8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

Date of report (date of earliest event reported):
January 28, 2005

Maxtor Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 1-16447
(Commission File No.) 77-0123732
(I.R.S. Employer
Identification No.)

500 McCarthy Blvd., Milpitas, California 95035
(Address of principal executive offices)

Registrant’s telephone number, including area code:
(408) 894-5000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition.
	Item 2.05 Costs Associated with Exit or Disposal Activities.
	Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
	Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.
	Item 8.01 Other Events.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 2.02 Results of Operations and Financial Condition.

     On February 3, 2005, Maxtor Corporation (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended December 25, 2004.

     The press release relating to the financial results for the fiscal quarter ended December 25, 2004 is attached hereto as Exhibit 99.1.

Item 2.05 Costs Associated with Exit or Disposal Activities.

     On January 28, 2005, the Company determined to proceed with a reduction in force of up to 200 employees in the United States during 2005. An estimated $2.0 million will be recorded in the first quarter of 2005 for severance-related expenses from the reduction in force. All of the charges will result in future cash expenditures. The Company is unable to currently estimate the total charges for the reduction in force as it is still evaluating personnel requirements in certain functions, and expects the reduction in force to be completed by the end of 2005.

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

(a) On February 3, 2005, the Audit Committee of the Company’s Board of Directors concluded that the previously issued financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 27, 2003 should not be relied upon because of errors in those financial statements.

     The decision to restate these financial statements was made by the Audit Committee of the Board of Directors, upon the recommendation of management and in consultation with PricewaterhouseCoopers LLP, our independent registered public accounting firm, after discovery and analysis of errors relating to certain 2001 purchase accounting entries. The Company has recorded balance sheet corrections to reverse a $196.5 million net deferred tax liability, to reduce goodwill by $165.0 million and increase equity by $31.5 million. In reviewing the Company’s deferred tax position as part of the close for this quarter in connection with the recent Quantum tax settlement, the Company’s management determined that deferred tax assets at the time of the 2001 acquisition of the Quantum HDD business were available to offset deferred tax liabilities required at the time of the transaction, resulting in these corrections. The Company also recorded corrections to reduce long term liabilities related to a restructuring reserve for facilities acquired in the Quantum HDD transaction by $13.8 million and to reduce goodwill by the same amount. The unaudited 2003 balance sheet accompanying the Company’s financial release on February 3, 2005 and attached as Exhibit 99.1 reflect these corrections. These entries had no impact on the Company’s income statements in periods subsequent to 2001.

     The deficiencies that led to these errors may constitute a material weakness in the Company’s internal controls over financial reporting. As a result of these corrections, management has recommended and the Company’s Audit Committee has approved the restatement of its financial statements through the prompt filing of an amended 2003 Form 10-K. The Company expects to timely file its 2004 Form 10-K. The holders of the Company’s 6.8% Convertible Senior Notes Due 2010 may not rely on the Company’s registration statement on Form S-3 until the Company has filed corrected financial statements and amended its registration statement.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

(b) On February 2, 2005, C.J. (“Nina”) Haralambidis, Corporate Controller, announced her intention to resign as Corporate Controller effective as of March 10, 2005 and to cease to serve as the Company’s principal accounting officer after February 3, 2005. Ms. Haralambidis had served as the Company’s principal accounting officer since October 14, 2004.

(c) Duston M. Williams will serve as principal accounting officer for the Company effective February 4, 2005.

     Mr. Williams became the Company’s Executive Vice President, Finance and Chief Financial Officer, on December 3, 2004. Mr. Williams previously served as Chief Financial Officer of Aruba Wireless Networks, a network infrastructure company, from 2003 to 2004, Chief Financial Officer of Rhapsody Networks, a storage networking provider (acquired by Brocade Communications Systems in 2002), from 2001 to 2003 and Chief

Financial Officer of Netigy Corporation, a networking consulting company (acquired by ThruPoint Inc. in 2001), from 2000 to 2001. From 1986 to 1999, Mr. Williams served in a variety of accounting and finance positions at Western Digital Corporation, a maker of hard disk drives, including its Senior Vice President and Chief Financial Officer from 1996 to 1999. Mr. Williams is 46 years old.

