,172,130 shares in 1999................................. (708) (736)
------ ------
Total Stockholders' Equity........................ 3,847 3,563
------ ------
Total Liabilities and Stockholders' Equity........ $7,167 $7,072
====== ======

See notes to consolidated financial statements.

45
47

SEAGATE TECHNOLOGY

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE DATA)

FOR THE YEARS ENDED
------------------------------
JUNE 30, JULY 2, JULY 3,
2000 1999 1998
-------- ------- -------

Revenue..................................................... $6,448 $6,802 $6,819
Cost of sales............................................... 5,194 5,250 5,830
Product development......................................... 587 581 585
Marketing and administrative................................ 515 534 502
Amortization of goodwill and other intangibles.............. 51 39 40
In-process research and development......................... 105 2 223
Restructuring............................................... 207 60 347
Unusual items............................................... 350 78 (22)
------ ------ ------
Total Operating Expenses.................................. 7,009 6,544 7,505
------ ------ ------
Income (Loss) from Operations............................. (561) 258 (686)
Interest income............................................. 101 102 98
Interest expense............................................ (52) (48) (51)
Gain on contribution of NSMG to VERITAS, net................ -- 1,670 --
Activity related to equity interest in VERITAS.............. (326) (119) --
Gain on sale of VERITAS stock............................... 537 -- --
Gain on sale of SanDisk stock............................... 679 -- --
Gain on exchange of certain investments in equity
securities................................................ 231 --
Other, net.................................................. -- 10 (65)
------ ------ ------
Other Income (Expense), net............................... 1,170 1,615 (18)
Income (loss) before income taxes........................... 609 1,873 (704)
Benefit (provision) for income taxes........................ (299) (697) 174
------ ------ ------
Net Income (Loss)......................................... $ 310 $1,176 $ (530)
====== ====== ======
Net income (loss) per share:*
Basic..................................................... $ 1.41 $ 4.99 $(2.20)
Diluted................................................... 1.35 4.54 (2.20)
Number of shares used in per share computations:*
Basic..................................................... 219.4 235.8 241.3
Diluted................................................... 229.5 242.5 241.3

* See (1) in Note 2, Net Income Per Share, of notes to consolidated financial
statements.

See notes to consolidated financial statements.
46
48

SEAGATE TECHNOLOGY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

FOR THE YEARS ENDED
------------------------------
JUNE 30, JULY 2, JULY 3,
2000 1999 1998
-------- ------- -------

OPERATING ACTIVITIES
Net income (loss)........................................... $ 310 $1,176 $ (530)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 693 696 664
Deferred income taxes.................................. (121) 661 (33)
In-process research and development.................... 105 2 223
Non-cash portion of restructuring charge............... 109 35 203
Gain on contribution of NSMG to VERITAS, net........... -- (1,670) --
Activity related to equity interest in VERITAS......... 326 119 --
Gain on sale of VERITAS stock.......................... (537) -- --
Gain on sale of SanDisk stock.......................... (679) -- --
Gain on exchange of certain investments in equity
securities........................................... (231) -- --
Compensation expense related to SSI exchange offer..... 284 -- --
Other, net............................................. 55 36 41
Changes in operating assets and liabilities:
Accounts receivable.................................... 190 (114) 242
Inventories............................................ (15) 29 213
Accounts payable....................................... (54) 104 (278)
Accrued expenses, employee compensation and warranty... (222) (124) (262)
Accrued income taxes................................... (154) 52 (37)
Other assets and liabilities........................... 14 198 54
------- ------ -------
Net cash provided by operating activities................. 73 1,200 500
INVESTING ACTIVITIES
Acquisition of property, equipment and leasehold
improvements.............................................. (580) (603) (709)
Purchases of short-term investments......................... (3,352) (6,596) (4,810)
Maturities and sales of short-term investments.............. 3,429 6,519 4,889
Proceeds from sale of VERITAS stock......................... 834 -- --
Proceeds from sale of SanDisk stock......................... 680 -- --
Acquisitions of businesses, net of cash acquired............ -- -- (204)
Other, net.................................................. (18) (26) (14)
------- ------ -------
Net cash provided by (used in) investing activities.... 993 (706) (848)
FINANCING ACTIVITIES
Sale of common stock........................................ 191 98 67
Purchase of treasury stock.................................. (776) (859) (105)
Other, net.................................................. -- -- (1)
------- ------ -------
Net cash used in financing activities.................. (585) (761) (39)
Effect of exchange rate changes on cash and cash
equivalents............................................... (2) (3) 6
------- ------ -------
Increase (decrease) in cash and cash equivalents....... 479 (270) (381)
Cash and cash equivalents at the beginning of the year...... 396 666 1,047
------- ------ -------
Cash and cash equivalents at the end of the year............ $ 875 $ 396 $ 666
======= ====== =======

See notes to consolidated financial statements.

47
49

SEAGATE TECHNOLOGY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2000, JULY 2, 1999, AND JULY 3, 1998

ACCUMULATED
COMMON STOCK ADDITIONAL OTHER TREASURY
--------------- PAID-IN RETAINED COMPREHENSIVE DEFERRED COMMON
SHARES AMOUNT CAPITAL EARNINGS INCOME COMPENSATION STOCK TOTAL
------ ------ ---------- -------- ------------- ------------ -------- ------
(IN MILLIONS)

Balance at June 27, 1997............. 252 $3 $1,903 $1,946 $-- $(57) $(319) $3,476
Comprehensive income
Net loss........................... (530) (530)
Unrealized gain on marketable
securities....................... 1 1
Foreign currency translation....... (1) (1)
------
Comprehensive income (loss)........ (530)
Purchase of treasury stock at cost... (105) (105)
Stock options exercised and employee
stock purchase plan................ (98) 166 68
Issuance of restricted stock, net of
cancellations...................... 6 (20) (6) 20 --
Amortization of deferred
compensation....................... 8 8
Income tax benefit from stock options
exercised.......................... 12 12
Other stock-based compensation....... 8 8
--- -- ------ ------ --- ---- ----- ------
Balance at July 3, 1998.............. 252 3 1,929 1,298 -- (55) (238) 2,937
Comprehensive income
Net income......................... 1,176 1,176
Unrealized gain on marketable
securities....................... (6) (6)
Foreign currency translation....... (1) (1)
------
Comprehensive income............... 1,169
Purchase of treasury stock at cost... (859) (859)
Stock options exercised and employee
stock purchase plan................ (106) 204 98
Issuance of restricted stock, net of
cancellations...................... (2) (6) 2 6 --
Amortization of deferred
compensation....................... 10 10
Income tax benefit from stock options
exercised.......................... 26 26
Other stock-based compensation....... 38 (7) 151 182
--- -- ------ ------ --- ---- ----- ------
Balance at July 2, 1999.............. 252 3 1,991 2,355 (7) (43) (736) 3,563
Comprehensive income
Net income......................... 310 310
Unrealized gain on marketable
securities....................... 93 93
------
Comprehensive income............... 403
Purchase of treasury stock at cost... (776) (776)
Stock options exercised and employee
stock purchase plan................ (5) (62) 258 191
Exchange of SSI stock for SEG
stock.............................. (249) (64) 324 11
Acquisition of XIOtech............... 137 222 359
Issuance of restricted stock, net of
cancellations...................... (4) 4 --
Amortization of deferred
compensation....................... 6 6
Compensation expense related to
employee separations............... 28 28
Income tax benefit from stock options
exercised.......................... 57 57
Other stock-based compensation....... 5 5
--- -- ------ ------ --- ---- ----- ------
Balance at June 30, 2000............. 252 $3 $1,960 $2,539 $86 $(33) $(708) $3,847
=== == ====== ====== === ==== ===== ======

See notes to consolidated financial statements.

48
50

SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations -- Seagate Technology, Inc. (the "Company" or
"Seagate") designs, manufactures and markets products for storage, retrieval and
management of data on computer and data communications systems. The Company has
three operating segments, disc drives, software and tape drives, however, only
the disc drive and software businesses are reportable segments under the
criteria of SFAS No. 131. The Company sells its products to original equipment
manufacturers ("OEM") for inclusion in their computer systems or subsystems, and
to distributors who typically sell to small OEMs, dealers, system integrators
and other resellers.

Accounting Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ materially from
those estimates.

The actual results with regard to warranty expenditures could have a
material unfavorable impact on the Company if the actual rate of unit failure or
the cost to repair a unit is greater than what the Company has used in
estimating the warranty expense accrual.

The actual results with regard to restructuring charges could have a
material unfavorable impact on the Company if the actual expenditures to
implement the restructuring plan are greater than what the Company estimated
when establishing the restructuring accrual.

Given the volatility of the markets in which the Company participates, the
Company makes adjustments to the value of inventory based on estimates of
potentially excess and obsolete inventory after considering forecasted demand
and forecasted average selling prices. However, forecasts are subject to
revisions, cancellations, and rescheduling. Actual demand will inevitably differ
from such anticipated demand, and such differences may have a material effect on
the financial statements.

Basis of Consolidation -- The consolidated financial statements include the
accounts of the Company and its wholly-owned and majority-owned subsidiaries
after eliminations. Total outstanding minority interests are not material for
any period presented.

The Company operates and reports financial results on a fiscal year of 52
or 53 weeks ending on the Friday closest to June 30. Accordingly, fiscal 2000
ended on June 30, 2000, fiscal 1999 ended on July 2, 1999, and fiscal 1998 ended
on July 3, 1998. Fiscal year 2000 comprised 52 weeks, fiscal year 1999 comprised
52 weeks and fiscal year 1998 comprised 53 weeks. All references to years in
these notes to consolidated financial statements represent fiscal years unless
otherwise noted.

Reclassifications -- Certain amounts in prior year financial statements and
notes thereto have been reclassified to conform to current year presentation.

Foreign Currency Translation -- The U.S. dollar is the functional currency
for most of the Company's foreign operations. Gains and losses on the
translation into U.S. dollars of amounts denominated in foreign currencies are
included in net income for those operations whose functional currency is the
U.S. dollar and as a separate component of stockholders' equity for those
operations whose functional currency is the local currency.

Derivative Financial Instruments -- Seagate transacts business in various
foreign countries. Its primary currency cash flows are in emerging market
countries in Asia and in certain European countries. During 1998 and 1997,
Seagate employed a foreign currency hedging program utilizing foreign currency
forward exchange contracts and purchased currency options to hedge local
currency cash flows for payroll, inventory, other operating expenditures and
fixed asset purchases in Singapore, Thailand, Malaysia and Northern Ireland.
These local currency cash flows were designated as either firm commitments or as
anticipated transactions

49
51
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

depending upon the contractual or legal nature of local currency commitments in
Singapore, Thailand, Malaysia and Northern Ireland. Anticipated transactions
were hedged with purchased currency options and with foreign currency forward
exchange contracts; firm commitments were hedged with foreign currency forward
exchange contracts.

The Company may enter into foreign currency forward exchange and option
contracts to manage exposure related to certain foreign currency commitments,
certain foreign currency denominated balance sheet positions and anticipated
foreign currency denominated expenditures. The Company does not enter into
derivative financial instruments for trading purposes. Foreign currency forward
exchange contracts designated and effective as hedges of firm commitments and
option contracts designated and effective as hedges of firm commitments or
anticipated transactions are treated as hedges for accounting purposes. Gains
and losses related to qualified accounting hedges of firm commitments or
anticipated transactions are deferred and are recognized in income or as
adjustments to the carrying amounts when the hedged transaction occurs. All
other foreign currency forward exchange contracts are marked-to-market and
unrealized gains and losses are included in current period net income as a
component of other income (expense).

Premiums on foreign currency option contracts used to hedge firm
commitments and anticipated transactions are amortized on a straight-line basis
over the life of the contract. Forward points on foreign currency forward
exchange contracts which qualify as hedges of firm commitments are recognized in
income as adjustments to the carrying amount when the hedged transaction occurs.

The Company may, from time to time, adjust its foreign currency hedging
position by taking out additional contracts or by terminating or offsetting
existing foreign currency forward exchange and option contracts. These
adjustments may result from changes in the Company's underlying foreign currency
exposures or from fundamental shifts in the economics of particular exchange
rates, as occurred in the first and second quarters of fiscal 1998 with respect
to the Thai baht, Malaysian ringgit and Singapore dollar. For foreign currency
forward exchange and option contracts qualifying as accounting hedges, gains or
losses on terminated contracts and offsetting contracts are deferred and are
recognized in income as adjustments to the carrying amount of the hedged item in
the period the hedged transaction occurs. For foreign currency forward exchange
and option contracts not qualifying as accounting hedges, gains and losses on
terminated contracts, or on contracts that are offset, are recognized in income
in the period of contract termination or offset.

Revenue Recognition and Product Warranty -- Revenue from sales of products
is recognized when persuasive evidence of an arrangement exists including a
fixed price to the buyer, delivery has occurred, and collectibility is
reasonably assured. Estimated product returns are provided for in accordance
with SFAS 48. The Company warrants its products against defects in design,
materials and workmanship generally for two to five years depending upon the
capacity category of the disc drive, with the higher capacity products being
warranted for the longer periods. A provision for estimated future costs
relating to warranty expense is recorded when revenue is recorded.

The Company's software revenue is primarily derived from the sale of
product licenses, software maintenance, technical support, training and
consulting. During the first quarter of fiscal 1999, the Company began
recognizing license revenue in accordance with the American Institute of
Certified Public Accountant's Statement of Position 97-2, "Software Revenue
Recognition." Revenue from software license agreements is primarily recognized
at the time of product delivery, provided that fees are fixed or determinable,
evidence of an arrangement exists, collectibility is probable and the Company
has vendor-specific objective evidence of fair value. Revenue from resellers,
including VARs, OEMs and distributors, are primarily recognized at the time of
product delivery to the reseller. The Company's policy is to defer such revenue
if resale contingencies exist. Some of the factors that are considered to
determine the existence of such contingencies include payment terms,
collectibility and past history with the customer. Product returns are reserved
for in accordance with SFAS 48. Such returns are estimated based on historical
return rates. The Company considers other factors such as fixed and determinable
fees, resale contingencies, arms length contract terms

50
52
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and the ability to reasonably estimate returns to ensure compliance with SFAS
48. Service revenue from customer maintenance fees for ongoing customer support
and product updates is recognized ratably over the maintenance term, which is
typically 12 months. Service revenue from training and consulting is recognized
when such services are performed.

