MXO Maxtor Corp

MILPITAS, Calif., April 26 /PRNewswire-FirstCall/ -- Maxtor Corporation (NYSE:MXO) today announced its financial results for the first quarter ended April 1, 2006. Revenue for the first quarter was $881.0 million. The Company reported a net loss of $102.1 million, or $(0.40) per share. Revenue in the first quarter of 2005 totaled $1,069.6 million. The Company reported a net loss of $20.2 million, or $(0.08) per share, for the first quarter of 2005. "As we announced in our update on April 4th, our first quarter financial results reflect a number of factors related to our pending acquisition by Seagate Technology," said Dr. C.S. Park, chairman and chief executive officer of Maxtor. "We did not achieve the unit volume growth of our desktop drives that we expected during the quarter, reflecting customer concerns related to the possible impact of the pending acquisition. We also experienced marginal merger-related desktop market share losses. The reduced volume put additional pressure on our cost structure and further constrained our ability to compete, especially in the lower-priced, lower-capacity desktop drive market. In addition, we were unable to realize expected component cost improvements in the first quarter, due to the uncertainty around future product plans relative to the pending Seagate merger transaction." Drive shipments totaled 12.1 million in the first quarter of 2006 compared with 13.6 million in the fourth quarter of 2005. The Company shipped 973,000 SCSI drives in the first quarter of 2006. Drives sold to consumer electronics customers totaled 1.2 million in the 2006 first quarter. The average selling price increased to $73 in the first quarter of 2006 compared with $71 in the fourth quarter of 2005, reflecting an improved product mix. The lower production volume, along with component pricing pressures, resulted in a gross profit margin of 2.5% in the first quarter of 2006 compared with 9.3% in the fourth quarter of 2005. About Maxtor Maxtor Corporation (http://www.maxtor.com/) is one of the world's leading suppliers of information storage solutions. The Company has an expansive line of storage products for desktop computers, near-line storage, high-performance Intel-based servers, and consumer electronics. Maxtor has a reputation as a proven market leader built by consistently providing high-quality products and service and support for its customers. Maxtor and its products can be found at http://www.maxtor.com/ or by calling toll-free 800-2-MAXTOR. Maxtor is traded on the NYSE under the MXO symbol. Important Additional Information On December 21, 2005, Maxtor announced that it had entered into a definitive agreement with Seagate Technology, which provides for Seagate to acquire Maxtor in a merger transaction. In connection with the proposed transaction, Seagate filed a Registration Statement on Form S-4 with the SEC on March 14, 2006 containing a preliminary Joint Proxy Statement/Prospectus (SEC File No. 333-132420). This registration statement was declared effective by the SEC on April 14, 2006. On or about April 18, 2006, the definitive Joint Proxy Statement/Prospectus was mailed to the stockholders of Seagate and Maxtor. Each of Seagate and Maxtor has filed, and will continue to file, with the SEC other documents regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders can obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus and other documents filed with the SEC by Seagate and Maxtor through the web site maintained by the SEC at http://www.sec.gov/. In addition, investors and security holders are able to obtain free copies of the Registration Statement and the definitive Joint Proxy Statement/Prospectus and other documents filed with the SEC from Seagate by directing a request to Seagate Technology, 920 Disc Drive, P.O. Box 66360, Scotts Valley, California 95067, Attention: Investor Relations (telephone: 831-439-5337) or going to Seagate's corporate website at http://www.seagate.com/; or from Maxtor by directing a request to Maxtor Corporation, 500 McCarthy Boulevard, Milpitas, California 95035, Attention: VP of Investor Relations (telephone: 408-894-5000) or going to Maxtor's corporate website at http://www.maxtor.com/. Seagate and Maxtor, and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Seagate's directors and executive officers is contained in Seagate's Annual Report on Form 10-K for the fiscal year ended July 1, 2005 and its proxy statement dated October 7, 2005, which were filed with the SEC. Information regarding Maxtor's directors and executive officers is contained in Maxtor's Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and its proxy statement dated April 14, 2006. MAXTOR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) (Unaudited) Three months ended April 1, April 2, 2006 2005 Net revenues $881,018 $1,069,601 Cost of revenues 858,807 953,197 Gross profit 22,211 116,404 Operating expenses: Research and development 76,046 78,551 Selling, general and administrative 34,547 37,302 Merger-related expense 12,192 -- Restructuring charge (4,863) 13,854 Amortization of intangible assets 217 217 Total operating expenses 118,139 129,924 Loss from operations (95,928) (13,520) Interest expense (6,879) (8,401) Interest income 4,290 2,356 Write-off of unamortized debt issuance costs (7,419) -- Other gain (loss) 4,213 (268) Loss before income taxes (101,723) (19,833) Provision for income taxes 424 328 Net loss $(102,147) $(20,161) Net loss per share - basic and diluted $(0.40) $(0.08) Shares used in basic and diluted per share calculation 258,020,987 251,595,181 MAXTOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) April 1, December 31, 2006 2005 ASSETS Current assets: Cash and cash equivalents $451,350 $497,509 Marketable securities 42,809 67,722 Restricted cash 16,261 16,055 Accounts receivable, net 349,427 417,981 Inventories 279,547 240,462 Prepaid expenses and other 25,280 89,813 Total current assets 1,164,674 1,329,542 Property, plant and equipment, net 347,563 335,336 Goodwill and other intangible assets, net 489,845 490,062 Other assets 66,474 22,832 Total assets $2,068,556 $2,177,772 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings, including current portion of long-term debt $331,648 $5,868 Accounts payable 660,782 677,288 Accrued and other liabilities 308,716 300,758 Total current liabilities 1,301,146 983,914 Long-term debt, net of current portion 245,739 575,773 Other liabilities 51,889 65,113 Total liabilities 1,598,774 1,624,800 Total stockholders' equity 469,782 552,972 Total liabilities and stockholders' equity $2,068,556 $2,177,772 Maxtor Corporation Historical Trend Information Q404 Q105 Q205 Q305 Q405 Q106 Disk Drive Units shipped (K) 14,667 14,179 12,071 13,161 13,570 12,075 Revenue (M) $1,031 $1,070 $925 $926 $969 $881 Disk Drive Average ASP (blended) $70 $75 $77 $70 $71 $73 Revenue by Market Channel OEMs 49% 51% 53% 52% 49% 51% Distributors 41% 38% 37% 38% 41% 38% Retail 10% 11% 10% 10% 10% 11% Revenue by Geographic Location The Americas 31% 32% 37% 36% 32% 35% Europe/Middle East/Africa 40% 38% 32% 35% 38% 36% Asia Pacific & Japan 29% 30% 31% 29% 30% 29% Inventory 229 231 264 257 241 280 Raw Materials 79.9 75.7 86.7 93.1 55.4 55.7 WIP 57.8 48.9 50.2 51.1 56.1 47.2 Finished Goods 91.7 106.4 127.6 112.8 129.0 176.7 Turns 16 17 12 13 15 12 DSO 41 39 41 44 39 36 DATASOURCE: Maxtor Corporation CONTACT: Karen Clyne, Media Relations, +1-408-894-5958, or , or Jenifer Kirtland, Investor Relations, +1-408-324-7056, or , both of Maxtor Corporation Web site: http://www.maxtor.com/

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