     See disclosure under Item 1.01 of the Company’s Current Report on Form 8-K filed on December 9, 2004 for material terms of Mr. Williams’ employment offer letter and other material terms of his employment, incorporated herein by reference.

Item 8.01 Other Events.

     On February 3, 2005, the Company announced its financial results for the fourth quarter ended December 25, 2004. Revenue for the quarter was $1.031 billion. The Company reported a net loss on a GAAP basis in the fourth quarter of 2004 of $70.2 million, or $(0.28) per share. Included in the GAAP net loss was $5.1 million for the amortization of intangibles, $7.3 million in executive and other severance related expenses, $7.8 million in impairment charges related to real estate holdings, and $25.0 million due to a product cancellation and impairments related to intangibles from the acquisition of Quantum’s hard drive division in 2001. These charges were offset by a favorable adjustment related to the previously announced settlement with Quantum of $8.5 million. The net total of these charges unfavorably impacted net income by $36.7 million. In the fourth quarter of 2003, revenue totaled $1.171 billion. Net income on a GAAP basis in the third quarter of 2003 was $39.2 million, or $0.15 per diluted share. The GAAP net income included a charge for the amortization of intangible assets and stock-based compensation expense totaling $23.8 million. Also included was income from discontinued operations of $2.2 million .

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits.

Exhibit
No.	Description
Exhibit 99.1	Earnings release, dated February 3, 2005, regarding the fourth quarter 2004 results of Maxtor Corporation

Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

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

Date: February 3, 2005

MAXTOR CORPORATION
By:	/s/ Duston M. Williams
	Name:	Duston M. Williams
	Title:	Executive Vice President, Finance and Chief Financial Officer

EXHIBIT INDEX

Exhibit
No.	Description
Exhibit 99.1	Earnings release, dated February 3, 2005, regarding the fourth quarter 2004 results of Maxtor Corporation

EX-99.1

Exhibit 99.1

CONFIDENTIAL

CONTACT:

Media Relations	Investor Relations
Alan Bernheimer	Jenifer Kirtland
Maxtor Corporation	Maxtor Corporation
408-894-4233	408-324-7056
alan_bernheimer@maxtor.com	jenifer_kirtland@maxtor.com

MAXTOR CORPORATION REPORTS FOURTH QUARTER 2004 RESULTS

Company Announces Pending Restatement Relating to Certain 2001 Purchase Accounting Entries

MILPITAS, Calif., February 3, 2005 — Maxtor Corporation (NYSE: MXO) today announced its financial results for the fourth quarter and fiscal year ended December 25, 2004. Revenue for the quarter was $1.031 billion. The Company reported a net loss on a GAAP basis in the fourth quarter of 2004 of $70.2 million, or $(0.28) per share. Included in the GAAP net loss were $5.1 million for the amortization of intangibles, $7.3 million in executive and other severance related expenses, $7.8 million in impairment charges related to real estate holdings, and $25.0 million due to a product cancellation and impairments related to intangibles from the acquisition of Quantum’s hard drive division in 2001. These charges were offset by a favorable adjustment related to the previously announced settlement with Quantum of $8.5 million. The net total of these charges unfavorably impacted net income by $36.7 million. In the fourth quarter of 2003, revenue totaled $1.171 billion. Net income on a GAAP basis in the fourth quarter of 2003 was $39.2 million, or $0.15 per diluted share. The GAAP net income included a charge for the amortization of intangible assets and stock-based compensation expense totaling $23.8 million. Also included was income from discontinued operations of $2.2 million.