In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions. SOP 98-9
amends SOP 97-2 Software Revenue Recognition to require recognition of revenue
using the "residual method" when certain criteria are met. The Company
implemented the provisions of SOP 98-9 during its fiscal year ending June 30,
2000. The adoption of this pronouncement did not have a material impact on the
Company's financial statements and results of operations.

Inventory -- Inventories are valued at the lower of standard cost (which
approximates actual cost using the first-in, first-out method) or market. Market
value is based upon an estimated average selling price reduced by normal gross
margins.

Property, Equipment, and Leasehold Improvements -- Land, equipment,
buildings and leasehold improvements are stated at cost. Equipment and buildings
are depreciated using the straight-line method over the estimated useful lives
of the assets. Leasehold improvements are amortized using the straight-line
method over the shorter of the estimated life of the asset or the remaining term
of the lease.

Advertising Expense -- The cost of advertising is expensed as incurred.
Advertising costs were $21 million, $56 million and $68 million in 2000, 1999
and 1998, respectively.

Stock-Based Compensation -- The Company accounts for employee stock-based
compensation under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APBO 25") and related interpretations. Pro forma
net income and net income per share are disclosures required by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") and are included in the Stock-Based Benefit
Plans -- Pro Forma Information note to the consolidated financial statements.

Impact of Recently Issued Accounting Standards -- Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133") is effective for all fiscal quarters beginning after
June 15, 2000 and will be adopted by the Company in its fiscal year 2001. This
statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that derivatives be
recognized in the balance sheet at fair value and specifies the accounting for
changes in fair value. The Company is still assessing the impact of the adoption
of SFAS 133 on its financial statements and related results.

51
53
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of stock compensation awards in a business combination. FIN 44 is effective July
1, 2000. The Company is still assessing the impact of FIN 44 on its consolidated
results of operations, financial position, and cash flows.

Cash, Cash Equivalents and Short-Term Investments -- The Company considers
all highly liquid investments with a remaining maturity of 90 days or less at
the time of purchase to be cash equivalents. Cash equivalents are carried at
cost, which approximates fair value. The Company's short-term investments
primarily comprise readily marketable debt securities with remaining maturities
of more than 90 days at the time of purchase. The Company has classified its
entire investment portfolio as available-for-sale. Available-for-sale securities
are classified as cash equivalents or short-term investments and are stated at
fair value with unrealized gains and losses included in accumulated other
comprehensive income which is a component of stockholders' equity. The amortized
cost of debt securities is adjusted for amortization of premiums and accretion
of discounts to maturity. Such amortization and accretion are included in
interest income. Realized gains and losses are included in other income
(expense). The cost of securities sold is based on the specific identification
method.

Equity Investments -- The Company enters into certain equity investments
for the promotion of business and strategic objectives, and typically does not
attempt to reduce or eliminate the inherent market risks on these investments.
Both marketable and non-marketable investments are included in other assets. A
substantial majority of the Company's marketable investments are classified as
available-for-sale as of the balance sheet date and are reported at fair value,
with unrealized gains and losses, net of tax, recorded in stockholders' equity.
The cost of securities sold is based on the specific identification method.
Realized gains or losses and declines in value, if any, judged to be other than
temporary on available-for-sale securities are reported in other income or
expense. Non-marketable investments are recorded at cost.

Concentration of Credit Risk -- The Company's customer base for disc drive
products is concentrated with a small number of systems manufacturers and
distributors. Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable, cash
equivalents and short-term investments. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no
collateral from its customers. The allowance for noncollection of accounts
receivable is based upon the expected collectibility of all accounts receivable.
The Company places its cash equivalents and short-term investments in investment
grade, short-term debt instruments and limits the amount of credit exposure to
any one commercial issuer.

Supplier Concentration -- Certain of the raw materials used by the Company
in the manufacture of its products are available from a limited number of
suppliers. Shortages could occur in these essential materials due to an
interruption of supply or increased demand in the industry. For example, all of
the Company's disc drive products require ASIC chips which are produced by a
limited number of manufacturers. During the fourth quarter of fiscal 2000 the
Company experienced shortages and delays with regards to receipt of such chips
and expects similar delays and shortages to continue in fiscal 2001. If the
Company were unable to procure certain of such materials, it would be required
to reduce its manufacturing operations which could have a material adverse
effect upon its results of operations.

52
54
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. BALANCE SHEET INFORMATION

FINANCIAL INSTRUMENTS

The following is a summary of the fair value of available-for-sale
securities at June 30, 2000:

AMORTIZED GROSS GROSS
COST UNREALIZED GAIN UNREALIZED LOSS FAIR VALUE
--------- --------------- --------------- ----------
(IN MILLIONS)

Money market mutual funds............... $ 266 $ -- $ -- $ 266
U.S. government and agency
obligations........................... 323 -- (6) 317
Repurchase agreements................... 16 -- -- 16
Auction rate preferred stock............ 374 -- -- 374
Municipal bonds......................... 1 -- -- 1
Corporate securities.................... 733 -- (2) 731
Mortgage-backed and asset-backed
securities............................ 218 -- (4) 214
Euro/Yankee time deposits............... 12 -- -- 12
------ ---- ----- ------
Subtotal................................ 1,943 -- (12) 1,931
Marketable equity securities*........... 334 471 (376) 429
------ ---- ----- ------
Total available-for-sale
securities.................. $2,277 $471 $(388) $2,360
====== ==== ===== ======
Included in other assets................ $ 429
Included in cash and cash equivalents... 791
Included in short-term investments...... 1,140
------
$2,360
======

- ---------------
* No such similar amounts were recorded in fiscal 1999.

The following is a summary of the fair value of available-for-sale
securities at July 2, 1999:

AMORTIZED GROSS
COST UNREALIZED LOSS FAIR VALUE
--------- --------------- ----------
(IN MILLIONS)

Money market mutual funds................... $ 74 $-- $ 74
U.S. government and agency obligations...... 314 (4) 310
Repurchase agreements....................... -- -- --
Auction rate preferred stock................ 222 -- 222
Municipal bonds............................. 109 -- 109
Corporate securities........................ 515 (1) 514
Mortgage-backed and asset-backed
securities................................ 302 (2) 300
Euro/Yankee time deposits................... 48 -- 48
------ --- ------
$1,584 $(7) $1,577
====== === ======
Included in cash and cash equivalents....... $ 350
Included in short-term investments.......... 1,227
------
$1,577
======

The fair value of the Company's investment in debt securities, by
contractual maturity, is as follows:

JUNE 30, 2000 JULY 2, 1999
------------- ------------
(IN MILLIONS)

Due in less than 1 year............................... $ 939 $ 486
Due in 1 to 3 years................................... 352 794
------ ------
$1,291 $1,280
====== ======

53
55
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fair Value Disclosures -- The carrying value of cash and cash equivalents
approximates fair value. The fair values of short-term investments, notes,
debentures (see Long-Term Debt and Lines of Credit footnote) and foreign
currency forward exchange and option contracts are estimated based on quoted
market prices.

The carrying values and fair values of the Company's financial instruments
are as follows:

JUNE 30, 2000 JULY 2, 1999
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(IN MILLIONS)

Cash equivalents................................. $ 791 $ 791 $ 350 $ 350
Short-term investments........................... 1,140 1,140 1,227 1,227
Marketable equity securities..................... 429 429 -- --
7.125% senior notes, due 2004.................... (200) (187) (200) (194)
7.37% senior notes, due 2007..................... (200) (180) (200) (189)
7.45% senior debentures, due 2037................ (200) (177) (200) (188)
7.875% senior debentures, due 2017............... (100) (85) (100) (92)

Derivative Financial Instruments -- The Company may enter into foreign
currency forward exchange and option contracts to manage exposure related to
certain foreign currency commitments, certain foreign currency denominated
balance sheet positions and anticipated foreign currency denominated
expenditures. The Company does not enter into derivative financial instruments
for trading purposes. Based on uncertainty in the Southeast Asian foreign
currency markets, beginning in the second quarter of 1998 the Company
temporarily suspended its hedging program. At July 3, 1998, the Company had
effectively closed out all of its foreign currency forward exchange contracts by
purchasing offsetting contracts. As of June 30, 2000, the Company had no
outstanding foreign currency forward exchange or purchased currency option
contracts.

Net foreign currency transaction gains and losses included in the
determination of net income (loss) were a gain of $1 million for fiscal 2000 and
losses of $1 million and $252 million for fiscal 1999, and fiscal 1998,
respectively. The Company transacts business in various foreign countries. Its
primary foreign currency cash flows are in emerging market countries in Asia and
in certain European countries. During fiscal 1998, the Company employed a
foreign currency hedging program utilizing foreign currency forward exchange
contracts and purchased currency options to hedge local currency cash flows for
payroll, inventory, other operating expenditures and fixed asset purchases in
Singapore, Thailand and Malaysia. During fiscal 1998 the Singapore dollar, Thai
baht, and Malaysian ringgit declined in value relative to the U.S. dollar. The
transaction loss of $252 million for fiscal 1998 primarily included losses
incurred on closing out these foreign currency forward exchange contracts.

ACCOUNTS RECEIVABLE

Accounts receivable are summarized below:

2000 1999
----- -----
(IN MILLIONS)

Accounts receivable......................................... $752 $925
Less allowance for noncollection............................ (74) (53)
---- ----
$678 $872
==== ====

54
56
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INVENTORIES

Inventories are summarized below:

2000 1999
----- -----
(IN MILLIONS)

Components.................................................. $142 $143
Work-in-process............................................. 51 54
Finished goods.............................................. 237 254
---- ----
$430 $451
==== ====

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consisted of the following:

ESTIMATED USEFUL LIFE 2000 1999
------------------------ ------- -------
(IN MILLIONS)

Land.............................. $ 48 $ 40
Equipment......................... 3 - 4 years 2,472 2,365
Building and leasehold
improvements.................... Life of lease - 30 years 982 932
Construction in progress.......... 252 196
------- -------
3,754 3,533
Less accumulated depreciation and
amortization.................... (2,146) (1,846)
------- -------
$ 1,608 $ 1,687
======= =======

Equipment and leasehold improvements include assets under capitalized
leases. Amortization of leasehold improvements is included in depreciation
expense. Depreciation expense was $597 million, $574 million and $549 million in
2000, 1999 and 1998, respectively.

GOODWILL AND OTHER INTANGIBLES

Goodwill represents the excess of the purchase price of acquired companies
over the estimated fair value of the tangible and specifically identified
intangible net assets acquired. Other intangible assets consist of trademarks,
assembled workforces, distribution networks, developed technology, and customer
bases related to acquisitions accounted for by the purchase method. Amortization
of purchased intangibles, other than acquired developed technology, is provided
on the straight-line basis over the respective useful lives of the assets
ranging from 36 to 60 months for trademarks, 24 to 48 months for assembled
workforces and distribution networks, and 12 to 36 months for customer bases.
In-process research and development without alternative future use is expensed
when acquired.

In accordance with SFAS 121, the carrying value of other intangibles and
related goodwill is reviewed if the facts and circumstances suggest that they
may be permanently impaired. If this review indicates these assets' carrying
value will not be recoverable, as determined based on the undiscounted net cash
flows of the entity acquired over the remaining amortization period, the
Company's carrying value is reduced to its estimated fair value, first by
reducing goodwill, and second by reducing long-term assets and other intangibles
(generally based on an estimate of discounted future net cash flows). Goodwill
and other intangibles are being amortized on a straight-line basis over periods
ranging from two to fifteen years. Accumulated amortization was $205 million and
$177 million as of June 30, 2000 and July 2, 1999, respectively.

55
57
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DEVELOPED TECHNOLOGY

The Company applies Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed" ("SFAS 86"), to software technologies developed internally, acquired
in business acquisitions, and purchased.

Internal development costs are included in research and development and are
expensed as incurred. SFAS 86 requires the capitalization of certain internal
development costs once technological feasibility is established, which based on
the Company's development process generally occurs upon the completion of a
working model. As the time period between the completion of a working model and
the general availability of software has been short, capitalization of internal
development costs has not been material to date. As of June 30, 2000 there are
no capitalized internal development costs remaining on the Company's balance
sheet. Capitalized costs are amortized based on the greater of the straight-line
basis over the estimated product life or the ratio of current revenue to the
total of current and anticipated future revenue.

Purchased developed technology is amortized based on the greater of the
straight-line basis over the estimated useful life (30 to 48 months) or the
ratio of current revenue to the total of current and anticipated future revenue.
The recoverability of the carrying value of purchased developed technology is
reviewed periodically. The carrying value of developed technology is compared to
the estimated future gross revenue from that product reduced by the estimated
future costs of completing and disposing of that product, including the costs of
performing maintenance and customer support (net undiscounted cash flows) and to
the extent that the carrying value exceeds the undiscounted cash flows the
difference is written off.

In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance on capitalization of the costs incurred for computer software developed
or obtained for internal use. It also provides guidance for determining whether
computer software is internal-use software and on accounting for the proceeds of
computer software originally developed or obtained for internal use and then
subsequently sold to the public. SOP 98-1 was adopted by the Company in fiscal
2000 and the adoption of this statement did not have a material impact on its
financial statements.

LONG-TERM DEBT AND LINES OF CREDIT

Long-term debt consisted of the following:

2000 1999
----- -----
(IN MILLIONS)

7.125% senior notes, due 2004............................... $200 $200
7.37% senior notes, due 2007................................ 200 200
7.45% senior debentures, due 2037........................... 200 200
7.875% senior debentures, due 2017.......................... 100 100
Capitalized lease obligations with interest at 14% to 19.25%
collateralized by certain manufacturing equipment and
buildings................................................. 4 4
---- ----
704 704
Less current portion........................................ 1 1
---- ----
$703 $703
==== ====

56
58
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

At June 30, 2000, future minimum principal payments on long-term debt and
capital lease obligations were as follows:

(IN MILLIONS)
-------------

2001..................................................... $ 1
2002..................................................... 1
2003..................................................... 1
2004..................................................... 201
2005..................................................... --
After 2005............................................... 500
----
$704
====

The Company's 7.125% senior notes due 2004, 7.37% senior notes due 2007 and
7.875% senior debentures due 2017 are redeemable at the option of the Company at
any time, at a redemption price equal to the greater of (i) 100% of their
principal amount plus accrued interest or (ii) the sum of the present values of
the remaining scheduled payments of principal and interest discounted to the
date of redemption at a discount rate (the "discount rate") as set forth in the
indenture governing the notes and debentures plus 10 basis points. The Company's
7.45% senior debentures due 2037 are redeemable at the option of the Company at
any time, at a redemption price equal to the greater of (i) 100% of their
principal amount plus accrued interest, (ii) the sum of the present values of
the remaining scheduled payments of principal and interest discounted to the
date of redemption at the discount rate plus 10 basis points, calculated as if
the principal amount were payable in full on March 1, 2009, or (iii) the sum of
the present values of the remaining scheduled payments of principal and interest
discounted to the date of redemption at the discount rate plus 10 basis points.
In addition, the Company's 7.45% senior debentures due 2037 will be redeemable
on March 1, 2009, at the option of the holders thereof, at 100% of their
principal amount, together with interest payable to the date of redemption. The
Company's 7.125% senior notes due 2004, 7.37% senior notes due 2007 and 7.875%
senior debentures due 2017 will not be redeemable at the option of the holders
thereof prior to maturity. These securities were issued in February 1997 in an
offering registered under the Securities Act of 1933, as amended.

57
59
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net
income (loss) per share.

FOR THE YEARS ENDED
------------------------------------
JUNE 30, JULY 2, JULY 3,
2000 1999 1998
---------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)

Basic Net Income (Loss) Per Share Computation
Numerator:
Net income (loss).............................. $ 310 $1,176 $ (530)
------ ------ ------
Denominator:
Weighted average number of common shares
outstanding during the period(1)............ 219.4 235.8 241.3
------ ------ ------
Basic net income (loss) per share(1)............. $ 1.41 $ 4.99 $(2.20)
====== ====== ======
Diluted Net Income (Loss) Per Share Computation
Numerator:
Net income (loss).............................. $ 310 $1,176 $ (530)
Adjustment to net income for dilutive effect of
subsidiary Seagate Software, Inc.'s
outstanding stock options................... -- (75) --
------ ------ ------
Total.......................................... $ 310 $1,101 $ (530)
------ ------ ------
Denominator:
Weighted average number of common shares
outstanding during the period(1)............ 219.4 235.8 241.3
Incremental common shares attributable to
exercise of outstanding options (assuming
proceeds would be used to purchase treasury
stock and restricted stock
outstanding)(1)............................. 10.1 6.7 --
------ ------ ------
Total.......................................... 229.5 242.5 241.3
------ ------ ------
Diluted net income (loss) per share(1)........... $ 1.35 $ 4.54 $(2.20)
====== ====== ======

(1) Prior to fiscal 2000, weighted average outstanding shares used to compute
basic net income (loss) per share have been amended to exclude the effects
of restricted shares outstanding. The result of doing so was to increase
basic net income per share in fiscal 1999 by $0.05 and basic net loss per
share in 1998 by $(0.03). Prior to fiscal 2000, diluted net income (loss)
per share has been amended to include the incremental effects of restricted
shares using the modified treasury stock method. The result of doing so was
to increase diluted net income per share in fiscal 1999 by $0.01 and diluted
net loss per share in fiscal 1998 by $(0.03).

Options to purchase 1.3 million, 6.2 million, and 9.7 million shares of
common stock were outstanding during fiscal 2000, 1999, and 1998, respectively,
but were not included in the computation of diluted net income per share because
the options' exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.

3. COMPENSATION

TAX-DEFERRED SAVINGS PLAN

The Company has a tax-deferred savings plan, the Seagate Technology, Inc.
Savings and Investment Plan ("the 40l(k) plan"), for the benefit of qualified
employees. The 40l(k) plan is designed to provide employees with an accumulation
of funds at retirement. Qualified employees may elect to make contributions

58
60
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

to the 401(k) plan on a monthly basis. The Company may make annual contributions
to the 401(k) plan at the discretion of the Board of Directors. During the
fiscal years ended June 30, 2000 and July 2, 1999, the Company made
contributions totaling approximately $14 million to the 401(k) plan in each
year. No material contributions were made by the Company during fiscal year
1998.

STOCK-BASED BENEFIT PLANS

Stock Option Plans -- Options granted under the Company's stock option
plans are granted at fair market value, expire ten years from the date of the
grant and generally vest in four equal annual installments, commencing one year
from the date of the grant.

Following is a summary of stock option activity for the three years ended
June 30, 2000:

OPTIONS OUTSTANDING
----------------------------
NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE
--------- ----------------
(SHARES IN MILLIONS)

Balance June 27, 1997................................ 22.0 $22.92
Granted............................................ 18.3 27.10
Exercised.......................................... (2.4) 13.34
Canceled........................................... (11.9) 32.62
-----
Balance July 3, 1998................................. 26.0 22.30
Granted............................................ 14.1 23.98
Exercised.......................................... (4.3) 15.15
Canceled........................................... (1.9) 25.49
-----
Balance July 2, 1999................................. 33.9 23.73
Granted............................................ 8.3 30.97
Exercised.......................................... (7.3) 21.48
Canceled........................................... (2.0) 26.12
-----
Balance June 30, 2000................................ 32.9 $25.80
=====

In fiscal 1998, the Company offered to all optionees below the level of
Senior Vice President, who held options with an exercise price higher than the
prevailing fair market value of the Company's common stock the right to exchange
their options for new options exercisable at such fair market value. In
connection with this transaction, 8.4 million options were exchanged. The number
of options shown as granted and canceled in the above table reflects this
exchange of options. Such options had a weighted average exercise price before
repricing of $34.20 and the new options were granted at a weighted average price
of $24.45.

Options available for grant were 13.0 million at June 30, 2000; 5.0 million
at July 2, 1999; and 13.6 million at July 3, 1998. On October 30, 1997, the
stockholders approved an amendment to the 1991 Incentive Stock Option Plan to
increase the number of shares of common stock reserved for issuance thereunder
by 15 million.

59
61
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes information about options outstanding at
June 30, 2000.

OUTSTANDING OPTIONS EXERCISABLE OPTIONS
----------------------------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED
SHARES IN MILLIONS NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE NUMBER AVERAGE
RANGE OF EXERCISE PRICES OF SHARES (IN YEARS) EXERCISE PRICE OF SHARES EXERCISE PRICE
------------------------ --------- ---------------- ---------------- --------- --------------

$ .00 - $ 6.38................... 0.7 4.01 $ 4.33 0.6 $ 4.86
6.63 - 20.38................... 5.8 7.02 18.16 1.6 12.17
20.50 - 28.94................... 19.9 7.71 27.74 8.1 24.42
29.00 - 47.75................... 5.9 8.28 35.71 1.8 35.38
47.88 - 71.75................... 0.6 9.61 62.31 -- 51.47
---- ---- ------ ---- ------
$ .00 - $71.75................... 32.9 7.64 $25.78 12.1 $23.57

On March 4, 1998, the Board of Directors approved the adoption of the 1998
Nonstatutory Stock Option Plan and the reservation of 3.5 million shares of
common stock for issuance thereunder.

Executive Stock Plan -- The Company has an Executive Stock Plan under which
senior executives of the Company are granted the right to purchase shares of the
Company's common stock at $.01 per share. The difference between the fair market
value of the shares on the measurement date and the exercise price is recorded
as deferred compensation and is charged to operations over the vesting period of
four to seven years. The Company has the right to repurchase the restricted
stock from an executive upon his or her voluntary or involuntary termination of
employment with the Company for any reason at the same price paid by the
executive. If an executive voluntarily resigns at or above age 65, the Company
may release from the repurchase option, or if his or her employment terminates
as a result of death, disability, termination by the Company other than for
cause or constructive termination within the two-year period following a change
of control, the Company will release from the repurchase option a pro rata
number of shares based on the number of months that have passed since the grant
date divided by the number of months in the vesting period. The following is a
summary of restricted stock activity under the Executive Stock Plan for the
three years ended June 30, 2000:

RESTRICTED SHARES OUTSTANDING
-----------------------------
(SHARES IN THOUSANDS)

Balance June 27, 1997........................ 2,185
Granted.................................... 454
Repurchased................................ (254)
Released from restrictions................. (44)
-----
Balance July 3, 1998......................... 2,341
Granted.................................... 145
Repurchased................................ (216)
Released from restrictions................. (357)
-----
Balance July 2, 1999......................... 1,913
Granted.................................... 30
Repurchased................................ (135)
Released from restrictions................. (53)
-----
Balance June 30, 2000........................ 1,755
=====

At June 30, 2000, 291,000 shares were available for future grants. In
addition, the Company has a Restricted Stock Plan which also has a deferred
compensation component. Under this plan the deferred compensation is amortized
over a period of seven years. There are two employees remaining in the plan and
no shares are available for future grant. The aggregate amount charged to
operations for amortization of deferred compensation under both plans was $6
million, $10 million, and $8 million in 2000, 1999 and 1998, respectively.

60
62
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock Purchase Plan -- The Company also maintains an Employee Stock
Purchase Plan. A total of 19,600,000 shares of common stock have been authorized
for issuance under the Purchase Plan. The Purchase Plan permits eligible
employees who have completed thirty days of employment prior to the inception of
the offering period to purchase common stock through payroll deductions
generally at the lower of 85% of the fair market value of the common stock at
the beginning or at the end of each six-month offering period. Under the plan,
1,515,000; 1,604,000; and 1,348,000 shares of common stock were issued from
treasury shares in fiscal 2000, 1999, and 1998, respectively.

Common stock reserved for future issuance under the Company's Employee
Stock Purchase Plan aggregated 4,307,000 shares at June 30, 2000.

Treasury Shares -- During fiscal 2000, 1999, and 1998, the Company
repurchased 25 million, 27 million, and 4 million shares of common stock at an
average price of $30.76, $31.82, and $28.31 per share, respectively.

Pro Forma Information -- The Company has elected to follow APBO 25 and
related interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APBO 25, the Company generally recognized
no compensation expense with respect to such options.

Pro forma information regarding net income and earnings per share is
required by SFAS 123 for stock options granted after June 30, 1995 as if the
Company had accounted for its stock options under the fair value method of SFAS
123. The fair value of the Company's stock options was estimated using a
Black-Scholes option valuation model. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options which have
no vesting restrictions and are fully transferable. In addition, the Black-
Scholes model requires the input of highly subjective assumptions, including the
expected stock price volatility. Because the Company's stock options granted to
employees have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its stock
options granted to employees.

The fair value of the Company's stock options granted to employees was
estimated assuming no expected dividends and the following weighted average
assumptions:

2000 1999 1998
---- ---- ----

Stock Option Plan Shares
Expected life (in years).............................. 3.9 3.8 3.2
Risk-free interest rate............................... 6.0% 5.3% 5.5%
Volatility............................................ .60 .56 .45
Employee Stock Purchase Plan Shares
Expected life (in years).............................. .5 .5 .6
Risk-free interest rate............................... 5.9% 4.6% 5.5%
Volatility............................................ .78 .68 .63

The weighted average fair value of stock options granted under the
Company's Stock Option Plans was $16.66, $11.09, and $10.05 per share in 2000,
1999, and 1998, respectively. The weighted average fair value of shares granted
under the Company's Employee Stock Purchase Plan was $11.47, $10.18, and $12.03
per share in fiscal 2000, 1999, and 1998, respectively. The weighted average
purchase price of shares granted under the Company's Employee Stock Purchase
Plan was $23.38, $22.72, and $26.99 per share in 2000, 1999, and 1998,
respectively.

61
63
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period (for stock options) and
the six month purchase period for stock purchases under the Stock Purchase Plan.
The Company's pro forma information follows:

2000 1999 1998
-------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)

Pro forma net income (loss)..................... $ 217 $1,018 $ (600)
Pro forma basic net income (loss) per share..... 0.99 4.64 (2.49)
Pro forma diluted net income (loss) per share... 0.96 4.29 (2.49)

The effects on pro forma disclosures of applying SFAS 123 are not likely to
be representative of the effects on pro forma disclosures of future years.
Because SFAS 123 is applicable only to options granted subsequent to June 30,
1995, the pro forma effect was not fully reflected in fiscal years prior to
1999.

POST-RETIREMENT HEALTH CARE PLAN

In fiscal 2000, the Company adopted a post-retirement health care plan
which offers medical coverage to eligible U.S. retirees and their eligible
dependents. Substantially all U.S. employees become eligible for these benefits
after 15 years of service and attaining age 60 and older.

The following table provides a reconciliation of the changes in the
post-retirement health care plan's benefit obligation and a statement of the
funded status as of June 30, 2000 (in millions):

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year..................... $ --
Service cost................................................ 4
Amortization of unrecognized prior service cost............. 2
----
Benefit obligation at end of year........................... $ 6
====
FUNDED STATUS OF THE PLAN
Fair value of plan assets at end of year.................... $ --
Unrecognized prior service cost............................. (22)
Accrued benefit liability recognized in the balance sheet at
June 30, 2000............................................. (6)
----
Accrued benefit cost........................................ $(28)
====

Net periodic benefit cost for the year ended June 30, 2000 was as follows
(in millions):

Service cost................................................ $ 2
Interest cost............................................... 2
Amortization of prior service cost.......................... 2
---
Net periodic benefit cost................................... $ 6
===

Weighted-Average Actuarial Assumptions

A discount rate of 7.0% was used in the determination of the accumulated
benefit obligation.

The Company's future medical benefit costs were estimated to increase at an
annual rate of 10% during 2000, decreasing to an annual growth rate of 5% in
2010 and thereafter. The Company's cost is capped at 200% of the fiscal 1999
employer cost and, therefore, will not be subject to medical and dental trends
after the capped cost is attained. A 1% change in these annual trend rates would
not have a significant impact on the accumulated post-retirement benefit
obligation at June 30, 2000, or 2000 benefit expense. Claims are paid as
incurred.

62
64
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INCOME TAXES

The provision for (benefit from) income taxes consisted of the following:

2000 1999 1998
----- ---- -----
(IN MILLIONS)

Current Tax Expense (Benefit)
Federal........................................... $ 367 $ 20 $(157)
State............................................. 50 1 --
Foreign........................................... 3 15 16
----- ---- -----
420 36 (141)
----- ---- -----
Deferred Tax Expense (Benefit)
Federal........................................... (121) 573 (19)
State............................................. -- 86 (20)
Foreign........................................... -- 2 6
----- ---- -----
(121) 661 (33)
----- ---- -----
Provision for (Benefit from) Income Taxes........... $ 299 $697 $(174)
===== ==== =====

The income tax benefit related to the exercise of stock options reduces
taxes currently payable and is credited to additional paid-in capital. Such
amounts approximated $57 million, $26 million, and $12 million for fiscal 2000,
1999, and 1998, respectively.