“The fourth quarter was characterized by strong seasonal demand in the desktop and enterprise markets, stable pricing and lean channel inventory,” said Dr. C.S. Park, chairman and chief executive officer of Maxtor. “While Maxtor’s core results were better than we anticipated in December, they continue to reflect an uncompetitive cost and expense structure, primarily on our desktop business. We shipped 14.7 million total disk

drives and realized a gross profit margin of 8.1%, an improvement from the 6.4% in the third quarter.”

Of the unit shipments in the fourth quarter, 563,000 represented shipments of SCSI drives and drives shipped to consumer electronics OEMs totaled 1,264,000. The average selling price was $70 compared with $67 in the third quarter.

“As promised during our mid-quarter update in December, the Maxtor management team has developed and begun execution of a 100 Day Plan,” continued Dr. Park. “Key components of that plan are to rationalize the product roadmap, improve our cost structure and reduce operating expenses. We have identified specific actions associated with these initiatives and have begun implementation.”

“We have prioritized our product development for 2005, eliminating uncompetitive programs and increasing our funding for small form factor drive development. MMC, our media subsidiary, continues to offer cost benefits and we have initiatives underway to further reduce its costs. We are working with our head partners to drive cost reductions across the head supply chain. Finally, we expect to reduce U.S. headcount by up to 200 over the course of the year. Some of the benefits of these activities will be evident in our financial results in 2005 and some will accrue as we move into 2006,” concluded Dr. Park.

Fiscal Year 2004 Financial Results

For fiscal year 2004, revenue totaled $3.796 billion. The net loss on a GAAP basis was $181.9 million, or $(0.73) per share. Included in the GAAP net loss were $36.0 million for the amortization of intangibles, $18.3 in executive and other severance related expenses, $20.3 million in facilities related restructuring charges, $7.8 million in impairment charges related to real estate holdings, and $25.0 million due to a product cancellation and impairments related to intangibles from the acquisition of Quantum’s hard drive division in 2001. These charges were offset by a favorable adjustment related to the previously announced settlement with Quantum of $8.5 million and the Philips litigation settlement of $24.8 million. The net total of these charges unfavorably impacted net income by $74.1 million. In 2003, Maxtor generated

$4.086 billion in revenue. Net income on a GAAP basis was $102.7 million or $0.41 per diluted share. Included in the GAAP net income were charges totaling $86.1 million for the amortization of intangible assets and stock-based compensation expense. GAAP net income also included income from discontinued operations of $2.2 million.

Restatement

Maxtor also announced that it has recorded balance sheet corrections to reverse a $196.5 million net deferred tax liability, to reduce goodwill by $165.0 million and increase equity by $31.5 million. In reviewing its deferred tax position as part of the close for this quarter in connection with the Quantum tax settlement, the Company determined that deferred tax assets at the time of the 2001 acquisition of the Quantum HDD business were available to offset deferred tax liabilities required at the time of the transaction, resulting in these corrections. The Company also recorded corrections to reduce long term liabilities related to a restructuring accrual for facilities acquired in the Quantum HDD transaction by $13.8 million and to reduce goodwill by the same amount. The unaudited 2003 balance sheet accompanying this financial release reflects these corrections. These entries had no impact on the Company’s income statements in periods subsequent to 2001.

These errors may constitute a material weakness in the Company’s internal controls over financial reporting. As a result of these corrections, management has recommended, and the Company’s audit committee has approved, the restatement of its financial statements through the prompt filing of an amended 2003 Form 10-K. The Company expects to timely file its 2004 Form 10-K.

About Maxtor

Maxtor Corporation (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 www.maxtor.com or by calling toll-free (800) 2-MAXTOR. Maxtor is traded on the NYSE under the MXO symbol.