Income (loss) before income taxes consisted of the following:

2000 1999 1998
---- ------ -----
(IN MILLIONS)

Domestic........................................... $526 $1,547 $(778)
Foreign............................................ 83 326 74
---- ------ -----
$609 $1,873 $(704)
==== ====== =====

63
65
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities were as follows:

JUNE 30, JULY 2,
2000 1999
-------- -------
(IN MILLIONS)

DEFERRED TAX ASSETS
Accrued warranty......................................... $ 97 $ 114
Inventory valuation accounts............................. 35 31
Receivable reserves...................................... 26 28
Accrued compensation and benefits........................ 45 31
Depreciation............................................. 20 32
Restructuring reserves................................... 27 17
Other reserves and accruals.............................. 28 42
Acquisition related items................................ 32 38
Net operating loss and tax credit carry-forwards......... 5 69
Other assets............................................. 13 3
------- -------
Total Deferred Tax Assets...................... 328 405
Valuation allowance...................................... (38) (56)
------- -------
Net Deferred Tax Assets........................ 290 349
------- -------
DEFERRED TAX LIABILITIES
Unremitted income of foreign subsidiaries................ (543) (558)
Acquisition related items................................ (170) (14)
Deferred gain on VERITAS................................. (378) (615)
Other liabilities........................................ -- (13)
------- -------
Total Deferred Tax Liabilities................. (1,091) (1,200)
------- -------
Net Deferred Tax Liabilities................... $ (801) $ (851)
======= =======
AS REPORTED ON THE BALANCE SHEET
Deferred Income Tax Assets............................... $ 219 $ 252
Deferred Income Tax Liabilities.......................... (1,020) (1,103)
------- -------
Net Deferred Tax Liability..................... $ (801) $ (851)
======= =======

The valuation allowance has been provided for deferred tax assets related
to certain foreign net operating loss carry-forwards, foreign tax credit
carry-forwards and future tax benefits associated with the acquisition of
certain software companies. The valuation allowance decreased by $18 million and
$26 million in 2000 and 1999, respectively, and increased by $25 million in
1998.

The Company, as of June 30, 2000, has foreign net operating loss
carry-forwards of approximately $5 million.

64
66
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The differences between the provision for (benefit from) income taxes at
the U.S. statutory rate and the effective rate are summarized as follows:

2000 1999 1998
---- ---- -----
(IN MILLIONS)

Provision (benefit) at U.S. statutory rate........... $213 $656 $(246)
State income tax provision (benefit), net of federal
income tax benefit................................. 33 72 (15)
Benefit from net earnings of foreign subsidiaries
considered to be permanently invested in non-U.S.
operations......................................... -- (68) --
Write-off of in-process research and development..... 37 21 75
Compensation expense SSI exchange offer.............. 62 -- --
VERITAS.............................................. (6) (10) --
Valuation reserve.................................... (18) 17 25
Use of R&D credit carryforwards...................... (17) -- --
Other individually immaterial items.................. (5) 9 (13)
---- ---- -----
Provision for (benefit from) income taxes............ $299 $697 $(174)
==== ==== =====

A substantial portion of the Company's Asia Pacific manufacturing
operations in Singapore, Thailand, Malaysia and China operate under various tax
holidays which expire in whole or in part during fiscal years 2001 through 2010.
Certain tax holidays may be extended if specific conditions are met. The tax
holidays had no impact on net income in 2000. The net impact of these tax
holidays was to increase net income by approximately $35 million ($.14 per
share, diluted) in 1999. The tax holidays had no impact on the net loss in 1998.
Cumulative undistributed earnings of the Company's Asia Pacific subsidiaries for
which no income taxes have been provided aggregated approximately $1.634 billion
at June 30, 2000. These earnings are considered to be permanently invested in
non-U.S. operations. Additional federal and state taxes of approximately $585
million would have to be provided if these earnings were repatriated to the U.S.

Certain of the Company's foreign and state tax returns for various fiscal
years are under examination by taxing authorities. The Company believes that
adequate amounts of tax have been provided for any final assessments which may
result from these examinations.

5. BUSINESS COMBINATIONS

The Company has a history of business combinations and during the three
most recent fiscal years these included the acquisition of XIOtech Corporation
in fiscal 2000, the contribution of NSMG to VERITAS in fiscal 1999, and the
acquisition of Quinta Corporation and Eastman Storage Software Management Group
in fiscal 1998. In connection with certain business combinations, the Company
has recognized significant write-offs of in-process research and development.
The completion of the underlying in-process projects acquired within each
business combination was the most significant and uncertain assumption utilized
in the valuation of the in-process research and development. Such uncertainties
could give rise to unforeseen budget over runs and/or revenue shortfalls in the
event that the Company is unable to successfully complete a certain R&D project.
The Company is primarily responsible for estimating the fair value of the
purchased R&D in all business combinations accounted for under the purchase
method. The nature of research and development

65
67
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

projects acquired, the estimated time and costs to complete the projects and
significant risks associated with the projects are described below.

Valuation Methodology

In accordance with the provisions of APB Opinion 16, all identifiable
assets, including identifiable intangible assets, were assigned a portion of the
cost of the acquired enterprise (purchase price) on the basis of their
respective fair values. This included the portion of the purchase price properly
attributed to incomplete research and development projects expensed according to
the requirements of Interpretation 4 of SFAS No. 2.

Valuation of acquired intangible assets. Intangible assets were identified
through (i) analysis of the acquisition agreement, (ii) consideration of the
Company's intentions for future use of the acquired assets, and (iii) analysis
of data available concerning XIOtech's, Quinta's and Eastman's (collectively
referred to as the "Targets") products, technologies, markets, historical
financial performance, estimates of future performance and the assumptions
underlying those estimates. The economic and competitive environment in which
the Company and the Targets operate was also considered in the valuation
analysis.

To determine the value of in-process research and development, the Company
considered, among other factors, the state of development of each project, the
time and cost needed to complete each project, expected income, associated risks
which included the inherent difficulties and uncertainties in completing each
project and thereby achieving technological feasibility and risks related to the
viability of and potential changes to future target markets. This analysis
resulted in amounts assigned to in-process research and development for projects
that had not yet reached technological feasibility and which did not have
alternative future uses. The Income Approach, which includes analysis of
markets, cash flows, and risks associated with achieving such cash flows, was
the primary technique utilized in valuing each in-process research and
development project. The underlying in-process projects acquired were the most
significant and uncertain assumptions utilized in the valuation analysis of
in-process research and development projects.

To determine the value of developed technologies, the expected future cash
flows of existing product technologies were evaluated, taking into account risks
related to the characteristics and applications of each product, existing and
future markets and assessments of the life cycle stage of each product. Based on
this analysis, the existing technologies that had reached technological
feasibility were capitalized.

To determine the value of the distribution networks and customer bases,
Seagate, considered, among other factors, the size of the current and potential
future customer bases, the quality of existing relationships with customers, the
historical costs to develop customer relationships, the expected income and
associated risks. Associated risks included the inherent difficulties and
uncertainties in transitioning the business relationships from the acquired
entity to Seagate and risks related to the viability of and potential changes to
future target markets.

To determine the value of trademarks, the Company considered, among other
factors, the assumption that in lieu of ownership of a trademark, Seagate would
be willing to pay a royalty in order to exploit the related benefits of such
trademark.

To determine the value of assembled workforces, the Company considered,
among other factors, the costs to replace existing employees including search
costs, interview costs and training costs.

Goodwill is determined based on the residual difference between the amount
paid and the values assigned to identified tangible and intangible assets. If
the values assigned to identified tangible and intangible assets exceed the
amounts paid, including the effect of deferred taxes, the values assigned to
long-term assets were reduced proportionately.

The underlying in-process projects acquired within each acquisition was the
most significant and uncertain assumption utilized in the valuation analysis.
Such uncertainties could give rise to unforeseen budget

66
68
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

over runs and/or revenue shortfalls in the event that the Company is unable to
successfully complete a certain research and development project. Seagate
management recognizes that the Company is primarily responsible for estimating
the fair value of the purchased research and development in all acquisitions
accounted for under the purchase method.

The following details specific information about significant acquisitions
including related assumptions used in the purchase price allocation.

ACQUISITION OF XIOTECH CORPORATION

In January 2000, the Company acquired XIOtech, for 8,031,804 shares of
Seagate common stock, issued from treasury shares, and options, with a combined
fair value of $359 million. XIOtech designs, manufactures and markets a
centralized data storage system. This system is based on an exclusive set of
sophisticated data management and data movement tools. It offers storage
virtualization, multi-node server clustering, and zero backup window solutions.
The main component of the system is MAGNITUDE, a fully implemented storage area
network ("SAN"). MAGNITUDE is sold in a cabinet containing software-based
architecture that allows the incorporation of all of the components of a SAN in
one centralized configuration.

XIOtech also designs, develops and produces software, namely the REDI suite
of software, which runs MAGNITUDE's software based architecture. The REDI
software suite is application specific and gives customers the capability of
better managing their data. XIOtech is currently developing the next generation
technologies for both products, named Thunderbolt and REDI 7.0, respectively.

Assumptions used in estimating the fair value of intangible assets:

Revenue

Future revenue estimates were generated for the following technologies: (i)
MAGNITUDE, (ii) REDI, (iii) Thunderbolt, the next generation development of
MAGNITUDE and (iv) REDI 7.0, the next generation development of REDI. Aggregate
revenue was estimated to be approximately $47.6 million in fiscal 2000 and to
increase to approximately $230 million for fiscal year 2001 when the in-process
projects were expected to be complete and shipping. Revenue was estimated to
increase to approximately $650 million and $1,060 million in fiscal years 2002
and 2003, respectively. Estimated revenues decreased 29% in fiscal 2004 to $750
million. The estimated revenue growth is consistent with the introduction of new
technology. Revenue estimates were based on (i) aggregate revenue growth rates
for the business as a whole, (ii) individual product revenue, (iii) growth rates
for the storage management software market, (iv) the aggregate size of the
storage management software market, (v) anticipated product development and
introduction schedules, (vi) product sales cycles, and (vii) the estimated life
of a product's underlying technology.

Operating expenses

Estimated operating expenses used in the valuation analysis of XIOtech
included (i) cost of goods sold, (ii) general and administrative expense, (iii)
selling and marketing expense, and (iv) research and development expense. In
developing future expense estimates, an evaluation of Seagate and XIOtech's
overall business model, specific product results, including both historical and
expected direct expense levels (as appropriate), and an assessment of general
industry metrics was conducted.

67
69
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Cost of goods sold. Estimated cost of goods sold, expressed as a percentage
of revenue, for the developed and in-process technologies ranged from
approximately 46% to 55%.

General and administrative ("G&A") expense. Estimated G&A expense,
expressed as a percentage of revenue, for the developed and in-process
technologies ranged from 5% in fiscal 2000 to less than 1% in fiscal 2004
declining as production levels and related revenue increased and thus
efficiencies in production are assumed to be attained.

Selling and marketing ("S&M") expense. Estimated S&M expense, expressed as
a percentage of revenue, for the developed and in-process technologies ranged
from 20% in fiscal 2001 to a sustainable 15% in fiscal 2002 and beyond. For
fiscal 2000, however, when the Thunderbolt and REDI 7.0 technology was estimated
to become commercially available, S&M expense was estimated to be 45% due to the
relatively low revenue expectation in the initial commercialization period.

Research and development ("R&D") expense. Estimated R&D expense consists of
the costs associated with activities undertaken to correct errors or keep
products updated with current information (also referred to as "maintenance"
R&D). Maintenance R&D includes all activities undertaken after a product is
available for general release to customers to correct errors or keep the product
updated with current information. These activities include routine changes and
additions. The maintenance R&D expense was estimated to be 2% of revenue for the
developed and in-process technologies in fiscal 2000 and 3% throughout the
remainder of the estimation period.

In addition, as of the date of the acquisition, Seagate's management and
XIOtech's management anticipated the costs to complete the in-process
technologies at approximately $0.95 million.

Effective tax rate

The effective tax rate utilized in the analysis of the in-process
technologies was 40%, which reflects the Company's combined federal and state
statutory income tax rates, exclusive of non-recurring charges at the time of
the acquisition and estimated for future years.

Discount rate

The discount rates selected for XIOtech's developed and in-process
technologies was 16% and 23%, respectively. In the selection of the appropriate
discount rates, consideration was given to the Weighted Average Cost of Capital
("WACC") of approximately 16% at the date of acquisition. The discount rate
utilized for the in-process technology was determined to be higher than
Seagate's WACC due to the fact that the technology had not yet reached
technological feasibility as of the date of valuation. In utilizing a discount
rate greater than the Company's WACC, management has reflected the risk premium
associated with achieving the forecasted cash flows associated with these
projects.

As a result of this acquisition, the Company incurred a one-time write-off
of in-process research and development of approximately $105 million. This
acquisition was accounted for as a purchase and, accordingly, the results of
operations of Quinta have been included in the Company's consolidated financial
statements from the date of acquisition.

68
70
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following is a summary of the purchase price allocation (in millions):

Tangible assets less liabilities assumed.................. $ 12
Developed technology...................................... 37
Tradenames................................................ 5
Assembled workforce....................................... 2
Customer list............................................. 2
In-process research and development....................... 105
Goodwill.................................................. 214
Deferred tax liability.................................... (18)
----
$359
====

ACQUISITION OF QUINTA CORPORATION

In April and June 1997, the Company invested an aggregate of $20 million to
acquire approximately ten percent (10%) of the outstanding stock of Quinta
Corporation ("Quinta"), a developer of ultra-high capacity disc drive
technologies, including a new optically-assisted Winchester ("OAW") technology.
In August 1997, the Company completed the acquisition of Quinta. Pursuant to the
purchase agreement with Quinta, the shareholders of Quinta, other than Seagate,
received cash payments aggregating $230 million upon the closing of the
acquisition and were eligible to receive additional cash payments aggregating
$96 million upon the achievement of certain product development and early
production milestones. Of the $96 million, $19 million was charged to operations
in fiscal 1998. Of the $19 million charged to operations, $5 million was paid in
fiscal 1998. In July 1998, the Company and Quinta amended the purchase agreement
to eliminate the product development and early production milestones and provide
that the former shareholders of Quinta will be eligible to receive the remaining
$77 million and the $14 million that had been accrued but unpaid in fiscal 1998.
In the first quarter of fiscal 1999, the Company recorded a charge to operations
for the remaining $77 million.

Quinta's research and development project revolves around an OAW
technology. OAW refers to Quinta's newly designed recording technology that,
upon completion, would be implemented into Winchester hard disk drives. OAW
combines traditional magnetic recording technology with Winchester hard disc
drives and optical recording capabilities; optical recording technology enables
greater data storage capacity. By integrating advanced optical features along
with a highly fine and sophisticated tracking and delivery system within the
head design, OAW would multiply the real density of disc drives.

Assumptions used in estimating the fair value of intangible assets:

Revenue

Future revenue estimates were generated for the following product that the
OAW technology would be utilized in: (i) fixed drives, (ii) removable drive,
(iii) fixed/removable drives, and (iv) cartridges. No revenue was expected
through fiscal 1998 since the underlying technology was anticipated not to be
technologically feasible until fiscal 1999. Revenue was estimated to be
approximately $26.6 million in fiscal 1999 and to increase to approximately $212
million for fiscal year 2000 when the in-process project was expected to be

69
71
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

complete and shipping. Revenue growth was expected to decline to a sustainable
20% growth by fiscal 2005. The estimated revenue growth is consistent with the
introduction of new technology. Revenue estimates were based on (i) aggregate
revenue growth rates for the business as a whole, (ii) individual product
revenue, (iii) growth rates for the disc drive market, (iv) the aggregate size
of the disc drive market, (v) anticipated product development and introduction
schedules, (vi) product sales cycles, and (vii) the estimated life of a
product's underlying technology. Quinta's development cycle, in total, was
expected to take approximately 18 to 24 months.

Operating expenses

Estimated operating expenses used in the valuation analysis of Quinta
included (i) cost of goods sold, (ii) general and administrative expense, (iii)
selling and marketing expense, and (iv) research and development expense. In
developing future expense estimates, an evaluation of Seagate's overall business
model, specific product results, including both historical and expected direct
expense levels (as appropriate), and an assessment of general industry metrics
was conducted. Due to Quinta's limited operating history, an analysis of
Quinta's historical performance was not meaningful.

Cost of goods sold. Estimated cost of goods sold, expressed as a percentage
of revenue, for the in-process technologies ranged from approximately 65% to
80%.

General and administrative ("G&A") expense. Estimated G&A expense,
expressed as a percentage of revenue, for the in-process technologies ranged
from 2.6% in fiscal 2000 to a sustainable 3.5% in fiscal 2001 and beyond. For
fiscal 1999, however, when the OAW technology would become commercially
available, G&A expense was estimated to be 6.4% due to the relatively low
revenue expectation in the initial commercialization period.

Selling and marketing ("S&M") expense. Estimated S&M expense, expressed as
a percentage of revenue, for the in-process technologies ranged from 3.3% in
fiscal 2000 to a sustainable 3.5% in fiscal 2001 and beyond. For fiscal 1999,
however, when the OAW technology would become commercially available, S&M
expense was estimated to be 8.7% due to the relatively low revenue expectation
in the initial commercialization period.

Research and development ("R&D") expense. Estimated R&D expense consists of
the costs associated with activities undertaken to correct errors or keep
products updated with current information (also referred to as "maintenance"
R&D). Maintenance R&D includes all activities undertaken after a product is
available for general release to customers to correct errors or keep the product
updated with current information. These activities include routine changes and
additions. The maintenance R&D expense was estimated to be 0.5% of revenue for
the in-process technologies throughout the estimation period.

Effective tax rate

The effective tax rate utilized in the analysis of the in-process
technologies was 38%, which reflects the Company's combined federal and state
statutory income tax rates, exclusive of non-recurring charges at the time of
the acquisition and estimated for future years.

Discount rate

The discount rates selected for Quinta's in-process technology was 25%. In
the selection of the appropriate discount rates, consideration was given to (i)
the WACC of approximately 15% at the date of acquisition and (ii) the Weighted
Average Return on Assets of approximately 25%. The discount rate utilized for
the in-process technology was determined to be higher than Seagate's WACC due to
the fact that the technology had not yet reached technological feasibility as of
the date of valuation. In utilizing a discount rate

70
72
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

greater than the Company's WACC, management has reflected the risk premium
associated with achieving the forecasted cash flows associated with these
projects.

As a result of this acquisition, the Company incurred a one-time write-off
of in-process research and development of approximately $214 million. Intangible
assets arising from the acquisition of Quinta are being amortized on a
straight-line basis over two years. This acquisition was accounted for as a
purchase and, accordingly, the results of operations of Quinta have been
included in the Company's consolidated financial statements from the date of
acquisition.

The following is a summary of the purchase price allocation (in millions):

Tangible assets less liabilities assumed.................... $ 34
In-process research and development......................... 214
Assembled workforce......................................... 2
----
$250
====

CONTRIBUTION OF NSMG TO VERITAS AND THE PURCHASE OF OUTSTANDING SHARES OF
SEAGATE SOFTWARE BY SEAGATE

Contribution of NSMG to VERITAS

On May 28, 1999, Seagate and Seagate Software closed and consummated an
Agreement and Plan of Reorganization dated as of October 5, 1998 with VERITAS
and VERITAS Operating Corporation. The transaction provided for the contribution
by Seagate, Seagate Software, and certain of their respective subsidiaries to
VERITAS of (a) the outstanding stock of NSMG and certain other subsidiaries of
Seagate Software and (b) those assets used primarily in the NSMG business of
Seagate Software, in consideration for the issuance of shares of common stock of
VERITAS to Seagate Software and the offer by VERITAS to grant options to
purchase common stock of VERITAS to certain of Seagate Software's employees who
become employees of VERITAS or its subsidiaries. As part of the transaction,
VERITAS assumed certain liabilities of the NSMG business. The transaction was
structured to qualify as a tax-free exchange.

Seagate accounted for the contribution of NSMG to VERITAS as a non-monetary
transaction using the fair value of the assets and liabilities exchanged.
Immediately after the transaction, Seagate Software owned approximately 41.63%
(155,583,468 shares) of the outstanding shares of VERITAS. Because Seagate still
owns a portion of the NSMG business through its ownership of VERITAS, Seagate
did not recognize 100% of the gain on the exchange. The gain recorded is equal
to the difference between 58.37% of the fair value of the VERITAS common stock
received and 58.37% of Seagate's basis in the NSMG assets and liabilities
exchanged. Seagate is accounting for its ongoing investment in VERITAS using the
equity method. The difference between the recorded amount of Seagate's
investment in VERITAS and the amount of its underlying equity in the net assets
of VERITAS was allocated based upon the fair value of the underlying tangible
and intangible assets and liabilities of VERITAS. The intangible assets included
amounts allocated to in-process research and development and resulted in a $85
million write-off in 1999 included in activity related

71
73
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

to equity interest in VERITAS in the accompanying statement of operations.
Intangible assets including goodwill are being amortized over four years.

Seagate exchange offer

72
74
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Computation of pro rata gain on contribution of NSMG to VERITAS

(IN MILLIONS)

Fair value of shares received............................... $3,151
Times: pro rata percentage accounted for at fair value...... 58.37%
------
Adjusted fair value of securities received.................. $1,839
------
Book value of NSMG.......................................... $ 57
Times: pro rate percentage accounted for at fair value...... 58.37%
------
Book value exchanged........................................ 33
------
Pro rata gain............................................... $1,806
======

Computation of original investment in VERITAS

(IN MILLIONS)

Book value of NSMG.......................................... $ 57
Times: pro rata percentage accounted for at fair value...... 41.63%
------
Portion of investment in VERITAS with no step up in basis... 24
Plus: Adjusted fair value of securities received............ 1,839
------
Investment in VERITAS....................................... $1,863
======

Allocation of original investment in VERITAS

(IN MILLIONS)

Allocation of investment to VERITAS assets and liabilities:
Net tangible assets....................................... $ 114
Intangible assets:
Distribution channel................................... 9
Developed technology................................... 46
Trademark and workforce................................ 16
In-process research and development.................... 40
Allocation of investment to NSMG assets and liabilities:
Net tangible assets....................................... 24
Intangible assets:
Distribution channel................................... 66
Developed technology................................... 92
Trademark and workforce................................ 14
In-process research and development.................... 45
Goodwill.................................................. 1,397
------
Total original investment in VERITAS.............. $1,863
======

73
75
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Value of minority interest acquired in October 1999

(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)

Number of Seagate Software shares and options exchanged
for Seagate stock held by former employees, consultants
and shares held more than six months by employees....... 1,010,010
Times: Exchange ratio into Seagate stock.................. 1.699
----------
Number of Seagate shares issued........................... 1,716,007
Value per share of Seagate common stock as of June 9,
1999.................................................... $ 30.75
----------
Total value Seagate shares issued......................... $ 53
Less: Proceeds from assumed exercise of Seagate Software
stock options........................................... (1)
----------
Total value of minority interest................ $ 52
==========

Allocation of minority interest purchase price to the intangible assets of
Seagate Software

(IN MILLIONS)

Distribution channel........................................ $ 2
Developed technology........................................ 4
Trademark and workforce..................................... 1
In-process research and development......................... 2
Goodwill.................................................... 45
---
Subtotal.................................................. 54
Deferred tax liability...................................... (2)
---
Total............................................. $52
===

Compensation relating to stock purchased from employees

(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)

Seagate Software options exercised and exchanged for
Seagate stock........................................... 2,240,470
Plus: Seagate Software stock held for less than 6 months
and exchanged for Seagate stock......................... 16,775
----------
Total Seagate Software shares exchanged................... 2,257,245
Times: Exchange ratio into Seagate Technology stock....... 1.699
----------
Number of Seagate shares issued........................... 3,835,059
----------
Value per share of Seagate common stock on June 9, 1999... $ 30.75
Less: Average price paid per Seagate Technology share..... $ (4.01)
----------
Average compensation expense per Seagate share issued..... $ 26.74
----------
Total compensation expense...................... $ 103
==========

Reconciliation of amounts included in Gain on contribution of NSMG to VERITAS,
net

(IN MILLIONS)

Pro rata gain............................................... $1,806
Less:
Compensation expense...................................... 124
Transaction costs......................................... 12
------
Gain on contribution of NSMG to VERITAS, net................ $1,670
======

74
76
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Activity related to equity interest in VERITAS

2000 1999
----- -----
(IN MILLIONS)

Write-off of in-process research and development............ $ -- $ 85
Equity interest in VERITAS' net income/loss................. (30) --
Amortization of intangible assets including goodwill........ 356 34
---- ----
Activity related to equity interest in VERITAS.............. $326 $119
==== ====

All activity related to the equity interest in VERITAS in 1999 was recorded
in the fourth quarter of that year.

ALLOCATION OF TANGIBLE AND INTANGIBLE ASSETS AND LIABILITIES RELATED TO NSMG AND
VERITAS

Overview

NSMG offers network and storage management software solutions, which focus
on the information availability component of Enterprise Information Management
("EIM") by enabling IT professionals to manage distributed network resources and
to secure and protect enterprise data. NSMG's products include features such as
system backup, disaster recovery, migration, replication, automated client
protection, storage resource management, scheduling, event correlation and
desktop management.

VERITAS develops, markets and supports advanced storage management and high
availability products for open system environments. VERITAS' products provide
performance improvement and reliability enhancement features that are critical
for many commercial applications. Some of the key features of storage management
products include protection against data loss and file corruption, rapid
recovery after disk or system failure, the ability to process large files
efficiently and the ability to manage the storage systems without interrupting
users. The high availability products provide an automated failover between
computer systems organized in clusters sharing disk resources.

In accordance with the provisions of Accounting Principles Board ("APB")
Opinions No. 16 and 17, all identifiable assets acquired were analyzed to
determine their Fair Market Values. As the basis for identifying the in-process
research and development ("R&D"), the development projects were evaluated in the
context of Interpretation 4 of Financial Accounting Standards Board Statement
No. 2. In accordance with these provisions, the developmental projects were
examined to determine if there were any alternative future uses. Such evaluation
consisted of a specific review of the efforts, including the overall objectives
of the project, progress toward the objectives, and the uniqueness of the
developments of these objectives. Further, each in-process R&D project was
reviewed to determine if technological feasibility had been achieved.

Description of methodology

Tangible net assets of VERITAS principally include cash and investments,
accounts receivable, fixed assets and other current assets. Liabilities
principally include accounts payable, accrued compensation, and other accrued
liabilities.

To estimate the value of the developed technology, the expected future cash
flows attributable to all existing technology was discounted, taking into
account risks related to the characteristics and applications of the technology,
existing and future markets, and assessments of the life cycle stage of the
technology. The developed technology is being amortized on the straight-line
basis over its estimated useful life (four years) which is expected to exceed
the ratio of current revenues to the total of current and anticipated revenues.

The value of the distribution networks and original equipment manufacturer
agreements was estimated by considering, among other factors, the size of the
current and potential future customer bases, the quality of

75
77
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

existing relationships with customers, the historical costs to develop customer
relationships, the expected income and associated risks. Associated risks
included the inherent difficulties and uncertainties in transitioning business
relationships and risks related to the viability of and potential changes to
future target markets.

The value of trademarks was estimated by considering, among other factors,
the assumption that in lieu of ownership of a trademark, a company would be
willing to pay a royalty in order to exploit the related benefits of such
trademark.

The value of the assembled workforce was estimated as the costs to replace
the existing employees, including recruiting, hiring, and training costs for
each category of employee.

Goodwill is calculated as the residual difference between the estimated
amount paid and the values assigned to identified tangible and intangible assets
and liabilities.

Valuation Assumptions

Revenue

Revenue estimates were based on (i) aggregate revenue growth rates for the
businesses as a whole, (ii) growth rates for the storage management software
market, (iii) the aggregate size of the storage management software market, (iv)
anticipated product development and introduction schedules, (v) product sales
cycles, and (vi) the estimated life of a product's underlying technology.

Future revenue estimates were generated based on the worldwide storage
management software market and the backup, restore and archive market. The
overall storage management software market is forecasted to increase at a
compound annual growth rate of 14.2%, from a 1997 value of $2.543 billion to a
2002 value of $4.941 billion. The backup, restore and archive software sector of
storage management software, in which NSMG competes, is expected to grow much
faster than other sectors.