The Company’s results are subject to risks and uncertainties which could materially affect the Company’s results, including, but not limited to, market demand for hard disk drives, qualification of the Company’s products, market acceptance of the Company’s products, the Company’s ability to execute future development and production ramps and utilize manufacturing assets efficiently, changes in product and customer mix, the availability of components, pricing trends, actions by competitors, and general economic and industry conditions. These and other risk factors are contained in periodic reports filed with the SEC, including, but not limited to, the Form 10-K for fiscal 2003. Maxtor is under no obligation (and expressly disclaims any obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

Conference Call

Maxtor has scheduled a conference call for analysts and investors today, February 3, 2005, at 2:00 p.m. PT to discuss the fourth quarter 2004 results. Financial information to be discussed on the call will be available on the Company’s website immediately prior to the commencement of the call. The dial-in number for the live call is (800) 597-3261. The call will be webcast on the Company’s site at www.maxtor.com. There will be a replay available shortly following the call through February 10, 2005. The dial-in number for the replay is (800) 252-6030 or (402) 220-2491, access code: 35729693.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share and per share amounts)
(Unaudited)

	Three months ended						Twelve months ended
	December 25,			December 27,			December 25,			December 27,
	2004			2003			2004			2003
Net revenues	$	1,031,182		$	1,171,120		$	3,796,328		$	4,086,443
Cost of revenues		947,176			973,585			3,423,949			3,385,390
Gross profit		84,006			197,535			372,379			701,053
Operating expenses:
Research and development		79,648			94,999			323,200			354,050
Selling, general and administrative		28,558			34,920			127,932			131,703
Amortization of intangible assets		5,053			23,602			35,994			85,279
Restructuring and impairment charges		33,755			—			65,148			—
Total operating expenses		147,014			153,521			552,274			571,032
Income (loss) from operations		(63,008	)		44,014			(179,895	)		130,021
Interest expense		(8,370	)		(7,891	)		(32,371	)		(30,604	)
Interest income		1,609			1,407			5,255			5,160
Income from litigation		—			—			24,750			—
Other gain (loss)		14			20			81			(613	)
Income (loss) from continuing operations before income taxes		(69,755	)		37,550			(182,180	)		103,964
Provision for (benefit from) income taxes		448			581			(261	)		3,504
Income (loss) from continuing operations		(70,203	)		36,969			(181,919	)		100,460
Income (loss) from discontinued operations		—			2,211			—			2,211
Net income (loss)	$	(70,203	)	$	39,180		$	(181,919	)	$	102,671
Net income (loss) per share — basic Continuing operations	$	(0.28	)	$	0.15		$	(0.73	)	$	0.41
Discontinued operations	$	—		$	0.01		$	—		$	0.01
Total	$	(0.28	)	$	0.16		$	(0.73	)	$	0.42
Net income (loss) per share — diluted Continuing operations	$	(0.28	)	$	0.14		$	(0.73	)	$	0.40
Discontinued operations	$	—		$	0.01		$	—		$	0.01
Total	$	(0.28	)	$	0.15		$	(0.73	)	$	0.41
Shares used in per share calculation - -basic		250,026,784			245,439,935			247,671,870			243,022,694
-diluted		250,026,784			256,714,105			247,671,870			251,135,683

MAXTOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

	December 25,		Restated December 27,
	2004		2003
ASSETS Current assets:
Cash and cash equivalents	$	378,065	$	530,816
Restricted cash		24,561		37,154
Marketable securities		103,969		44,543
Restricted marketable securities		—		42,337
Accounts receivable, net		466,366		578,907
Inventories		229,410		218,011
Prepaid expenses and other		36,336		38,301
Total current assets		1,238,707		1,490,069
Property, plant and equipment, net		347,934		342,679
Goodwill and other intangible assets, net		497,644		696,794
Other assets		30,168		13,908
Total assets	$	2,114,453	$	2,543,450
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings, including current portion of long-term debt	$	82,561	$	77,037
Accounts payable		674,947		730,056
Accrued and other liabilities		332,679		455,875
Total current liabilities		1,090,187		1,262,968
Long-term debt, net of current portion		382,570		355,809
Other liabilities		58,284		172,695
Total liabilities		1,531,041		1,791,472
Total stockholders’ equity		583,412		751,978
Total liabilities and stockholders’ equity	$	2,114,453	$	2,543,450