NSMG is positioned for continued growth in its backup, restore, and archive
software products. The backup, restore, and archive segment is the fastest
growing in the storage management software market. Moreover, NSMG competes, and
is one of the leaders in providing this type of software for the Windows NT
operating environment. Revenue for Windows 95 and Windows NT is projected to
grow at a 43.3% compound annual growth rate (1997 through 2002), higher than for
any other operating environment.

Revenue for NSMG was forecasted by product line for the years 1999 through
2001. Revenue was expected to be $350 million for the 1999 calendar year.
Thereafter, NSMG is expected to grow slightly greater

76
78
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

than the 43.3% industry average through 2003. The revenue by product was
allocated between existing, in-process, and future technology; indicating a
four-year life cycle (revenue contribution from technology), which is consistent
with NSMG's past experience with technology life cycles.

VERITAS is an open systems supplier. The market for open systems suppliers
grew 101.2% between 1996 and 1997. In addition, VERITAS looks to grow and
increase its market share through positioning itself as a provider of software
services in the Windows NT operating environment. As above, revenue for Windows
is projected to grow at a 43.3% compound annual growth rate (1997 through 2002).

Revenue for VERITAS was forecasted by product line for the years 1999
through 2001. Revenue was expected to be $270 million for the 1999 calendar
year. Thereafter, VERITAS is expected to grow at 67.9% and 58.4% for years 2000
and 2001, respectively, a rate greater than the 43.3% industry average. For
years 2002 through 2005, revenues are expected to level off at a 40% growth
rate. The revenue by product was allocated between existing, in-process, and
future technology indicating a four-year life cycle (revenue contribution from
technology) for NT based products and a three-year life cycle for Unix based
products which is consistent with VERITAS' past experience with technology life
cycles.

Operating expenses

Estimated operating expenses used in the valuation analysis of NSMG and
VERITAS included (i) cost of goods sold, (ii) general and administrative
expense, (iii) sales and marketing expense, and (iv) research and development
expense. In developing future expense estimates, an evaluation of both NSMG and
VERITAS's overall business models, specific product results, including both
historical and expected direct expense levels (as appropriate), and an
assessment of general industry metrics was conducted.

Cost of goods sold. Cost of goods sold, for the developed and in-process
technologies was estimated to be approximately 8.6% of revenues from 2000 to
2006 for NSMG. Cost of goods sold, for the developed and in-process technologies
was estimated to be approximately 14.7% of revenues from 2000 to 2005 for
VERITAS.

General and administrative ("G&A") expense. G&A expense, expressed as a
percentage of revenue, for the developed and in-process technologies was
estimated to be 9.2% in 1999 and expected to be reduced to 6.7% by 2002 for
NSMG. G&A expense for VERITAS, expressed as a percentage of revenue, for the
developed and in-process technologies was held constant at 4.4% of revenues for
the forecast period of 2000 to 2005.

Selling and marketing ("S&M") expense. S&M expense, expressed as a
percentage of revenue, for the developed and in-process technologies was
estimated to be 37.4% for years 2000 to 2006 related to NSMG. S&M expense for
VERITAS, expressed as a percentage of revenue, for the developed and in-process
technologies was estimated to be 34.7% for years 2000 to 2005.

Research and development ("R&D") expense. R&D expense consists of the costs
associated with activities undertaken to correct errors or keep products updated
with current information (also referred to as "maintenance" R&D). Maintenance
R&D includes all activities undertaken after a product is available for general
release to customers to correct errors or keep the product updated with current
information. These activities include routine changes and additions. The
maintenance R&D expense was estimated to be 17.4% of revenue for the developed
and in-process technologies for the years 2000 to 2006 for NSMG. R&D expense for
VERITAS was estimated as 18.2% of revenue in 1999 and was reduced to 16% by
2002, continuing at that rate until 2005.

In addition, as of the date of the contribution of NSMG to VERITAS, Seagate
Software's management and VERITAS' management anticipated the costs to complete
the in-process technologies at approximately $5.8 million and $44.2 million,
respectively.

77
79
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Effective tax rate

The effective tax rate utilized in the analysis of developed and in-process
technologies was 33%, which reflects VERITAS' combined effective federal and
state statutory income tax rates, exclusive of non-recurring charges at the time
of the contribution and estimated for future years.

Discount rate

The discount rates selected for the developed and in-process technologies
were 12% and 17%, respectively. In the selection of the appropriate discount
rates, consideration was given to (i) the Weighted Average Rate of Return
(approximately 14% at the date of acquisition) and (ii) the Weighted Average
Return on Assets (approximately 18%) that investors expect for company's with
similar anticipated growth rates and other characteristics as the NSMG and
VERITAS businesses. The discount rate utilized for the in-process technology was
determined to be higher than the WARR due to the fact that the technology had
not yet reached technological feasibility as of the date of valuation. In
utilizing a discount rate greater than the WARR, management has reflected the
risk premium associated with achieving the forecasted cash flows associated with
these projects. The discount rate was adjusted downward from the WARR for the
developed technologies to reflect less technological and/or market risk
associated with forecasted sales of the existing products.

Allocation of tangible and intangible assets and liabilities related to the
Seagate Software minority interest acquired by Seagate

Seagate Software's investment in VERITAS comprises over 85% of the fair
value of Seagate Software. Accordingly, the assumptions utilized in the
allocation of the purchase price of the minority interest of Seagate Software
acquired by Seagate were materially the same as those used in the allocation of
the tangible and intangible assets and liabilities of NSMG and VERITAS.

Pro forma financial information

The pro forma financial information presented below is presented as if the
contribution of NSMG to VERITAS and the purchase of the Seagate Software
minority interest by Seagate had occurred at the beginning of fiscal 1998. The
pro forma statements of operations for the twelve months ended July 2, 1999 and
July 3, 1998, include the historical results of Seagate less the historic
results of the NSMG business, plus Seagate's equity interest in the pro forma
results of VERITAS, including recurring amortization of related goodwill and
intangibles plus recurring amortization of goodwill and intangibles associated
with the purchase of shares of Seagate Software stock by Seagate. Non-recurring
transactions, such as the gain on the NSMG contribution to VERITAS, compensation
expense relating to the acquisition of stock held less than six months by
employees of Seagate Software, transaction costs and the write-off of in-process
research and development are excluded from the pro forma presentation. The pro
forma financial results are as follows:

FOR THE YEARS ENDED
--------------------------------------
JULY 2, 1999 JULY 3, 1998
----------------- -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA)

Revenue.................................................. $6,600 $ 6,644
Loss before income taxes................................. (110) (1,127)
Net loss................................................. (34) (789)
Net loss per share -- basic and diluted.................. $(0.14) $ (3.27)

As of June 30, 2000, the Company held approximately 32% of the outstanding
common stock of VERITAS. The Company accounts for its investment in VERITAS
under the equity method and records its equity interest in VERITAS' net income
(loss) on a one-quarter lag. The Company's recorded equity in the

78
80
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

net income of VERITAS for the year ended June 30, 2000 was $30 million, and
differs from the Company's proportionate share of VERITAS' reported net loss for
the twelve months ended March 31, 2000. This difference is primarily because the
Company eliminates from VERITAS' net income (loss) the effect of VERITAS'
accounting for the NSMG business contribution, including VERITAS' amortization
expense related to intangible assets. The Company was not required to record its
equity interest in VERITAS' net income (loss) in fiscal 1999 because the NSMG
business contribution occurred late in the fourth quarter.

The Company's activity related to equity interest in VERITAS for the year
ended June 30, 2000 consisted of recorded equity in the net income of VERITAS of
$30 million, as described above, and the Company's amortization expense for
goodwill and other intangible assets relating to the investment in VERITAS
amounting to $356 million. The Company's activity related to equity interest in
VERITAS for the year ended July 2, 1999 consisted of amortization of goodwill
and other intangible assets relating to the investment in VERITAS of $34 million
and in-process research and development of $85 million.

6. SEAGATE SOFTWARE REORGANIZATION

On October 20, 1999, the stockholders of Seagate Software, then a
majority-owned subsidiary of the Company, approved the merger of Seagate
Daylight Merger Corp., a wholly-owned subsidiary of the Company, with and into
Seagate Software. Seagate Software's assets consisted of the assets of IMG and
its investment in the common stock of VERITAS Software Corporation. The merger
was effected on October 20, 1999. As a result of the merger, Seagate Software
became a wholly-owned subsidiary of the Company. In connection with the merger,
Seagate Software's stockholders and optionees received payment in the form of
3.23 shares of the Company's common stock per share of Seagate Software common
stock less any amounts due for the payment of the exercise price for such
options. All outstanding Seagate Software stock options were accelerated
immediately prior to the merger. Seagate issued 9,124,046 shares of its common
stock from treasury shares to optionees and minority stockholders of Seagate
Software.

In connection with the reorganization, Seagate Software also formed IMG, a
wholly-owned subsidiary. Seagate Software transferred the IMG assets into IMG.
This new company, IMG, is now the operating entity for the IMG business. IMG has
established stock option plans. Total shares available for issuance under these
plans are 22,700,000. As of June 30, 2000, IMG had granted 9,501,899 options to
purchase common stock to employees of Seagate Software at an average exercise
price of $4 per share, and 1,050 shares had been exercised.

79
81
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ALLOCATION OF MINORITY INTEREST PURCHASE PRICE TO THE INTANGIBLE ASSETS OF
SEAGATE SOFTWARE

(IN MILLIONS)
-------------

Distribution channel..................................... $ 1
Developed technology..................................... 1
Goodwill................................................. 18
---
Subtotal............................................... 20
Deferred tax liability................................... (1)
---
Total.......................................... $19
===

COMPENSATION RELATING TO STOCK PURCHASED FROM EMPLOYEES

(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
----------------------

Seagate Software options exercised and exchanged
for Seagate stock............................... 3,723,015
Plus: Seagate Software stock held for less than 6
months and exchanged for Seagate stock.......... 17,952
-----------
Total Seagate Software shares exchanged........... 3,740,967
Times: Exchange ratio into Seagate stock.......... 3.23
-----------
Number of Seagate shares issued................... 12,083,323
-----------
Value per share of Seagate common stock on October
20, 1999........................................ $ 29.00
Less: Average price paid per Seagate share........ $ (5.50)
-----------
Average compensation expense per Seagate share
issued.......................................... $ 23.50
-----------
Total compensation expense.............. $ 284
===========

7. RESTRUCTURING

In fiscal 2000, the Company recorded restructuring charges of $218 million.
The $218 million restructuring charge was a result of a restructuring plan
established to align the Company's global workforce and manufacturing capacity
with existing and anticipated future market requirements and necessitated by the
Company's improved productivity and operating efficiencies (the "fiscal 2000
restructuring plan"). These actions included workforce reductions, capacity
reductions including closure of facilities or portions of facilities, write-off
of excess equipment and consolidation of operations in the Company's recording
media operations, disc drive assembly and test facilities, printed circuit board
assembly manufacturing, recording head operations, software operations, customer
service operations, sales and marketing activities, and research and development
activities. The restructuring charges were comprised of $81 million for the
write-off of excess manufacturing, assembly and test equipment formerly utilized
in Singapore, Thailand and Northern California; $90 million for employee
termination costs; $29 million for the write-off of owned facilities located in
Singapore; $11 million in lease termination and holding costs; $5 million in
renovation costs to restore facilities in Singapore and Northern California to
their pre-lease condition; and $2 million in contract cancellations associated
with one of the Singapore facilities. Prior to this period, there was no
indication of permanent impairment of the assets associated with the closure and
consolidation of facilities. In connection with the fiscal 2000 restructuring
plan, the Company plans to reduce its workforce by approximately 23,000
employees primarily in manufacturing. Approximately 18,300 of the 23,000
employees had been terminated as of June 30, 2000. As a result of employee
terminations and the write-off of equipment and facilities in connection with
the restructuring charges recorded during the year ended June 30, 2000 related
to the fiscal 2000 restructuring plan, the Company estimates that after the
completion of these restructuring activities, annual

80
82
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

salary and depreciation expense will be reduced by approximately $151 million
and $88 million, respectively. The Company anticipates that the implementation
of the fiscal 2000 restructuring plan will be substantially complete by December
29, 2000.

In fiscal 2000, the Company reversed $11 million of its restructuring
accruals comprised of $2 million of restructuring reserves recorded in the same
period, $5 million of restructuring reserves recorded in fiscal 1999 and $4
million of restructuring reserves recorded in fiscal 1998. This reversal
included $3 million of valuation reserves classified elsewhere on the balance
sheet and the reversal of amounts included in the restructuring reserve for
facility lease costs. In addition, reclassifications between cost categories
within the restructuring reserve were made as a result of differences between
original estimates and amounts actually incurred or expected to be incurred.

During the third quarter of fiscal 1999, the Company recorded a
restructuring charge of $72 million as a result of steps the Company is taking
to further improve the efficiency of its operations. These actions included
closure of the Company's microchip manufacturing facility in Scotland;
discontinuance of the Company's recording head suspension business located in
Malaysia and Minnesota; consolidation of global customer service operations by
relocating such operations in Singapore, Scotland and Costa Mesa, California to
Reynosa, Mexico; and closure of the Company's recording media substrate facility
in Mexico. The restructuring charges were comprised of $37 million for the
write-off or write-down of excess manufacturing, assembly and test equipment
formerly utilized in Scotland, Malaysia and Minnesota; $16 million for lease
termination and holding costs for facilities located in Scotland and Singapore;
$10 million for employee termination costs; $3 million for the write-off of
goodwill associated with the recording media substrate operation in Mexico; $2
million for the write-down of owned facilities located in Malaysia; $1 million
for the write-down of leasehold improvements in Singapore; $1 million for the
write-off of tooling; $1 million for contract cancellations associated with the
suspension business; and $1 million for repayment of various grants previously
received from the Scottish government. Prior to this period, there was no
indication of permanent impairment of the assets associated with the closure and
consolidation of facilities. Evaluations of the resale market for certain assets
were used to estimate fair value.

As of July 2, 1999, all of the equipment located at the microchip facility
in Scotland had been sold and the lease on this facility had been terminated.

The Company is in the final stages of disposing all of the assets for its
suspension business. The facility that was previously occupied by the suspension
operations is currently being used for other operations.

In connection with the fiscal 1999 restructuring, the Company's planned
workforce reduction had been completed as of March 31, 2000 and the other
restructuring activities were substantially complete as of March 31, 2000.

In fiscal 1999, the Company reversed $12 million of its restructuring
accruals originally recorded in fiscal year 1998 as a result of the Company
abandoning its plan to seek an agreement with an external vendor to supply parts
currently manufactured at a facility in Thailand. This reversal included $10
million of valuation reserves classified elsewhere on the balance sheet and
reversal of amounts included in the restructuring reserve of $1 million for
facility lease costs and $1 million for contract cancellations. In addition,
reclassifications between cost categories within the restructuring reserve were
made as a result of differences between original estimates and amounts actually
incurred or expected to be incurred. This was primarily a result of an increase
in the period of time estimated to obtain a suitable sub-lessee for certain
leased buildings located at the former San Jose, California design facility
offset by lower severance and benefits costs than originally estimated.

In the second and third quarters of fiscal 1998, the Company recorded
restructuring charges aggregating $347 million. The Company had experienced
reductions in revenue from the third quarter of fiscal year 1997 to the fourth
quarter of fiscal year 1997 of 21%, from the fourth quarter of fiscal year 1997
to the first quarter of fiscal year 1998 of 4% and from the first quarter of
fiscal year 1998 to the second quarter of fiscal year 1998

81
83
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of an additional 12%. During the second quarter of fiscal 1998, forecasted
production needs were much lower than the current capacity of the Company and
the Company recognized that the recent oversupply in the marketplace was not a
short-term anomaly. In this period, the Company also decided to discontinue
production of several products, rendering test and manufacturing equipment
unique to those products obsolete. Prior to this period, there was no indication
of permanent impairment of these assets associated with the recent excess
capacity of the Company or the products to be discontinued. These charges
reflect steps the Company is taking to align worldwide operations with current
market conditions by reducing existing capacity in all areas of the Company and
improving the productivity of its operations and the efficiency of its
development efforts by consolidating manufacturing and R&D operations. Actions
include exiting production of mobile products; early discontinuation of several
other products; closing and selling the Clonmel, Ireland drive manufacturing
facility; closing and subleasing the San Jose and Moorpark, California design
center facilities; aborting production expansion projects in Cork, Ireland; and
divesting the Company of the new Philippines manufacturing facility, which was
nearing completion. Included in the restructuring charge are the write-down and
write-off of tangible assets comprised of manufacturing, assembly and test
equipment and tooling formerly utilized in California, Singapore, Thailand,
Ireland and facilities located in California, the Philippines and Thailand
totaling $200 million and intangible assets totaling $2.5 million for goodwill
associated with permanently impaired media manufacturing equipment.

The majority of the tangible assets have been disposed of or sold including
the disposal of the Clonmel, Ireland facility in May 1998 and the sublease of
one of the five buildings at the San Jose, California design center. The Company
is marketing three additional buildings in the San Jose, California design
center for sublease. The fifth building has a remaining lease term so short as
to make a sublease impractical. Equipment formerly utilized at these facilities,
in addition to equipment associated with restructuring actions in Singapore and
Thailand, has been relocated to other sites or scrapped. Of the $137 million in
write-offs and write-downs of equipment, $109 million was scrapped and $28
million is awaiting final disposition. In addition, $10 million of equipment was
transferred at net book value for use in operations at other sites. Subsequent
to the recording of the restructuring reserve, depreciation related to certain
assets that continued in use, was included in operations. At the time these
assets were identified as available for sale no further depreciation was
recorded. The write-off of intangibles and other assets includes capital
equipment deposits and goodwill associated with permanently impaired equipment.
Costs associated with aborting production expansion projects in Cork, Ireland
include primarily architect costs, lease termination costs associated with
equipment leased by contractors, and lease termination costs for temporary
housing used by contractor personnel.

Certain facilities including design centers in California, as well as
manufacturing facilities in Thailand continued in use after restructuring
amounts were recorded. The Moorpark, California product design center remained
in use for six months after the write-down of leasehold improvements and
equipment totaling $9 million. This facility has been subleased for a portion of
the remaining minimum lease term. One Thailand manufacturing facility continues
to be utilized until a satisfactory agreement can be made with an external
vendor to supply parts currently manufactured at this location. At the time the
decision to exit this facility was made, the Company believed that it had
identified a supplier for parts. It was subsequently determined that the
supplier could not meet the Company's quality standards.

As of January 1, 1999, the Company's planned workforce reduction associated
with the fiscal 1998 restructuring had been completed. The implementation of the
1998 restructuring plan was substantially complete as of July 2, 1999.

82
84
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the Company's restructuring activities:

SEVERANCE INTANGIBLES
AND EXCESS & OTHER CONTRACT
BENEFITS FACILITIES EQUIPMENT ASSETS CANCELLATIONS OTHER TOTAL
--------- ---------- --------- ----------- ------------- ----- -----
(IN MILLIONS)

FY1998 restructuring charge..... $ 57 $ 78 $ 137 $ 11 $ 43 $ 21 $ 347
FY1999 restructuring charge..... 10 19 37 4 1 1 72
Cash charges.................... (60) (23) -- -- (38) (12) (133)
Non-cash charges................ -- (59) (174) (15) -- -- (248)
Adjustments and
reclassifications............. (3) 3 -- -- (3) 1 (2)
---- ---- ----- ---- ---- ---- -----
Reserve balances, July 2,
1999.......................... $ 4 $ 18 $ -- $ -- $ 3 $ 11 $ 36
FY2000 restructuring charge..... 90 40 81 -- 2 5 218
Cash charges.................... (69) (11) -- -- -- (2) (82)
Non-cash charges................ -- (29) (81) -- -- -- (110)
Adjustments and
reclassifications............. (2) (8) -- -- -- 2 (8)
---- ---- ----- ---- ---- ---- -----
Reserve balances, June 30,
2000.......................... $ 23 $ 10 $ -- $ -- $ 5 $ 16 $ 54
==== ==== ===== ==== ==== ==== =====

8. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company designs, manufactures and markets products for storage,
retrieval and management of data on computer and data communications systems.
These products include disc drives and disc drive components, tape drives and
software. The Company has three operating segments: disc drives, software and
tape drives, however, only the disc drive and software businesses are reportable
segments under the criteria of SFAS No. 131. The "other" category in the
following revenue and gross profit tables consists of tape drives and
out-of-warranty repair. The CEO evaluates performance and allocates resources
based on revenue and gross profit from operations. Gross profit from operations
is defined as revenue less cost of sales. The Company does not evaluate or
allocate assets or depreciation by operating segment, nor does the CEO evaluate
segments on these criteria. The CEO has been identified as the Chief Operating
Decision Maker as defined by SFAS No. 131.

83
85
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the Company's operations by business
segment:

2000 1999 1998
-------- -------- --------
(IN MILLIONS)

Revenue:
Disc Drives.............................. $ 6,013 $ 6,101 $ 6,152
Software................................. 126 343 293
Other.................................... 309 358 374
-------- -------- --------
Consolidated............................. $ 6,448 $ 6,802 $ 6,819
======== ======== ========
Gross Profit:
Disc Drives.............................. $ 1,061 $ 1,163 $ 667
Software................................. 99 291 242
Other.................................... 94 98 80
-------- -------- --------
Consolidated............................. $ 1,254 $ 1,552 $ 989
======== ======== ========
Total Assets:
Disc Drives.............................. $ 19,900 $ 16,553 $ 16,685
Other.................................... 1,066 586 292
-------- -------- --------
Operating Segments....................... 20,966 17,139 16,977
Investment in VERITAS.................... 1,122 1,745 --
Eliminations............................. (14,921) (11,812) (11,332)
-------- -------- --------
Consolidated............................. $ 7,167 $ 7,072 $ 5,645
======== ======== ========

In fiscal 2000, 1999 and 1998, Compaq Computer Corporation accounted for
more than 10% of consolidated revenue for a total of $1.100 billion, $1.144
billion, and $873 million, respectively. Sales to Compaq Computer Corporation
were from the Company's disc drive segment.

Enterprise-wide information is provided in accordance with SFAS No. 131.
Long-lived assets consist of property, equipment and leasehold improvements,
capital leases, equity investments, goodwill and other intangibles, and other
non-current assets as recorded by the Company's operations in each area.

84
86
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the Company's operations by geographic area:

2000 1999 1998
------ ------ ------
(IN MILLIONS)

Revenue from external customers:(1)
United States.................................. $2,917 $3,440 $3,641
The Netherlands................................ 1,312 1,361 1,447
Singapore...................................... 1,378 1,194 1,119
Other.......................................... 841 807 612
------ ------ ------
Consolidated................................... $6,448 $6,802 $6,819
====== ====== ======
Long-lived Assets:
United States.................................. $1,521 $ 826 $ 771
Singapore...................................... 392 546 607
Investment in VERITAS.......................... 1,122 1,745 --
Other.......................................... 623 643 652
------ ------ ------
Consolidated................................... $3,658 $3,760 $2,030
====== ====== ======

- ---------------
(1) Revenue is attributed to countries based on the shipping location.

9. ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of accumulated other comprehensive income (loss), net of
related tax, at June 30, 2000 and July 2, 1999 were as follows:

JUNE 30, JULY 2,
2000 1999
-------- -------
(IN MILLIONS)

Unrealized gain (loss) on securities....................... $88 $(5)
Foreign currency translation adjustments................... (2) (2)
--- ---
Accumulated other comprehensive income (loss).............. $86 $(7)
=== ===

10. PENDING GOING PRIVATE TRANSACTION AND MERGER

On March 29, 2000, Seagate, Seagate Software Holdings, Inc. ("Seagate
Software"), a subsidiary of Seagate, and Suez Acquisition Company (Cayman
Limited ("SAC"), an entity affiliated with, among others, Silver Lake Partners
and Texas Pacific Group, entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement"), and Seagate, VERITAS Software Corporation ("VERITAS") and
a wholly owned subsidiary of VERITAS entered into an Agreement and Plan of
Merger and Reorganization (the "Merger Agreement").

85
87
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

All of the transactions contemplated by the SAC transaction and the Merger
are herein referred to as the VERITAS/Silver Lake transaction. The
VERITAS/Silver Lake transaction is expected to close in the second quarter of
fiscal 2001, subject to the approval of the VERITAS stockholders and Seagate
stockholders, funding of the debt commitments and clearance by the United States
Securities and Exchange Commission, as well as other customary closing
conditions. Seagate expects that while the VERITAS/Silver Lake transaction is
pending, the value of Seagate common stock will depend primarily on the value of
VERITAS common stock.

11. COMMITMENTS

Leases -- The Company leases certain property, facilities and equipment
under non-cancelable lease agreements. Land and facility leases expire at
various dates through 2015 and contain various provisions for rental adjustments
including, in certain cases, a provision based on increases in the Consumer
Price Index. All of the leases require the Company to pay property taxes,
insurance and normal maintenance costs.

Future minimum lease payments for operating leases with initial or
remaining terms of one year or more were as follows at June 30, 2000:

OPERATING
LEASES
-------------
(IN MILLIONS)

2001..................................................... $ 44
2002..................................................... 36
2003..................................................... 29
2004..................................................... 25
2005..................................................... 19
After 2005............................................... 131
----
$284
====

86
88
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Total rent expense for all land, facility and equipment operating leases
was approximately $44 million, $56 million, and $58 million for 2000, 1999 and
1998, respectively.

Capital Expenditures -- The Company's commitments for construction of
manufacturing facilities and equipment approximated $52 million at June 30,
2000.

Joint Venture -- In July 2000, the Company and Thomson Multimedia formed an
independent company called CacheVision. CacheVision brings together the
Company's product development activities and Thomson Multimedia's A/V
technologies expertise and marketing presence to develop cost-optimized,
time-to-market integrated systems to be incorporated into consumer electronic
products such as televisions, set-top boxes, personal video recorders, and DVD
players. The Company expects to sell rigid disc drive products to CacheVision as
an OEM customer. This information is unaudited.

12. SUPPLEMENTAL CASH FLOW INFORMATION

2000 1999 1998
---- ------ ----
(IN MILLIONS)

Cash Transactions:
Cash paid for interest............................. $ 52 $ 52 $52
Cash paid for income taxes, net of refunds......... 577 (109) (1)
Non-Cash Transactions:
Contribution of NSMG to VERITAS.................... $ -- $1,806 $--
Acquisition of minority interest................... 19 52 --
Acquisition of XIOtech Corporation................. 359 -- --

The components of depreciation and amortization expense are as follows:

2000 1999 1998
---- ---- ----
(IN MILLIONS)

Depreciation.......................................... $597 $574 $549
Amortization:
Goodwill and intangibles............................ 52 51 56
Deferred compensation............................... 6 10 8
Other assets........................................ 38 61 51
---- ---- ----
$693 $696 $664
==== ==== ====

13. LITIGATION

Class Actions

87
89
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

financial interests and did not secure the highest possible price for the
Company's shares. All the complaints are styled as class actions, and seek to
enjoin the transaction with VERITAS/Silver Lake and secure damages from all
defendants. None of the defendants has yet responded to the complaints. The
Delaware plaintiffs have initiated discovery in preparation for filing a motion
for a preliminary injunction. The Company and the individual defendants believe
that none of the lawsuits has any merit and intend to defend all these claims
vigorously.

Intellectual Property Litigation

Rodime PLC -- In late 1992, Rodime PLC filed a complaint alleging
infringement on a certain patent. The process of litigation ensued and elapsed
through January 2000. On January 18, 2000, the U.S. Supreme court denied the
Company's petition for certiorari. On the following day, through a mediation
process, the Company and Rodime agreed to a settlement amount of $45 million to
bring the related litigation to an end. As a result, a previously recorded
estimate of related settlement costs was revised and a charge of $39 million was
recorded in the three months ended December 31, 1999.

TeraStor/Maxoptix -- In November 1997, TeraStor Corporation ("TeraStor")
filed a cross-complaint against the Company in an action pending in the Superior
Court of California, County of Santa Clara entitled Maxoptix Corporation v.
TeraStor Corporation and Gordon Knight. The cross-complaint alleges causes of
action against the Company for unfair business practices, misappropriation of
trade secrets, attempted monopolization, refusal to deal, breach of contract,
specific performance, breach of the covenant of good faith and fair dealing,
fraud, negligent misrepresentation, intentional interference with prospective
economic advantage and negligent interference with prospective economic
advantage. The allegations against the Company arose out of the Company's
dealings with TeraStor pursuant to a joint development agreement concerning the
development of magneto optical recording heads. In December 1997 TeraStor sought
a preliminary injunction against the Company seeking to prevent certain Company
employees who formerly worked with TeraStor under the joint development
agreement from engaging in work related to the Company's Quinta subsidiary. In
January 1998 the Court denied TeraStor's motion for injunctive relief. The
Company has asserted cross-claims against TeraStor for trade secret
misappropriation, fraud, negligent misrepresentation, breach of contract,
declaratory relief, rescission, violation of Business & Professions Code Section
17200, common law unfair competition, intentional interference with contractual
relations, negligent interference with contractual relations, and inducing
breach of fiduciary duty. The Company also filed claims against Rick Wilmer and
Amyl Ahola, two former Seagate employees employed by TeraStor, for breach of
contract and breach of fiduciary duty. Trial is currently set to begin on
September 18, 2000. On June 28, 2000, the parties reached agreements during
settlement mediation that would resolve the litigation. Related settlement costs
were recorded as of June 30, 2000.

88
90
SEAGATE TECHNOLOGY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

contract and fraud, relating to Convolve's Input Shaping(R) and Quick and
Quiet(TM) technology. Plaintiffs claim their technology is incorporated in the
Company's sound barrier technology, which was announced on June 7, 2000. The
complaint seeks injunctive relief and $800 million in damages. Plaintiffs moved
for expedited discovery, which was denied by the court. The court ordered
plaintiffs to identify their trade secrets to defendants before discovery can
begin. The Company answered the complaint on August 2, 2000 and filed
cross-claims for declaratory judgment that two Convolve patents are invalid and
not infringed and that the Company owns any intellectual property based upon any
information the company disclosed to Convolve. Convolve served a trade secrets
disclosure on August 4, 2000. The Company believes this matter is without merit
and intends to defend it vigorously.

Other Matters

89
91

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Seagate Technology, Inc.

We have audited the accompanying consolidated balance sheets of Seagate
Technology, Inc. as of June 30, 2000 and July 2, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended June 30, 2000. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These consolidated financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements and schedule referred
to above present fairly, in all material respects, the consolidated financial
position of Seagate Technology, Inc. at June 30, 2000 and July 2, 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended June 30, 2000, in conformity with accounting standards
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

/s/ Ernst & Young LLP

San Jose, California
July 12, 2000

90
92

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors of the Company and compliance with Section
16(a) of the Securities Exchange Act of 1934, as amended, are hereby
incorporated herein by reference to the sections entitled "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance,"
respectively, in the Company's Proxy Statement to be filed with the Commission
within 120 days of the end of the Registrant's fiscal year pursuant to General
Instruction G(3) to Form 10-K. The information required by that Item concerning
executive officers is set forth in Part I of this Report.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the
Company's Proxy Statement to be filed with the Commission within 120 days of the
end of the Registrant's fiscal year pursuant to General Instruction G(3) to Form
10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this Report:

1. Financial Statements. The following Consolidated Financial Statements
of Seagate Technology, Inc. and Report of Independent Auditors are
included in Item 8:

Report of Independent Auditors

Consolidated Balance Sheets-June 30, 2000 and July 2, 1999.

Consolidated Statements of Operations-Years Ended June 30, 2000; July
2, 1999; and July 3, 1998.

Consolidated Statements of Stockholders' Equity-Years Ended June 30,
2000; July 2, 1999; and July 3, 1998.

Consolidated Statements of Cash Flows-Years Ended June 30, 2000; July
2, 1999; and July 3, 1998.

Notes to Consolidated Financial Statements.

91
93

2. Financial Statement Schedules. The following consolidated financial
statement schedule of Seagate Technology, Inc. is filed as part of
this Report and should be read in conjunction with the Consolidated
Financial Statements of Seagate Technology, Inc.:

SCHEDULE II -- Valuation and Qualifying Accounts

Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or notes thereto.

3. Exhibits:

NOTES
-----

92
94

NOTES
-----

10.18 $300,000,000 Credit Agreement between Seagate Technology,
Inc. and Bank of America, N.A. dated November 4, 1999
10.19 Management Retention Agreement dated November 1998 between
Seagate Technology, Inc. and Stephen J. Luczo
10.20 Form of Management Retention Agreement for Senior Management
dated November 1998
10.21 Summary description of Deferred Compensation Plan for
Corporate Officers
10.22 Agreement and Plan of Merger and Reorganization, dated as of (J)
March 29,2000, by and among VERITAS Software Corporation,
Victory Acquisition Sub, Inc. and Seagate Technology, Inc.
10.23 Stock Purchase Agreement, dated as of March 29, 2000, by and (J)
among Suez Acquisition Company (Cayman) Limited, Seagate
Technology, Inc. and Seagate Software Holdings, Inc.
10.24 Indemnification Agreement, dated as of March 29, 2000, by (J)
and among VERITAS Software Corporation, Seagate Technology,
Inc., Suez Acquisition Company (Cayman) Limited and certain
other parties
10.25 Letter Agreement, dated March 29, 2000, by and between (J)
VERITAS Software Corporation and Suez Acquisition Company
(Cayman) Limited
10.26 Form of Stockholder Agreement between Seagate Software, (K)
Inc., a wholly-owned subsidiary of Seagate Technology, Inc.,
and VERITAS Software Corporation
10.27 Form of Registration Rights Agreement between Seagate (L)
Software, Inc., a wholly-owned subsidiary of Seagate
Technology, Inc. and VERITAS Software Corporation
10.28 Agreement and Plan of Reorganization by and among Seagate (M)
Technology, Inc., Trout Acquisition Corp. and XIOtech
Corporation
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (included on page 95)
27.1 Financial Data Schedule
27.2 Amended Financial Data Schedule
99.1 Corporate Information

- ---------------
(A) Incorporated by reference to exhibits filed in response to Item 16,
"Exhibits," of the Company's Registration Statement on Form S-3 (File No.
33-13430) filed with the Securities and Exchange Commission on April 14,
1987.

(B) Incorporated by reference to exhibits filed in response to Item 7(b),
"Financial Statements and Exhibits" of the Company's Current Report on Form
8-K dated March 4, 1997.

(C) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended June 30, 1983.

(D) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-00697) as filed with the
Commission on February 5, 1996.

(E) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-01059) as filed with the
Commission on February 21, 1996.

(F) Incorporated by reference to exhibits filed in response to Item 14(a),
"Exhibits," of the Company's Form 10-K for the year ended July 3, 1998.

93
95

(G) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-34136) as filed with the
Commission on April 6, 2000.

(H) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-92277) as filed with the
Commission on December 7, 1999.

(I) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-8 (registration number 333-95719) as filed with the
Commission on January 31, 2000.

(J) Incorporated by reference to exhibits filed by the Registrant's
Registration Statement on Form S-8 (registration number 001-11403) as filed
with the Commission on April 5, 2000.

(K) Incorporated by reference to exhibits filed by Seagate Software, Inc.
(registration number 000-23169) in connection with its Quarterly Report on
Form 10-Q/A for the period ended January 1, 1999 filed with the Commission
on April 21, 1999.

(L) Incorporated by reference to exhibits filed by Seagate Software, Inc.
(registration number 000-23169) in connection with its Quarterly Report on
Form 10-Q/A for the period ended January 1, 1999 filed with the Commission
on April 16, 1999.

(M) Incorporated by reference to exhibits filed with the Registrant's Current
Report on Form 8-K (registration number 001-11403) as filed with the
Commission on December 17,1999.

(b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during
the quarter ended June 30, 2000 except for the following:

On April 5, 2000, a report on Form 8-K was filed reporting that on March
29, 2000, Seagate Technology, Inc., Seagate Software Holdings, Inc. and
Suez Acquisition Company (Cayman) Limited, an entity affiliated with,
among others, Silver Lake Partners and Texas Pacific Group, entered into a
Stock Purchase Agreement, and Seagate Technology and VERITAS Software
Corporation entered into an Agreement and Plan of Merger and
Reorganization.

94
96

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, INC.

/s/ STEPHEN J. LUCZO
--------------------------------------
(Stephen J. Luczo, Chief Executive
Officer
and a Director)

Dated: August 23, 2000

POWER OF ATTORNEY

Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Stephen J. Luczo and Charles C. Pope, jointly and
severally, his or her attorney-in-fact, each with the power of substitution, for
him or her in any and all capacities, to sign any and all amendments to this
Report on Form 10-K, including post-effective amendments, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ STEPHEN J. LUCZO Chief Executive Officer and a August 23, 2000
- ----------------------------------------------------- Director (Principal Executive
(Stephen J. Luczo) Officer)

/s/ CHARLES C. POPE Executive Vice President and August 23, 2000
- ----------------------------------------------------- Chief Financial Officer
(Charles C. Pope) (Principal Financial and
Accounting Officer)

/s/ GARY B. FILLER Co-Chairman of the Board August 23, 2000
- -----------------------------------------------------
(Gary B. Filler)

/s/ LAWRENCE PERLMAN Co-Chairman of the Board August 23, 2000
- -----------------------------------------------------
(Lawrence Perlman)

/s/ KENNETH E. HAUGHTON Director August 23, 2000
- -----------------------------------------------------
(Kenneth E. Haughton)

/s/ ROBERT A. KLEIST Director August 23, 2000
- -----------------------------------------------------
(Robert A. Kleist)

/s/ THOMAS P. STAFFORD Director August 23, 2000
- -----------------------------------------------------
(Thomas P. Stafford)

/s/ LAUREL L. WILKENING Director August 23, 2000
- -----------------------------------------------------
(Laurel L. Wilkening)

95
97

SEAGATE TECHNOLOGY, INC.

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

COL. A COL. B COL. C COL. D COL. E COL. F
------ ------ ------ ------ ------ ------
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER ACCOUNTS -- DEDUCTIONS -- END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE(1) PERIOD
----------- ------------ ----------- ----------------- ------------- -----------

YEAR ENDED JUNE 30, 2000:
Deducted from asset accounts:
Allowance for doubtful
accounts................ $52,529,000 $24,294,000 $-- $2,569,000 $74,254,000
=========== =========== === ========== ===========

YEAR ENDED JULY 2, 1999:
Deducted from asset accounts:
Allowance for doubtful
accounts................ $54,130,000 $ 457,000 $-- $2,058,000 $52,529,000
=========== =========== === ========== ===========

YEAR ENDED JULY 3, 1998:
Deducted from asset accounts:
Allowance for doubtful
accounts................ $60,413,000 $ 1,182,000 $-- $7,465,000 $54,130,000
=========== =========== === ========== ===========

- ---------------
(1) Uncollectible accounts written off, net of recoveries.

96
98

SEAGATE TECHNOLOGY, INC.

INDEX TO EXHIBITS

EXHIBITS NOTES
- -------- -----

3.1 Certificate of Incorporation of Registrant, as amended (A)
3.2 By-Laws of Registrant, as amended
4.1 Indenture, dated as of March 1, 1997 (the "Indenture"), (B)
between Seagate Technology, Inc. (the "Company") and First
Trust of California, National Association, as Trustee
4.2 Officers' Certificate pursuant to Section 301 of the (B)
Indenture, without Exhibits, establishing the terms of the
Company's senior notes and senior debentures
4.3 Form of Senior Note (B)
4.4 Form of Senior Debenture (B)
10.1 1983 Incentive Stock Option Plan and form of Stock Option (C)
Agreement
10.2 Seagate Technology Employee Stock Purchase Plan, as amended (F)
10.3 Registrant's Executive Stock Plan (D)
10.4 Conner Peripherals, Inc. 1986 Incentive Stock Plan (D)
10.5 Building Agreement for Land At Private Lot A14547 in Yio Chu (F)
Kang dated May 30, 1996 between Seagate Technology
International and Jurong Town Corporation
10.6 Lease Agreement dated July 18, 1994 between Universal (F)
Appliances Limited and Seagate Technology (Thailand) Limited
10.7 1991 Incentive Stock Option Plan and form of Option (F)
Agreement, as amended
10.9 Amended and Restated Directors' Option Plan and form of
Option Agreement
10.10 Amended and Restated Archive Corporation Stock Option and (D)
Restricted Stock Purchase Plan -- 1981
10.12 Conner Peripherals, Inc. -- Arcada Holdings, Inc. Stock (E)
Option Plan
10.13 Arcada Holdings, Inc. 1994 Stock Option Plan (E)
10.14 Separation Agreement and Release between the Registrant and (F)
Alan F. Shugart dated as of July 29, 1998
10.15 1998 Nonstatutory Stock Option Plan and form of Stock Option (G)
Agreement
10.16 1999 Stock Option Plan (H)
10.17 XIOtech Amended and Restated 1996 Stock Option Plan (I)
10.18 $300,000,000 Credit Agreement between Seagate Technology,
Inc. and Bank of America, N.A. dated November 4, 1999
10.19 Management Retention Agreement dated November 1998 between
Seagate Technology, Inc. and Stephen J. Luczo
10.20 Form of Management Retention Agreement for Senior Management
dated November 1998
10.21 Summary description of Deferred Compensation Plan for
Corporate Officers
10.22 Agreement and Plan of Merger and Reorganization, dated as of (J)
March 29,2000, by and among VERITAS Software Corporation,
Victory Acquisition Sub, Inc. and Seagate Technology, Inc.
10.23 Stock Purchase Agreement, dated as of March 29, 2000, by and (J)
among Suez Acquisition Company (Cayman) Limited, Seagate
Technology, Inc. and Seagate Software Holdings, Inc.

97
99

EXHIBITS NOTES
- -------- -----

10.24 Indemnification Agreement, dated as of March 29, 2000, by (J)
and among VERITAS Software Corporation, Seagate Technology,
Inc., Suez Acquisition Company (Cayman) Limited and certain
other parties
10.25 Letter Agreement, dated March 29, 2000, by and between (J)
VERITAS Software Corporation and Suez Acquisition Company
(Cayman) Limited
10.26 Form of Stockholder Agreement between Seagate Software, (K)
Inc., a wholly-owned subsidiary of Seagate Technology, Inc.,
and VERITAS Software Corporation
10.27 Form of Registration Rights Agreement between Seagate (L)
Software, Inc., a wholly-owned subsidiary of Seagate
Technology, Inc. and VERITAS Software Corporation
10.28 Agreement and Plan of Reorganization by and among Seagate (M)
Technology, Inc., Trout Acquisition Corp. and XIOtech
Corporation
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (included on page 95)
27.1 Financial Data Schedule
27.2 Amended Financial Data Schedule
99.1 Corporate Information